| Thu 11 Aug 2011, 8:00 | | SBK - Standard Bank Group Limited - Standard Bank Group unaudited results and |
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SBK - Standard Bank Group Limited - Standard Bank Group unaudited results and
dividend announcement for the six months ended 30 June 2011
Standard Bank Group Limited
Registration No. 1969/017128/06
Incorporated in the Republic of South Africa
JSE share code: SBK
ISIN: ZAE000109815
NSX share code: SNB
NSX share code: SNB ZAE000109815
SBKP ZAE000038881 (First preference shares)
SBPP ZAE000056339 (Second preference shares)
JSE bond codes: SBS, SBK, SBN, SBR, ETN series and CLN series (all JSE listed
bonds issued in terms of The Standard Bank of South Africa Limited`s Domestic
Medium Term Note Programme and Credit Linked Note Programme)
Standard Bank Group unaudited results and dividend announcement for the six
months ended 30 June 2011
Headline earnings
- normalised R6 637 million, up 11% on 1H10
- IFRS R6 562 million, up 12% on 1H10
Headline earnings per ordinary share (HEPS)
- normalised 418,4 cents, up 10% on 1H10
- IFRS 435,0 cents, up 10% on 1H10
Return on equity (ROE)
- normalised 14,5% (1H10: 13,5%)
- IFRS 14,9% (1H10: 13,9%)
Tier I capital adequacy ratio of 12,4% (1H10: 11,8%)
Dividend per ordinary share of 141 cents (1H10: 141 cents)
Net asset value (NAV) per share
- normalised 5 926 cents (1H10: 5 792 cents)
- IFRS 5 994 cents (1H10: 5 876 cents)
Cost-to-income ratio
- normalised 58,4% (1H10: 58,1%)
- IFRS 58,6% (1H10: 58,2%)
Credit loss ratio
- normalised 0,80% (1H10: 1,04%)
- IFRS 0,81% (1H10: 1,05%)
The unaudited results discussed in the commentary below have been prepared on a
normalised basis. Results are normalised to reflect the legal and economic
substance of the group`s black ownership initiative, and deemed treasury shares
held for the benefit of Liberty policyholders and to facilitate client trading
activities (described fully below).
Overview of financial results
"It is encouraging to see that the action we took on costs in 2010 is starting
to bear fruit."
- Jacko Maree, group chief executive
Global operating environment
Uncertainty and volatility were again features of the global economy and while
some signs of stability and strengthening of risk appetite were evident in
April, the following months have brought further cause for concern.
While the BRICS economies remained at the forefront of global growth, there are
concerns over the potential for overheating and inflation in these markets.
The resilience of African economies has provided some respite from the troubling
global outlook. Better governance, continued reform and financial deepening have
improved the economic fundamentals of the major economies on the continent. A
wider spread of commercial partnerships in trade, investment and aid has also
made Africa hardier in withstanding external shocks. Elevated food and energy
prices, drought in East Africa and the political turmoil in North Africa,
however, are factors impeding the continent`s progress.
Domestic operating environment
Economic activity gathered momentum in South Africa in the first quarter with
real GDP growth expanding at an annualised rate of 4,8%. Strong growth in real
consumption expenditure by households continued to drive domestic demand. The
higher spending reflected further increases in real disposable income as wage
levels and property income rose in the quarter. Household debt crept up in the
first quarter, but the increase in disposable income was sufficient to reduce
the household debt-to-disposable income ratio slightly to 76,8%. Household
saving remained negative as a percentage of disposable income as households
continue to consume more than they earn. This leaves them financially vulnerable
to economic weakness. The unemployment rate remains high, impacting severely on
many households from both an economic and social perspective.
Unfortunately, short-term data indicated a softening in economic performance in
the second quarter of the year. The demand for credit remained weak and
manufacturing production slowed significantly in April and May, as did retail
sales in May.
Despite expectations for lower growth to be reported for the second quarter, the
slow economic upswing should remain intact.
Overview of results
For the six-month period ended 30 June 2011 the group generated headline
earnings of R6,6 billion, up 11% on the corresponding period last year, and
headline earnings per share of 418,4 cents were up 10%. The period was
characterised by lower levels of client activity across all the markets in which
we operate, precipitated in the main by ongoing concerns regarding the Eurozone,
the US budget deficit and the consequent worsening global economic outlook.
Corporate & Investment Banking was particularly affected, reporting modest
growth in both revenues and profits.
The group`s ROE for the six months was 14,5%, compared to 12,5% for the 2010
year, higher than our cost of equity.
Headline earnings by business unit % 1H11 1H10
change Rm Rm
Personal & Business Banking 30 2 483 1 904
Corporate & Investment Banking 1 3 320 3 277
Central and other (25) 201 268
Banking operations 10 6 004 5 449
Liberty 17 633 540
Total 11 6 637 5 989
Personal & Business Banking reported headline earnings of R2,5 billion, 30%
above the same period last year. The main contributor to this result was the
continued reduction in credit impairment charges with some pockets of new
business growth. Corporate & Investment Banking did well to sustain its revenues
at the same level as the prior period in a very difficult environment and,
despite a more normal credit charge, grew headline earnings by 1% to R3,3
billion. This was achieved through good cost control and improved fee and
commission income. Liberty reported improved operational results in the core
South African insurance and asset management operations, resulting in strong
headline earnings growth.
Headline earnings by region
% 1H11 1H10
change Rm Rm
South African banking 17 5 527 4 737
Liberty 17 633 540
South Africa 17 6 160 5 277
Rest of Africa (17) 423 511
Outside Africa 33 305 230
Central funding (>100) (251) (29)
Total 11 6 637 5 989
South African banking activities had a good six months, with the continued
reduction in credit impairments helping to offset still sluggish revenues.
