| Wed 14 Mar 2001, 0:00 | | Stanbic - Results For The Year Ended 31 December 2 |
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STANDARD BANK INVESTMENT CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration No. 1969/017128/06)
Headline earnings up 28%
Headline earnings per share up 26%
Cost-to-income ratio improved to 58,9%
Return on equity 23,5%
Total dividends per share 25% higher
How we performed
A strong set of results
The year was characterised by lower volatility in emerging markets and by
static interest rates. Despite these positive developments, consumer and
business confidence in South Africa has been slow to recover from the high
interest rates of 1998 and 1999.
Retail credit demand, in particular, remained sluggish for most of the year.
International investors were deterred by developments in other parts of
sub-Saharan Africa and the rand, as the only freely traded currency in the
region, suffered as "safer" havens for discretionary funds were sought
elsewhere.
The threat of a hostile take-over in 2000 accelerated a thorough review of the
bank's strategies and prospects. The result was a set of targets that would
convince investors and shareholders to retain and renew their faith in the
group. The failure of the bid ended a prolonged period of uncertainty and
enabled us to focus without distraction on operational and strategic issues in
a dynamic environment and a fast changing industry.
Against this background, the results achieved for the year were pleasing
particularly as the critical performance indicators promised to shareholders in
November 1999 were all met or exceeded.
Highlights of the year's performance were:
- Headline earnings of R3 690 million were 28% higher, increasing the
five-year compound annual rate of growth to 24%;
- Headline earnings per share of 285 cents increased by 26%;
- The cost-to-income ratio improved to 58,9% from 61,6%, continuing the
improvement shown in each of the past five years; and
- The return on equity increased to 23,5%, from 21,8% in 1999.
All business units contributed to this strong performance with good increases
in earnings and return on equity. Further gratifying features were a reduction
in credit provisioning and tight control over expenses, both of which increased
profitability in a year of limited asset growth.
Substantial progress was made in process improvements and operational
efficiencies and these efforts will continue. The focus on customer service was
epitomised in the "Simpler. Better. Faster." campaign that was launched in the
last quarter of the year and has found ready acceptance from staff and
customers alike.
Earnings
Good growth in earnings
Total income in Standard Bank operations of R13 035 million after provision for
credit losses was 13% up, despite difficult business conditions.
- Net interest income before credit provisions was 7% higher. The margin
declined to 3,8% from 3,9% because of lower interest rates and subdued growth
in domestic loans and advances.
- Non-interest income, which now comprises half of total income, was 13% higher
- Fees and commission were 21% up thanks to the introduction of new products
and a re-pricing of existing services as well as strong growth from
International Operations.
- Trading income was 3% lower, mainly due to quieter markets and lower
volatility.
- The balance of non-interest income was 13% higher.
Credit provisioning declines
The charge for credit losses of R1 405 million was 8% lower than in 1999 and,
as a percentage of loans and advances, declined to 1,2% from 1,4%. Included in
this charge was R147 million for general debt provision, which now amounts to
R1 088 million.
- The quality of the loan book improved. Non-performing loans as a percentage
of average loans were down to 4,4% from 5,5%.
- The total balance sheet provision for credit losses of R3 474 million exceeds
the new provisioning guideline requirements of the Banks Act.
Costs were well controlled
Operating expenses for the year were 6% higher, with staff and other costs up
5% and 6% respectively. Domestic cost growth was only 4%.
- The cost-to-income ratio improved to 58,9% from 61,6%.
- Continuing focus on efficiency and cost reduction throughout the group will
further improve this ratio.
The taxation charge for the year was 25% higher, with an effective rate of 29%
(31% in 1999).
An exceptional loss of R37 million was incurred on disposal of investments and
on take-over defence costs in the first half of the year.
Liberty Group
Net income from continuing operations of R456 million has been included in the
group's headline earnings for the year.
- The underlying core insurance activities performed strongly: total premium
income was 19% up and new business written, 22% up.
- On a comparable basis, excluding the effect of share unbundlings by Liberty
in the second half of 1999, headline earnings were 10% higher.
- The life fund operating surplus was 11% down due to the 61% lower performance
of the JSE compared with the previous year.
- In accordance with a commitment to return excess capital to shareholders,
Liberty Group has proposed to use cash resources of R3,5 billion in a
distribution to shareholders, inclusive of the final dividend for the year.
Capital position strengthened
Total assets at the year-end of R284 billion were 12% higher, with banking
assets reflecting an increase of 13%.
- Total capital and reserves of R17,5 billion were 26% up, due mainly to the
improvement in earnings and higher profit retention through capitalisation
awards to shareholders in lieu of cash dividends.
