| Thu 16 Aug 2001, 0:00 | | Standard Bank Investment Corporation Limited - Int |
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ANNOUNCEMENT
INTERIM RESULTS AND DIVIDEND ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2001
Headline earnings 24% up
Headline earnings per share 21 higher
Cost-to-income ratio improved to 57,8%
Return on equity 21%
Interim dividend per share 27% higher
Difficult trading conditions
Domestic and African banking operations achieved good profit growth during
the period. International operations, although negatively affected by the
downturn in world markets, did well to maintain moderate growth in their
contribution to group earnings.
In tandem with developments overseas, momentum in the domestic market slowed
over the period, with forecasts of economic growth being continually
reduced. Demand for retail credit has shown only modest improvement, as
consumers are still reluctant to incur additional debt in an uncertain
economic and business environment. Certain sectors, such as home loans, have
shown better growth and this selective improvement is expected to continue
and broaden moderately over the remainder of the year.
Against this background, the group achieved good results for the six months.
Performance highlights were as follows:
Headline earnings of R2 020 million were 24% higher;
Headline earnings per share of 154 cents were up by 21%;
The cost-to-income ratio improved to 57,8%; and
The return on equity of 21,2% was in line with the comparable period,
although lower than the previous year's 22,4%.
Earnings
Standard Bank operations
Headline earnings from banking operations for the six months of R1 800
million were 26% up on the comparable period. The impetus for this
performance was good growth in net interest and non-interest income and
tight control over expenses, which more than offset the effects of the
relatively slow growth in loans and advances and the small decline in
interest margin.
Total income of R7 164 million, after provision for credit losses, was 13%
higher.
Net interest income before credit provisions was 12% up. The interest
margin for the period of 3,5% compares with 3,7% previously.
Non-interest income, which now comprises 51% of total income, was 14%
higher.
Fees and commissions were 15% up due to new charges introduced and the
re-pricing of existing services. The move by customers from paper-based
to electronic transactions continues, with obvious cost benefits for the
longer term.
Trading income was 13% higher. Good growth from foreign exchange and
interest rate products, and from customer businesses within international
fixed income capital markets, was offset to some extent by a reduction in
equity trading revenues.
The charge for credit losses of R747 million was 13% up and, as a percentage
of loans and advances, declined marginally to 1,13% from 1,17% for the 2000
year. International and African operations, whilst comprising a small part
of the overall provision, experienced a substantial increase in their level
of provisioning. Provisions in respect of domestic operations were only 4%
higher. Non-performing loans, as a percentage of average loans, reduced to
4,0% from 4,4% in December 2000 and 5,0% in June 2000. The quality of the
loan book has continued to improve, as evidenced by the decline in the level
of arrears across all loan categories.
Operating expenses for the period were 7% higher, with staff and other costs
up 6% and 9% respectively. The cost-to-income ratio improved to 57,8% from
60,9% for the comparable period and 59,0% for the 2000 year.
The taxation charge for the period was 24% higher, with an effective rate,
inclusive of indirect taxes, of 31,1%.
Liberty Group
Liberty Group performed well over the period. Net income of R220 million has
been included in Stanbic's headline earnings for the period, 8% higher than
unadjusted earnings for the comparable period and 16% up on earnings
adjusted for the effect of the R3,5 billion distribution to shareholders in
April 2001. The annualised return on equity for the period, calculated on
continuing operations, increased to 24% from 17% for the previous year.
Features in the performance for the period were:
The life fund operating surplus increased by 16%, primarily due to the
turnaround in investment performance attributed to stronger local equity
and bond markets over the period, as well as Liberty Asset Management's
good relative performance;
New business increased by 18% from R4 091 million in the comparable
period to R4 824 million. Total new recurring premiums were 17% up, and
single premiums 18% higher; and
Total embedded value of R13 441 million was up 13%.
Good progress has been made on implementing the strategies set for the year
and Liberty is well on course to meet its stated objectives.
Capital
Total assets R309,7 billion were 18% higher than at June 2000, with banking
assets 20% up. Measured against December 2000, total assets were 9% higher.