Headline earnings from the rest of Africa were down 17% as investments in IT,
infrastructure and people continued in key growth countries. As anticipated,
Personal & Business Banking in the rest of Africa incurred a slightly bigger
loss than in the prior period, with more branches added to the network to
position the franchise for growth and attain the desired economies of scale.
Corporate & Investment Banking in the rest of Africa grew revenues by 2% off a
high base set in the first half of 2010. Headline earnings ended 7% lower than
the prior period as we continued to invest in the franchise. The group`s
operations in outside Africa were profitable for the period and up on the
comparative period last year. The benefits of action taken on costs in 2010 were
evident in this reporting period however returns still require substantial
improvement. Actions being taken in this region are covered in the strategic
update below.
Balance sheet analysis
Banking assets grew 4% compared to June 2010 reversing the two-year trend of a
shrinking balance sheet. Loans and advances grew 4% with loans to customers up
an encouraging 7%. Mortgage loans grew 5% on tentative signs of recovering
credit demand in South Africa. The number of applications climbed 36%, assisted
by good commercial relationships with independent mortgage originators. This
growth was achieved despite higher pricing of loans and robust assessments of
customers` creditworthiness. Instalment sale and finance leases rose 4%, helped
by good growth in Ghana, Nigeria and Argentina. In line with our focus on
inclusive banking, unsecured personal term loans in South Africa continued to
gain momentum and the book more than doubled to R736 million. However, this
still represents less than 1% of Personal & Business Banking`s loan book. Good
growth was achieved in longer-term unsecured lending in business banking,
primarily in agriculture and the public sector. Corporate & Investment Banking
achieved good loan growth late in the period, particularly in demand loans as
corporate requirements for working capital increased. Term loan balances reflect
no growth on a June year-on-year comparison, but were up on December 2010 with
some landmark transactions closed in our core sectors.
Deposit and current accounts showed growth across the board, reflecting our
relentless focus on customer service in South Africa and our ambitions to grow
our customer base in the rest of Africa. The deposit mix change was favourable
in the period with a focus on gathering longer duration liabilities.
Income statement analysis
Net interest income reduced by 1% when compared with the first six months of
2010 and was flat on the second half of 2010. Net interest margin on interest
earning assets reduced 12 basis points to 3,92%. Pricing improvements in
Personal & Business Banking were offset by increased competition in Corporate &
Investment Banking where client yields were squeezed. The negative endowment
impact of a lower average prime interest rate in South Africa on transactional
balances resulted in a 9 basis points reduction in margins. The squeeze in
margins was offset somewhat by asset growth, keeping net interest income at
similar levels to the prior period.
Non-interest revenue was up 6% compared to the prior period. This encouraging
result was achieved despite a 5% drop in trading revenues, as net fee and
commission income grew 8% and other revenue climbed 42%.
Net fees and commissions growth was achieved across all major classes of fees,
particularly in account transaction fees, which were up 6% due to an increased
number of Personal & Business Banking clients. Higher volumes in the card
business resulted in card-based commissions growing by 12%. Knowledge-based fees
grew 3%, reversing the decline experienced last year and indicating that the
promising deal pipeline across the continent is starting to convert into
revenue.
Trading revenues fell 5% compared to the prior period. Higher foreign exchange
trading volumes across our operations resulted in forex trading revenue growth
of 27%. Interest rate trading in South Africa achieved an excellent result on
the back of large hedging trades for clients, offset by very difficult trading
conditions in markets outside of South Africa. Other trading desks were impacted
by lower client activity and downward pressure on spreads in an increasingly
competitive environment. On a constant currency basis, trading revenue was up
1%.
A good contribution from the sale of insurance-related products to bank
customers in partnership with Liberty and improved short-term insurance profits
helped grow other revenue, as did positive revaluations on equity and property
investments in South Africa.
Credit impairment charges of R2 970 million for the six months were 22% lower
than the prior period, mainly as a consequence of the lower interest rate
environment. Non-performing loans (NPLs) reduced to 5,1% of the loan book
(FY10: 5,8%; 1H10: 6,4%), with the notable slowing of new defaults contributing
to lower NPL impairments.
The easing of consumer stress after another six months of low interest rates and
generally high salary increases resulted in Personal & Business Banking NPLs
reducing to 7,0% of the book (FY10: 7,9% and 1H10: 8,8%). While the level of
NPLs remains stubbornly high, particularly in home loans, the absolute level of
NPLs continued to show a decreasing trend. Personal & Business Banking`s credit
loss ratio of 1,25% is much improved compared to the cyclical high of 2,80% in
the second half of 2009. In Corporate & Investment Banking, a more normal
charge for credit was recorded, compared with a net reversal in the first six
months of 2010.
Cost growth of 2% for the period was achieved in an environment that demanded
rigorous cost control in the mature businesses, active cost cutting in the
international and regional head offices as well as regional locations, and
continued investment for the future in the growth franchises. On a constant
currency basis, costs grew 6% mainly due to branch and other infrastructure
rollout in West Africa. Given slower revenue growth, the cost-to-income ratio
rose to 58,4% (1H10: 58,1%), although this is lower than the 2010 full-year
ratio of 60,4% (excluding the restructure cost).
Cost efficiency has become an increasingly important management tool for banks
world-wide as the outlook for revenues remains uncertain. Recognising this in
2010, we embarked on a range of long-term and short-term cost saving initiatives
across the group, many of which are well under way and expected to have lasting
impacts.