- Total loans and advances of R127 billion were 13% higher, with domestic
growth restricted to 5%.
- The group remains well capitalised: total regulatory capital was 14,2% of
risk-weighted assets, and tier one capital, 10,7%. The application of the new
regulations to the Banks Act has the effect of reducing total regulatory
capital to 13,4%.
- R3,5 billion of tier two capital was raised during the year which will over
time improve the group's effective cost of capital.
Final dividend
A final dividend of 63 cents per share (1999: 50 cents) has been declared to
ordinary shareholders, bringing the total dividend for the year to 85 cents per
share (1999: 68 cents). Shareholders may elect to receive, for all or part of
their shareholding, fully paid ordinary shares as a capitalisation award, or a
cash payment. The total dividend is 3,3 times covered, consistent with group
policy.
Prospects
Sound economic and fiscal policies instituted by the South African government
and consistently followed over a number of years, have created a solid platform
for economic growth. The group is well positioned to benefit from a higher
level of economic activity and, provided that there are no unforeseen adverse
developments in international markets, it is expected that growth in earnings
for the year ahead should be satisfactory.
D E Cooper, Chairman
J H Maree, Chief Executive
Segmental report
The contribution by individual business units to total income and headline
earnings is set out below.
Banking operations' earnings up 34%
Banking operations as a whole performed strongly and increased their
contribution to the group's headline earnings from 84% in 1999 to 88%. Headline
earnings of R3 234 million were 34% higher.
Domestic Banking reflected a 39% increase in headline earnings, mainly due to a
17% lower debt charge, a 16% increase in fees and commission and a low 4%
increase in expenses.
Net interest income was up only 3% due to the twin effects of a softening in
the interest margin and limited growth in average lending. The cost-to-income
ratio at 58,5% was 1,7 percentage points better than in 1999.
- Retail Banking produced excellent results in a difficult market with headline
earnings 45% higher. The subdued retail lending environment was evident in the
low growth of 3% in average loans and the 1% increase in interest income. Costs
were well controlled and the cost-to-income ratio, at 65,6%, was 4,5 percentage
points lower than in 1999. The bancassurance partnership with Liberty Group has
continued to build momentum, and new business premiums for the year were 35%
higher.
- SCMB's headline earnings of R765 million were 33% up, with good performances
in all areas of the business. The core treasury operation produced strong
results. Operating expenses were 5% lower and the cost-to-income ratio reduced
to 54,3%.
- Commercial Banking was affected by the continued slowdown in business
activity. Headline earnings were 22% higher with revenues under pressure but
earnings benefiting from the focus on costs and the improved quality of the
loan book. The cost-to-income ratio for the year was 44,3%.
International Operations achieved a 25% increase in headline earnings, with
strong contributions from its core businesses - Capital Markets, Resource
Banking and Offshore Banking.
- Fees and commissions were well up due to continued growth in customer
business and increased advisory fees. Dealing profits remained buoyant.
- The acquisition of the Lazards offshore banking activities in the previous
year contributed to the growth in both Offshore Banking earnings and related
fees and commission.
- Cost-to-income ratio declined to 62,8%.
Stanbic Africa's headline earnings of R338 million were 21% up with good
performances from a number of operations.
- Provisioning in Kenya, Tanzania and Zimbabwe adversely impacted overall
earnings.
- Strong revenue growth and improved cost management saw the cost-to-income
ratio decline to 55,8% for the year.
A net gain of R723 million on the translation of assets and liabilities of
foreign entities into rands at the year-end, has been taken directly to
reserves.
2000 1999
% R million R million
Change Audited Audited
Segmental report
Total income
Domestic Banking 7 11423 10647
Retail Banking 10 7015 6387
Wholesale Banking 2 4388 4321
- SCMB 3 2246 2178
- Commercial Banking 2142 2143
Central services 20 (61)
International Operations 25 2013 1610
Stanbic Africa 27 1277 1007
Centralised funding (273) (181)
Standard Bank operations 10 14440 13083
Liberty Group income 456 472
Stanbic Group 10 14896 13555
Headline earnings
Domestic Banking 39 2466 1770
Retail Banking 45 1142 785
Wholesale Banking 28 1297 1011
- SCMB 33 765 576
- Commercial Banking 22 532 435
Central services 27 (26)
International Operations 25 569 455
Stanbic Africa 21 338 280
Centralised funding (139) (85)
Standard Bank operations 34 3234 2420
Liberty Group earnings (3) 456 472
Stanbic Group 28 3690 2892
CONSOLIDATED BALANCE SHEET
2000 1999
R million R million
Audited Audited
ASSETS
Standard Bank operations 208277 184308
Cash and short-term funds 34178 33925
Investment and trading securities 16488 12892
Loans and advances 126890 112445
Other assets 27329 21796
Interest in associated undertakings 100 65
Property and equipment 2906 2756
Acceptances outstanding 386 429
Liberty Group operations 75943 69214
Current assets 3909 3908
Investments 71543 64990
Intangible assets 58 7
Goodwill 123 -
Equipment and furniture 310 309
Total assets 284220 253522
EQUITY AND LIABILITIES
Capital and reserves 17534 13944
Share capital 139 136
Share premium 1648 1000
Reserves 15747 12808
Minority interest 4393 6410
Liabilities 262293 233168
Standard Bank operations 193441 173123
Deposit and current accounts 168845 155536
Other liabilities and provisions 20753 17123
Bonds 3457 35
Acceptances outstanding 386 429
Liberty Group operations 68852 60045
Life funds 62138 56184
Long-term liabilities 1828 1566
Other liabilities 4886 2295
Total equity and liabilities 284220 253522
CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
Contingent liabilities
- letters of credit 2159 1830
- guarantees 18333 11619
Capital commitments
- contracted capital expenditure 168 165
- capital expenditure authorised but not
yet contracted 57 4
ORDINARY SHAREHOLDERS' FUNDS
Adjusted for the increase in market value
over the carrying value of subsidiaries and
associates and over the book value of
investments and property 20652 17431
CONSOLIDATED INCOME STATEMENT
2000 1999
% R million R million
Change Audited Audited
Standard Bank operations
Interest income 20697 21255
Interest expense 13465 14524
Net interest income before
provision for credit losses 7 7232 6731
Provision for credit losses (8) 1405 1527
Net interest income 12 5827 5204
Non-interest income 13 7208 6352
Total income 13 13035 11556
Operating expenses 6 8506 8060
Employee compensation and benefits 5 4461 4241
Other operating expenses 6 4045 3819
Operating profit 30 4529 3496
Income from associated undertakings 16 10
Exceptional items (37) (13)
Income before taxation 29 4508 3493
Taxation 25 1298 1035
Income after taxation 31 3210 2458
Attributable to outside and
preference shareholders 13 13
Standard Bank income attributable to
ordinary shareholders 31 3197 2445
Liberty Group operations
Income before taxation 2149 2471
Taxation 938 863
Income after taxation 1211 1608
Attributable to outside and preference
shareholders 869 1136
Net income before investment (deficit)/surplus 342 472
Net income from continuing operations 9 456 420
Net income from unbundled operations - 52
Exceptional items (114) -
Investment (deficit)/surplus (235) 173
Liberty Group income attributable to
ordinary shareholders 107 645
Group income attributable to ordinary
shareholders 7 3304 3090
HEADLINE EARNINGS
Group income attributable to ordinary
shareholders 3304 3090
Standard Bank income adjusted for: 37 13
- restructuring costs - 138
- net deficit/(surplus) on the sale
of investments 14 (52)
- goodwill on acquisition of subsidiaries - 67 -
costs associated with take-over defence 23 54
- income from the alignment of reporting
periods - (194)
Liberty Group income adjusted for: 114 -
- secondary tax on companies relating to
capital reduction 112 -
- goodwill amortised 2 -
Less: Taxation on the above items - (38)
Investment deficit/(surplus) 235 (173)
Headline earnings 28 3690 2892
FINANCIAL STATISTICS
2000 1999
% R million R million
Change Audited Audited
Stanbic Group
Shares in issue (millions)
Number of ordinary shares in issue
Before deduction of treasury shares:
- end of period 1408 1375
- weighted average 1394 1373
After deduction of treasury shares:
- end of period 1309 1279
- weighted average 1296 1277
Cents per ordinary share
Headline earnings 26 284,8 226,5
Dividends 25 85,0 68,0
Earnings 255,0 242,0
Fully diluted earnings 251,7 239,9
Net asset value 23 1339 1089
Adjusted shareholders' funds 16 1577 1363
Financial performance (%)
Return on equity 23,5 21,8
Standard Bank operations
Financial performance (%)
Return on equity 21,9 20,8
Return on average total assets 1,7 1,4
Cost-to-income 58,9 61,6
Effective tax rate 28,9 31,5
Capital adequacy (%)
Capital ratio
- primary capital 10,7 9,6
- total capital 14,2 11,4
STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
2000 1999
R million R million
Audited Audited
Shareholders' funds at beginning
of the year 13944 12603
Movements in share capital and
share premium 651 (638)
Shares issued 721 3035
Write-off of goodwill - (2748)
Elimination of treasury shares (70) (925)
Movements in non-distributable reserves 319 (209)
Translation of foreign entities 477 (242)
Subsidiaries and equity accounted undertakings (181) (19)
Capital surpluses 23 52
Movements in distributable reserves 2620 2188
Group income attributable to ordinary
shareholders 3304 3090
Ordinary dividends (1111) (870)
Translation of foreign entities 246 (29)
Subsidiaries and equity accounted undertakings 181 (7)
Other - 4
Shareholders' funds at end of the year 17534 13944
CONSOLIDATED CASH FLOW INFORMATION
Cash flows from operating activities 11248 12239
Cash flows (used in)/from operating funds (11122) 5886
Net cash used in investing activities (2618) (9579)
Net cash from/(used in) financing activities 2700 (415)
ACCOUNTING POLICIES
Basis of presentation
The financial statements have been prepared under the historical cost basis as
modified by the revaluation of certain trading and insurance assets and
liabilities, and in conformity with South African Statements of Generally
Accepted Accounting Practice.