Detailed plans within the organisation to achieve sustained cost savings are
aimed at:
- dramatically streamlining regional, head office and support costs;
- re-evaluating the pace and scope of IT transformation;
- accelerating geographic hubbing and infrastructure sharing; and
- consolidating a consistent approach to enabling functions.
In banking activities, income from associates and joint ventures was down due to
lower earnings from Troika Dialog Group (Troika). Post the announcement of the
sale of our investment in Troika to Sberbank in March, the investment is
classified as a non-current asset held-for-sale and was only equity accounted
for the first quarter to 31 March 2011.
Overview of business unit performance
Personal & Business Banking
Headline earnings were up 30% to R2 483 million for the period, supported by an
improved credit experience. The division earned an ROE of 17,8%, up on the 14,7%
recorded in the prior period.
In mortgage lending in South Africa, the number of loan applications continued
to show an upward trend and the value of new loans registered in the six months
was 7% higher than in the corresponding period last year. This translated into
asset growth of 5%. Concessions on new business continued to decline as pricing
models more accurately reflected the cost of term funding and credit risk. The
average lending rate for new business was prime less 7 basis points for the
period compared to prime less 28 basis points in the prior period and the
average loan-to-value on new business increased to 86%. We are comfortable that
the new business currently being written in mortgages will be profitable over
its lifetime, earning an ROE well in excess of the cost of equity.
NPL levels remain high but reduced to 8,6% of the book (1H10: 10,4% and FY10:
9,4%). Early arrears in mortgages have ticked up slightly and are coming back in
line with a longer-term average rather than the very low levels we have seen in
the last 18 months of unusually low asset growth. The credit loss ratio for
mortgages rose to 1,17% for the period, from 1,15% for the 2010 year.
Mortgage lending returned to profitability in the second half of 2010 and
continued this trend in the first half of 2011, although the pace of growth in
earnings slowed considerably. This is as a result of a large unwinding of credit
impairments in the second half of 2010, which was not repeated in 2011.
Instalment sale and finance leases grew revenues and earnings in the period on
the back of loan growth and repricing initiatives. Loan growth was particularly
encouraging in Ghana and Nigeria. NPLs continued to decrease as a percentage of
the book to 4,3% (1H10: 6,7% and FY10: 5,3%). This meant credit impairments
continued to unwind and a credit loss ratio of 0,68% was recorded (1H10: 2,47%).
Total revenues declined in the card business despite an increased number of
accounts as customers continued to reduce their debt. However, increased
cardholder turnover pushed fee income up. Credit impairments improved further as
the existing portfolio continued to mature.
Transaction and lending product deposit margins came under pressure due to the
negative endowment impact of lower interest rates on transactional accounts. The
number of current accounts increased by 14% in South Africa and deposits grew by
5% across the network, which helped grow fee income. The roll out of additional
branches and ATMs in Nigeria contributed to higher transaction volumes and
revenue, but drove up operational expenses. In the lending book, the credit loss
ratio decreased to 1,67% (1H10: 2,55%) as the low interest rate environment
allowed personal and business banking customers to pay off existing debt.
We continued to forge closer operational ties with Liberty to grow bancassurance
volumes and, in the domestic market, increased the penetration rate for all
products. The bancassurance businesses also recorded higher short-term insurance
broking profit largely due to growth in home-owner cover policies. The offshore
wealth management businesses felt the impact of lower deposit margins due to
international interest rates remaining at structurally low levels.
Corporate & Investment Banking
Despite the difficult operating environment, Corporate & Investment Banking
recorded stronger revenues across its regions as the year progressed. For the
six months ended 30 June 2011, total income and headline earnings ended up 1%. A
credit impairment charge for the period (compared to a net reversal in the prior
period) was offset by good cost containment, with costs down 3%. An ROE of 15,4%
was recorded for the period, still dampened by an unacceptably low ROE in
operations outside Africa.
In a challenging market, characterised by increased competition and client
uncertainty, global markets revenues were up an encouraging 6%. The strongest
performance came from South Africa where a number of large client hedging
transactions were executed and forex volumes increased strongly albeit at
reduced spreads. The rest of Africa struggled to grow revenues off the high base
set in the prior year as we positioned our books cautiously ahead of elections
in Nigeria and Uganda. Outside Africa, revenues were down 9% and flat on a
constant currency basis, a good result relative to global peers. Ongoing
investment in IT in global markets resulted in headline earnings growing only 1%
for the period.
As a healthy pipeline began to convert into revenues, investment banking enjoyed
a better second quarter. This was particularly evident in capital markets where
a number of deals were closed in May and June. However, revenues were down on
the prior period given the longer lead times required to close deals due to
client uncertainty. A turnaround in credit impairments as client positions
improved resulted in headline earnings increasing 7%.
Transactional products and services experienced another stable six months, with
revenues and headline earnings up 8%. Increased levels of interest and fee
income in the rest of Africa, and an increase in customer deposits in Nigeria in
particular, drove this performance. A comparably weaker performance from South
Africa partially offset this, with net interest income adversely impacted by
margin compression following a negative endowment effect and increased
competition.
In principal investment management, real estate and private equity experienced
good growth in revenues as a result of positive valuation uplifts on property
investments.
Wealth - Liberty
The Liberty results reflect the group`s 53,7% investment in Liberty Holdings
Limited (Liberty). Bancassurance results are included under Personal & Business
Banking.
Strong operational earnings from Liberty`s core operations, namely retail
insurance South Africa and Stanlib, pushed Liberty`s headline earnings for the
first half of 2011 up 17% to R1 180 million. Of these headline earnings, R633
million was attributable to Standard Bank Group (1H10: R540 million). Retail
insurance South Africa`s excellent improvement in policyholder persistency has
continued at levels similar to the second half of 2010 resulting in positive
persistency variances. South African insurance indexed new business sales have
improved by 7,1% over 2010 despite significantly lower entry level market sales
as a consequence of the remedial action taken last year. Increases in flagship
investment products and credit life sales under the bancassurance agreement were
particularly pleasing. Overall, group insurance new business margin improved
from 1,2% at December 2010 to 1,3%. This is still being influenced by the
conservative persistency assumptions and relatively low increase in new business
contract volumes that have affected acquisition overhead cost efficiency.
Improving margin through increased volume of quality sales and better cost
efficiency is Liberty management`s top priority.
Continued concerns over sovereign debt in Europe and the United States treasury
policy influenced local investment markets, resulting in high uncertainty and
low equity and bond returns for the period. Returns on the Liberty shareholder
investment portfolio were impacted by weaker markets but were ahead of set
benchmarks. The asset/liability positions were managed within mandated risk
limits and capital ratios have improved and remain strong. Following a sustained
period of strong inflows, Stanlib experienced some expected net outflows from
its money market funds due to the increasing risk appetite of investors, which
were offset by continued inflows in Liberty Africa asset management operations.
Strategic update
Towards the end of 2010, we articulated a refined strategy in response to a
changed banking landscape post-crisis and intense pressures on revenues
following the global recession. We are some way down the road in implementing
this refined strategy.
In terms of our ambition to have first-class, on-the-ground operations in chosen
countries in Africa, we have continued to invest tactically in these businesses.
In some markets we have proved that we can grow sustainable universal banking
platforms, with strong Personal & Business Banking and Corporate & Investment
Banking franchises and we are earning good returns. In other markets we are just
beginning this journey and the returns in these markets dilute the overall
performance from the rest of Africa. We recognise that we are still not at
sufficient scale in key regions, nor present in some potentially attractive and
fast-growing countries. We have a good platform from which to expand, we have
the capacity to grow organically and we are also looking for opportunities for
acquisitions.
Our intention is, over time, to halve the amount of capital utilised in
operations outside Africa from USD3 billion to approximately USD1,5 billion. The
largest portion of capital outside Africa is in our subsidiary bank in London
and the strategic requirement for a London base has been re-evaluated. We remain
convinced that the London presence as a legal entity with a banking licence is
critical for the growth of our Corporate & Investment Banking franchise.
However, the capital usage is excessive and the cost base is disproportionately
high. We aim, therefore, to make better use of the prudential limit for foreign
currency lending on The Standard Bank of South Africa Limited`s (SBSA`s) balance
sheet for transactions in our core sectors which will reduce the capital demand
in London, but increase the capital requirements in South Africa. A narrower
focus with robust productivity assessments of each business line should further
reduce capital demand outside Africa, offsetting the increased capital demand we
expect to originate from our focus on African and natural resources businesses.
We have initiated a number of cost saving strategies in our international
operations which are targeted to save USD75 million on an annualised basis.
We announced in March that we sold our 36% stake in Troika to Sberbank, the
largest bank in Russia. And post the balance sheet date, we announced that we
have signed an agreement with Industrial and Commercial Bank of China (ICBC) for
the sale of a majority stake in Standard Bank Argentina (SBA). We have agreed to
sell 55% of our current 75% shareholding and retain a 20% shareholding in SBA.
Subject to conditions and approvals, proceeds from the sales of our interests in
Russia and Argentina of approximately USD750 million will flow to the group and
earnings will reduce by approximately USD50 million per annum. Our challenge
will be to redeploy this capital effectively. SBA will continue to be
consolidated within Corporate & Investment Banking and Personal & Business
Banking segments up to the disposal date.
Capital management and liquidity
The group remains well capitalised with a common equity tier I ratio of 11,5%,
tier I capital adequacy ratio of 12,4% and a total capital adequacy ratio of
14,8%, which are all above the SARB`s minimum requirements and the group`s
internal targets.
The divestitures in Russia and Argentina mentioned above will further strengthen
the group`s capital position. We will have greater clarity on uses of potential
surplus capital when we announce FY11 results in March 2012 by which time the
proceeds of these transactions may be received.
Continued focus has been placed on lengthening and further diversifying the
group`s funding base. The group maintained its long-term funding ratio at 26%
and retained conservative liquidity buffers with surplus liquidity totalling
R116,8 billion at 30 June 2011. Increased funding demand to support a growing
pipeline of term lending transactions is evident. A number of key debt capital
market and term loan funding transactions were executed, taking advantage of
pockets of well-priced liquidity. Investor appetite for capital markets issuance
remained robust and SBSA successfully placed R4,6 billion of senior debt in the
domestic bond market. SBSA also raised USD385 million in two transactions in the
international bank loan markets.
The group participated in the Basel III quantitative impact assessment submitted
to the SARB and the Bank of International Settlements. The results of the
assessment reflect a reduction in the group`s capital adequacy ratios under the
proposed framework, but the group is expected to remain adequately capitalised
to meet the new Basel III requirements. We continue to assess the impact of the
Basel III liquidity standards as proposed by the Basel Committee. These may
prove to be onerous, depending on the extent of further calibration of the
proposed Basel III liquidity ratios, as well as the scope of national discretion
applied by domestic banking regulators.
Dividend
An interim dividend of 141 cents per share has been declared, unchanged on the
prior interim dividend. Given our relatively low dividend cover ratios in FY09
(2,0 times) and FY10 (1,9 times), we are now gradually rebuilding our dividend
cover to a more normal level.