Accounting policies
The accounting policies adopted in the preparation of the financial statements
are consistent with those of the previous year, with the exception of goodwill
which is now treated in accordance with the accounting statement on business
combinations ("AC 131") that became effective for the 2000 year. In terms of
this statement, goodwill arising on acquisition will be recognised as an asset
and amortised on a systematic basis over its useful life, not to exceed 20
years.
Comparative amounts
Comparative amounts have been restated where necessary to allow for more
meaningful comparison of performance.
Capitalisation share award and cash dividend
The directors have resolved to issue fully paid ordinary shares in the company
as a capitalisation share award to ordinary shareholders registered in the
books of the company at the close of business on 30 March 2001. Such
shareholders will be entitled, in respect of all or part of their shareholding,
to elect to receive instead a cash dividend of 63 cents per ordinary share
("the election"). New fully paid ordinary shares in the company will be issued
only to those ordinary shareholders who do not elect to receive this dividend
in respect of all or part of their shareholding on or before 26 April 2001.
The number of capitalisation shares to which shareholders are entitled will be
determined in the ratio that 63 cents per ordinary share multiplied by 1,05
bears to the weighted average price of Stanbic's ordinary shares on the JSE
Securities Exchange South Africa ("the JSE") for the four business days ending
24 April 2001. Where entitlements to new Stanbic ordinary shares result in
fractions of shares, these fractions will rank for a residual cash payment.
Documentation dealing with the capitalisation share award and election will be
posted to shareholders on or about 5 April 2001. In order to be valid,
completed election forms will need to be received by Stanbic's transfer
secretaries by no later than 12:00 on 26 April 2001. Election forms in
envelopes postmarked on or prior to 26 April 2001 will be accepted only if
received by no later than 12:00 on 2 May 2001. Subject to the approval of the
JSE and the Namibian Stock Exchange ("NSX"), a listing for the new ordinary
shares to be issued persuant to the capitalisation award will commence on 4 May
2001 in the case of the JSE and on 7 May 2001 in the case of the NSX. It is
expected that on or about 4 May 2001:
- Share certificates will be posted to shareholders;
- Where applicable, dividends and/or fractional entitlements will be
transferred electronically to shareholders' bank accounts. In the absence of
suitable mandates, cheques will be posted to shareholders; and
- A further announcement will be made on the results of the election.
By order of the board,
K D Curr, Group Secretary
14 March 2001
BOARD OF DIRECTORS
DE Cooper (Chairman)
EAG Mackay (Joint Deputy Chairman)
SJ Macozoma (Joint Deputy Chairman)
JH Maree* (Chief Executive)
RC Andersen*, DDB Band, E Bradley, AR Evans, DA Hawton, RJ Khoza,
WS MacFarlane, BJM Masekela, RP Menell, RA Plumbridge, PC Prinsloo*, M Rapp#, A
Romanis#, CL Stals, CB Strauss, EP Theron
* Executive director
# British
GROUP SECRETARY
KD Curr
Standard Bank Investment Corporation Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Reg No 1969/017128/06)
Registered office
9th Floor, Standard Bank Centre
5 Simmonds Street, Johannesburg, 2001
P O Box 7725, Johannesburg, 2000
Share transfer secretaries
In South Africa
Mercantile Registrars Limited
10th Floor, 11 Diagonal Street, Johannesburg, 2001
P O Box 1053, Johannesburg, 2000
In Namibia
Transfer Secretaries (Proprietary) Limited
Shop 12, Kaiserkrone Centre
Post Street Mall, Windhoek, Namibia
P O Box 2401, Windhoek, Namibia
This announcement, together with a financial presentation, is available on the
Standard Bank website at: http://www.standardbank.co.za