Prospects
Current global economic uncertainty shows little sign of abating and, indeed,
the events of the last few weeks point to further volatility and softer
prospects for global economic growth. Consumers remain vulnerable and, despite
our expectation that interest rates will remain on hold for the remainder of the
year, we expect only moderate credit growth. While our improved performance
towards the end of the reporting period in Corporate & Investment Banking is a
positive sign, we will need to compete aggressively for client mandates to
maintain this momentum. Pipelines across our core sectors remain strong and are
growing. We will continue to focus on acquiring good quality new customers and
assets and we need to maintain our vigilance around our levels of expenditure
while investing in key growth areas that underpin our long-term strategy.
Our strong capital position and our sharpened focus on cost discipline will
enable us to build further on the progress we have made in the first half of the
year. We anticipate that the banking group`s total operating expenses for 2011
will be at the same level as 2010. We will continue our efforts to grow our
client franchises and improve returns to shareholders.
Any forward looking information contained in this announcement has not been
reviewed or audited by the group`s external auditors.
Jacko Maree Fred Phaswana
Chief executive Chairman
10 August 2011
Normalised results
With effect from 2004, we have adjusted the group`s results reported under IFRS
for required accounting conventions that do not reflect the underlying economic
substance of transactions. To arrive at the normalised results the IFRS results
have been adjusted for the following items:
* Preference share funding for the group`s Black Economic Empowerment Ownership
initiative (Tutuwa) transaction is deducted from equity and reduces the shares
in issue in terms of IFRS.
* Group companies` shares held for the benefit of Liberty policyholders that
result in a reduction of the number of shares in issue and the exclusion of fair
value adjustments and dividends on these shares. The IFRS requirement causes an
accounting mismatch between income from investments and changes in
policyholders` liabilities.
* Group share exposure entered into to facilitate client trading activities. As
part of the normal trading operations, a group subsidiary offers to its clients
trading positions of listed shares, including its own shares. In order to hedge
the risk on these shares the subsidiary buys or sells short group shares in the
market. Although the share exposure on the group`s own shares is deducted from
equity and the related fair value movements are reversed in the income statement
on consolidation, the client trading position and fair value movements are not
eliminated, resulting in an accounting mismatch.
The group has corrected these accounting mismatches resulting from the
application of IFRS in preparing the normalised results.
The result of these adjustments is shown in the table below:
Normalised headline earnings
Weighted average Headline Growth on
number of shares earnings 1H10
`000 Rm %
Disclosed on an IFRS basis 1 508 423 6 562 12
Tutuwa initiative 63 479 123
Group shares held for the 15 073 (47)
benefit of Liberty
policyholders
Share exposures held to (773) (1)
facilitate client trading
activities
Normalised 1 586 202 6 637 11
Abridged unaudited results in accordance with IFRS
The Standard Bank Group`s consolidated interim results for the six months ended
30 June 2011 have not been audited or independently reviewed by the group`s
external auditors. The preparation of the group`s consolidated interim results
was supervised by the group financial director, Simon Ridley, BCom (Natal),
CA(SA), AMP (Oxford). These results were made publicly available on 11 August
2011.
Consolidated income statement
for the six months ended 30 June 2011
% 1H11 1H10 FY10
change Unaudited Unaudited Audited
Rm Rm Rm
Income from banking activities 2 29 650 28 995 58 746
Net interest income (1) 14 323 14 452 28 742
Non-interest revenue 5 15 327 14 543 30 004
Income from investment 31 19 923 15 255 51 149
management and life insurance
activities
Total income 12 49 573 44 250 109 895
Credit impairment charges (22) 2 970 3 790 7 524
Benefits due to policyholders 36 12 810 9 389 37 335
Income after credit impairment 9 33 793 31 071 65 036
charges and policyholders`
benefits
Operating expenses in banking 2 17 426 17 019 36 656
activities
Operating expenses in 12 4 825 4 295 9 388
investment management and life
insurance activities
Net income before goodwill 18 11 542 9 757 18 992
Goodwill impairment 144
Net income before associates 18 11 542 9 757 18 848
and joint ventures
Share of profit from associates (57) 115 269 633
and joint ventures
Net income before indirect 16 11 657 10 026 19 481
taxation
Indirect taxation 19 781 656 1 475
Profit before direct taxation 16 10 876 9 370 18 006
Direct taxation 24 3 053 2 456 4 999
Profit for the period 13 7 823 6 914 13 007
Attributable to minorities 30 1 064 818 1 846
Attributable to preference (10) 179 199 387
shareholders
Attributable to ordinary 12 6 580 5 897 10 774
shareholders
Basic earnings per share 10 436,2 398,0 722,1
(cents)
Diluted earnings per share 10 422,4 383,1 696,0
(cents)
Headline earnings
for the six months ended 30 June 2011
% 1H11 1H10 FY10
change Unaudited Unaudited Audited
Rm Rm Rm
Group profit attributable to 12 6 580 5 897 10 774
ordinary shareholders
Headline earnings adjustable (56) (63) 296
items (reversed)/added back
Goodwill impairment - IFRS 3 144
Loss on deemed disposal of 22 10 10
associate - IFRS 3
Profit on sale of property and (24) (19) (23)
equipment - IAS 16
Realised foreign currency 21
translation reserve on foreign
operations - IAS 21
Losses on the disposal of 30
businesses and divisions - IAS
27
Reversal of impairment of (4)
associate - IAS 28
Impairment of investment in 14
joint venture - IAS 31
Impairment of intangible assets 179
- IAS 38
Realised gains on available-for- (54) (54) (75)
sale assets - IAS 39
Taxation on headline earnings 27 20 (28)
adjustable items
Minority share of headline 11 14 (73)
earnings adjustable items
Headline earnings 12 6 562 5 868 10 969
Consolidated statement of financial position
as at 30 June 2011
% 1H11 1H10 FY10
change Unaudited Unaudited Audited
Rm Rm Rm
Assets
Cash and balances with central 20 30 816 25 687 28 675
banks
Financial investments, trading 5 395 729 376 934 370 364
and pledged assets
Loans and advances 4 741 071 712 474 710 722
Loans and advances to banks (9) 103 791 114 276 107 090
Loans and advances to customers 7 637 280 598 198 603 632
Investment property 13 22 095 19 520 21 521
Derivative and other assets (6) 138 196 147 066 169 203
Interest in associates and 84 17 871 9 723 10 533
joint ventures
Non-current assets held for 100 2 553
sale
Goodwill and other intangible 13 11 346 10 069 10 383
assets
Property and equipment 11 14 793 13 316 14 907
Total assets 5 1 374 470 1 314 789 1 336 308
Equity and liabilities
Equity 3 107 133 104 006 103 198
Equity attributable to ordinary 3 90 531 88 025 87 073
shareholders
Preference share capital and 5 503 5 503 5 503
premium
Minority interest 6 11 099 10 478 10 622
Liabilities 5 1 267 337 1 210 783 1 233 110
Deposit and current accounts 9 846 556 773 128 789 500
Deposits from banks 13 114 936 101 345 91 729
Deposits from customers 9 731 620 671 783 697 771
Derivative, trading and other (14) 197 564 228 579 222 594
liabilities
Policyholders` liabilities 10 199 744 182 349 197 878
Subordinated debt (12) 23 473 26 727 23 138
Total equity and liabilities 5 1 374 470 1 314 789 1 336 308
Contingent liabilities and capital commitments
as at 30 June 2011
1H11 1H10 FY10
Unaudited Unaudited Audited
Rm Rm Rm
Letters of credit and bankers` 12 787 11 881 10 407
acceptances
Guarantees 30 119 31 349 29 327
Contingent liabilities 42 906 43 230 39 734
Contracted capital expenditure 3 044 1 822 2 662
Capital expenditure authorised but not 7 733 9 358 8 415
yet contracted
Capital commitments 10 777 11 180 11 077
Consolidated cash flow information
for the six months ended 30 June 2011
1H11 1H10 FY10
Unaudited Unaudited Audited
Rm Rm Rm
Net cash flows from operating 10 905 9 338 27 164
activities
Net cash flows used in investing (4 128) (6 001) (13 912)
activities
Net cash flows used in financing (4 555) (2 775) (7 810)
activities
Effects of exchange rate changes on (81) 142 (1 750)
cash and cash equivalents
Net increase in cash and cash 2 141 704 3 692
equivalents
Cash and cash equivalents at beginning 28 675 24 983 24 983
of the period
Cash and cash equivalents at end of 30 816 25 687 28 675
the period
Consolidated statement of comprehensive income
for the six months ended 30 June 2011
1H11 1H10 FY10
Minorities
Ordinary and
shareholders` preference
Rm equity shareholders Total Total Total
Profit for the period 6 580 1 243 7 823 6 914 13 007
Other comprehensive 384 (222) 162 (312) (5 353)
income after tax for
the period
Exchange rate 292 48 340 324 (4 406)
differences
ontranslating equity
investment of foreign
operations
Foreign currency hedge 19 19 (653) (768)
of net investment
Cash flow hedges 154 154 (225) (214)
Available-for-sale (96) (167) (263) 281 116
financial assets
Revaluation and other 15 (103) (88) (39) (81)
gains/(losses)
Total comprehensive 6 964 1 021 7 985 6 602 7 654
income for the period
Attributable to 842 842 1 030 1 002
minorities
Attributable to equity 6 964 179 7 143 5 572 6 652
holders of the parent
Attributable to 179 179 199 387
preference
shareholders
Attributable to 6 964 6 964 5 373 6 265
ordinary
shareholders
Consolidated statement of changes in equity
for the six months ended 30 June 2011
Rm Ordinary Preference Minority Total
Share- share interest equity
holders` capital
equity and
premium
Balance at 1 January 2010 84 022 5 503 9 844 99 369
Equity-settled share-based 412 32 444
payment transactions
Tax on share-based payments 2 2
Change in shareholding of (37) 36 (1)
subsidiary
Net increase in treasury (23) 449 426
shares
Issue of share capital and 205 30 235
share premium and
capitalisation of reserves
Total comprehensive income 6 265 387 1 002 7 654
for the period
Net dividends paid (3 773) (387) (771) (4 931)
Balance at 31 December 2010 87 073 5 503 10 622 103 198
Balance at 1 January 2011 87 073 5 503 10 622 103 198
Equity-settled share-based 165 15 180
payment transactions
Tax on share-based payments (54) (54)
Change in shareholding of (23) 23
subsidiary
Net decrease in treasury 179 196 375
shares
Issue of share capital and 61 61
share premium and
capitalisation of reserves
Total comprehensive income 6 964 179 842 7 985
for the period
Dividends paid (3 834) (179) (599) (4 612)
Balance at 30 June 2011 90 531 5 503 11 099 107 133
Financial statistics
for the six months ended 30 June 2011
% 1H11 1H10 FY10
change Unaudited Unaudited Audited
Number of ordinary shares in
issue (000`s)
- end of period 1 1 510 480 1 498 023 1 505 093
- weighted average 2 1 508 423 1 481 814 1 491 956
- diluted weighted average 1 1 557 675 1 539 165 1 548 001
Cents per ordinary share
Headline earnings 10 435,0 396,0 735,2
Diluted headline earnings 11 421,3 381,2 708,6
Dividend 141,0 141,0 386,0
Basic earnings 10 436,2 398,0 722,1
Diluted earnings 10 422,4 383,1 696,0
Net asset value 2 5 994 5 876 5 785
Financial performance (%)
Return on equity (ROE) 14,9 13,9 12,7
Net interest margin 2,89 3,01 3,00
Credit loss ratio 0,81 1,05 1,05
Cost-to-income ratio 58,6 58,2 61,8
Capital adequacy (%)
Capital ratios (unaudited)
- tier I capital 12,4 11,8 12,9
- total capital 14,8 14,6 15,3
Segment report
for the six months ended 30 June 2011
Rm % 1H11 1H10 FY10
change Unaudited Unaudited Audited
Revenue contribution by
business unit
Personal & Business Banking 5 17 660 16 840 34 916
Corporate & Investment Banking 1 11 652 11 583 22 633
Central and other (27) 434 593 1 301
Banking activities 3 29 746 29 016 58 850
Liberty 29 19 869 15 395 51 466
Standard Bank Group - 12 49 615 44 411 110 316
Normalised
Adjustment for IFRS (42) (161) (421)
Standard Bank Group - IFRS 12 49 573 44 250 109 895
Profit and loss attributable
to ordinary shareholders
Personal & Business Banking 31 2 489 1 896 4 346
Corporate & Investment Banking 1 3 329 3 311 5 527
Central and other (25) 204 271 (108)
Banking activities 10 6 022 5 478 9 765
Liberty 17 633 540 1 323
Standard Bank Group - 11 6 655 6 018 11 088
Normalised
Adjustment for IFRS (75) (121) (314)
Standard Bank Group - IFRS 12 6 580 5 897 10 774
Private equity associates and joint ventures
for the six months ended 30 June 2011
1H11 1H10 FY10
Unaudited Unaudited Audited
Rm Rm Rm
Cost 383 402 382
Carrying value 568 644 641
Fair value 601 817 651
Loans to/(from) associates and 97 460 (37)
joint ventures
Share of (loss)/profit from (1) (12) 43
associates and joint ventures
Accounting policies
Basis of preparation
These results are prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards (IFRS), its
interpretations adopted by the International Accounting Standards Board (IASB),
the presentation and the disclosure requirements of IAS 34 Interim Financial
Reporting, the AC 500 standards as issued by the Accounting Practices Board, the
Listings Requirements of the JSE Limited and the requirements of the South
African Companies Act 71 of 2008, as amended. The consolidated financial results
are prepared in accordance with the going concern principle under the historical
cost basis as modified by the fair value accounting of certain assets and
liabilities where required or permitted by IFRS.
The accounting policies are in accordance with IFRS and are consistent with
those adopted in the previous year, except as noted below.
Change in accounting policy
In December 2010, the group early adopted the amendments to IAS 12 Income Taxes
(Deferred Tax: Recovery of Underlying Assets). In terms of the amendment, if
deferred tax liabilities or assets arise from investment property that is
measured using the fair value model in IAS 40 Investment Property, there is a
rebuttable presumption that the carrying amount of the investment property will
be recovered through sale. Comparative information for June 2010 has been
restated to conform to the revised standard. This has resulted in the deferred
tax liability in respect of these investment property surpluses being restated
to the sale rate and has correspondingly increased policyholders` liabilities by
R756 million. The adoption of this amendment did not impact headline earnings or
earnings per share.
Adoption of new standards and interpretations effective for the current
financial year
* IFRS 7 Financial Instruments: Disclosures (2010 improvements to IFRS);
* IAS 24 Related Parties (revised 2009); and
* IAS 34 Interim Financial Reporting (2010 improvements to IFRS).
The revised IFRS statements have not resulted in any changes to the group`s
accounting policies, nor has there been any impact on the financial statement
line items, headline earnings or earnings per share.
Reclassifications and restatements
The comparative statement of financial position at 30 June 2010 has been
adjusted to reflect the presentation consequences of the reclassifications and
restatements below, with no impact on reserves.
The group routinely enters into soft (e.g. maize) and hard (e.g. precious
metals) commodity-based financing transactions. Hard commodity-based financing
transactions within the trading book have historically been accounted for as
either outright purchases, by recognising a commodity and related derivative
forward sales agreement, or sales, through derecognition of the commodity and
recognition of a related derivative forward purchase agreement. The group has
revised the accounting treatment for these transactions based on market practice
and analogy to IFRS requirements for similar financing transactions with a
financial instrument underlying.
The group`s revised policy treats certain of the group`s hard commodity-based
financing transactions as either buy to sell backs (collateralised lending),
where a reverse repurchase agreement within trading assets is recognised, and
sell to buy backs (collateralised borrowing), where the commodity continues to
be recognised together with a repurchase agreement within trading liabilities.
These financing transactions are accounted for in accordance with the group`s
existing accounting policy for `Sale and repurchase agreements and lending of
securities`.
The group has revised the accounting treatment of commodity-based leasing
transactions which in prior periods were treated as lending/borrowing
transactions where the underlying stock was derecognised/recognised. Based on
market practice and analogy to IFRS requirements for these transactions, these
transactions have been reclassified as lease type transactions with the lease
fee being accrued over the term of the transaction.
For the classification of loans and advances to banks, banks are defined as
entities that are regulated deposit taking institutions. In previous reporting
periods, overnight placements with certain banking groups, which are not
regulated deposit taking institutions, were included under loans to banks. These
placements have been reclassified as loans to customers.
Where reporting responsibility for individual cost centres and divisions within
business units changes, the segmental comparatives are reclassified accordingly.
Costs relating to marketing and leadership development have been allocated to
the respective business units and premises costs relating to support functions
have been allocated to the central and other unit. During 2010, a detailed
review of the key business drivers determining the cost allocation methodologies
was performed across all African entities. Following this review, changes were
implemented in 2011 to reflect the improved cost methodologies. The individual
segmental income statement line items have accordingly been adjusted.
Declaration of dividends
Notice is hereby given that the following interim dividends have been declared:
*Ordinary dividend No. 84 of 141 cents per ordinary share (share codes: SBK and
SNB, ISIN: ZAE000109815), payable on Monday, 12 September 2011, to ordinary
shareholders recorded in the books of the company at the close of business on
the record date, Friday, 9 September 2011. The last day to trade to participate
in the dividend is Friday, 2 September 2011. Ordinary shares will commence
trading ex-dividend from Monday, 5 September 2011.
*6,5% first cumulative preference shares (first preference shares) dividend No.
84 of 3,25 cents per first preference share (share code: SBKP, ISIN:
ZAE000038881), payable on Monday, 5 September 2011, to holders of first
preference shares recorded in the books of the company at the close of business
on the record date, Friday, 2 September 2011. The last day to trade to
participate in the dividend is Friday, 26 August 2011. First preference shares
will commence trading ex-dividend from Monday, 29 August 2011.
*Non-redeemable, non-cumulative, non-participating preference shares (second
preference shares) dividend No. 14 of 312,41 cents per second preference share
(share code: SBPP, ISIN: ZAE000056339), payable on Monday, 5 September 2011, to
holders of second preference shares recorded in the books of the company at the
close of business on the record date, Friday, 2 September 2011. The last day to
trade to participate in the dividend is Friday, 26 August 2011. Second
preference shares will commence trading ex-dividend from Monday, 29 August 2011.
The relevant dates for the payment of dividends are as follows:
Non-redeemable,
6,5% non-cumulative,
cumulative non-participating
preference shares preference shares
(First preference (Second preference
Ordinary shares shares) shares)
JSE Limited
(JSE)
Share code SBK SBKP SBPP
ISIN ZAE000109815 ZAE000038881 ZAE000056339
Namibian Stock
Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Dividend per 141 3,25 312,41
share (cents)
Last day to Friday, Friday, Friday,
trade "CUM" 2 September 2011 26 August 2011 26 August 2011
dividend
Shares trade Monday, Monday, Monday,
"EX" dividend 5 September 2011 29 August 2011 29 August 2011
Record date Friday, Friday, Friday,
9 September 2011 2 September 2011 2 September 2011
Payment date Monday, Monday, Monday,
12 September 2011 5 September 2011 5 September 2011
Ordinary share certificates may not be dematerialised or rematerialised between
Monday, 5 September 2011 and Friday, 9 September 2011, both days inclusive.
Preference share certificates (first and second) may not be dematerialised or
rematerialised between Monday, 29 August 2011 and Friday, 2 September 2011, both
days inclusive.
Where applicable, dividends in respect of certificated shares will be
transferred electronically to shareholders` bank accounts on the payment date.
In the absence of specific mandates, dividend cheques will be posted to
shareholders. Preference shareholders (first and second) who hold dematerialised
shares will have their accounts at their CSDP or broker credited on Monday, 5
September 2011. Ordinary shareholders who hold dematerialised shares will have
their accounts at their CSDP or broker credited on Monday, 12 September 2011.
On behalf of the board
Loren Wulfsohn
Group secretary
Administrative information
Standard Bank Group Limited
Registration No. 1969/017128/06
Incorporated in the Republic of South Africa
Directors
TMF Phaswana (Chairman), Hongli Zhang** (Deputy chairman), SJ Macozoma
(Deputy chairman), JH Maree* (Chief executive), DDB Band, RMW Dunne#,
TS Gcabashe, SE Jonah KBE##, Sir Paul Judge#, KP Kalyan, Yagan Liu**,
KD Moroka, AC Nissen, MC Ramaphosa, SP Ridley*, MJD Ruck, Lord Smith
of Kelvin, Kt#, EM Woods
*Executive director **Chinese #British ##Ghanaian
RP Menell resigned on 4 February 2011
Group secretary
L Wulfsohn
Registered office
9th Floor, Standard Bank Centre, 5 Simmonds Street, Johannesburg 2001.
PO Box 7725, Johannesburg 2000.
Share transfer secretaries in
South Africa
Computershare Investor Services (Proprietary)
Limited
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Namibia
Transfer Secretaries (Proprietary) Limited
Shop 8, Kaiserkrone Centre,
Post Street Mall, Windhoek
PO Box 2401, Windhoek
Independent sponsor
Deutsche Securities (SA) (Proprietary) Limited
Joint sponsor
Standard Bank
Investors are referred to www.standardbank.com where a detailed analysis of the
group financial results, including an income statement and a statement of
financial position for The Standard Bank of South Africa Limited (SBSA), can be
found.
www.standardbank.com
Johannesburg
11 August 2011
Independent sponsor
Deutsche Securities (SA) (Proprietary) Limited
Joint sponsor
Standard Bank
Date: 11/08/2011 08:00:45 Produced by the JSE SENS Department.
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