Total capital and reserves were 24% up, due mainly to the level of
earnings as well as capitalisation awards to shareholders in lieu of cash
dividends.
Loans and advances were 15% higher, with domestic growth restricted to 7%.
The group remains well capitalised, with total regulatory capital at 13,8%
of risk-weighted assets and tier one capital at 11,1%. The regulatory
minimum capital requirement will be raised to 10% from October 2001.
Interim dividend
An interim dividend of 28 cents per share (2000:22 cents) has been declared
to shareholders. The amount of the interim dividend has been determined in
accordance with the group's policy of declaring approximately one third of
the previous year's total dividend per share at the half year.
Prospects
Trading forecasts in the major markets of the world have been progressively
downgraded over the course of the year to date and an end to this trend is
not yet in sight. This is likely to affect trading results over the
remaining months of the year, particularly in those of the group's
operations that are more exposed to world markets. Similar growth in
earnings to that achieved in the first half is achievable in the second half
of the year, but this could be adversely impacted by further negative
developments in international markets.
Derek Cooper, Chairman
Jacko Maree, Chief Executive
15 August 2001
Segmental report
The contribution by individual business unit to total income and headline
earnings is set out below.
Banking operations performed well, with headline earnings 26% higher and the
contribution to the group's headline earnings increased from 88% to 89%.
Domestic Banking's headline earnings were 25% up, with revenue growth of 12%
exceeding the increase in debt provisioning and operating expenses of 4% and
8% respectively. Net interest income was 8% higher, with the domestic margin
a little lower than in the comparable period. Non-interest income was 16%
up, with fees and commissions, which comprise 38% of total revenues, 20%
higher. The cost-to-income ratio at 57,2% was 2,1 percentage points lower
than at June 2000.
Retail Banking again produced good results, with headline earnings 30% up.
Factors in this performance were strong growth in non-interest income, and
the continued focus on cost efficiencies that assisted in restricting the
growth in expenses to 9%. The provision for credit losses was 2% lower than
the comparable period. Net interest income was 8% up with this performance a
reflection of the subdued lending environment. The cost-to-income ratio was
2,4 percentage points lower at 65,5%.
SCMB's headline earnings of R490 million were 25% higher and continued the
trend of strong results from this operation. Testing and very competitive
market conditions limited the growth in total revenues. Operating expenses
for the period were only 4% higher, with the cost-to-income ratio one
percentage point lower at 48,1%.
Commercial Banking was heavily exposed to the slowdown in domestic business
activity but produced good results for the period, with headline earnings
25% higher. Total revenues were 17% higher and operating expenses 2% up. The
provision for credit losses was R54 million higher, reflecting the stress
still being experienced by mid-size corporates. This division enjoys the
lowest cost-to-income ratio in the group and, at 38,4%, was 5,5 percentage
points better than the comparable period.
International Operations' headline earnings grew by 13% in rand terms
despite difficult trading conditions as a result of the slowdown in global
markets and the resultant uncertainty created in emerging markets.
Significant increases in earnings occurred in the customer businesses of
Capital Markets and Precious Metals with the customer base expanded. As can
be expected, proprietary trading income was well down due to the continuing
uncertainty in emerging markets and the sell-off in the US high yield
market.
Stanbic Africa's headline earnings of R184 million were 20% higher for the
period, with strong performances from operations in Botswana, Namibia,
Swaziland, Uganda and Zambia. Earnings were boosted by initiatives to
develop non-funds income and by stringent cost controls. The credit
provision for the period was R15 million higher. The cost-to-income ratio at
54,2% was 4,0 percentage points lower than the comparable period. Total
assets of R14,2 billion were 16% up on June 2000.
Six months ended Year ended
30 June 30 June 31 December
2001 2000 2000
% R million R million R million
Change Unaudited Unaudited Audited
Segmental report
Total income
Domestic Banking 12 6165 5498 11423
Retail Banking 13 4063 3591 7015
Wholesale Banking 11 2152 1944 4388
- SCMB 7 1261 1184 2246
- Commercial Banking 17 891 760 2142
Central services (50) (37) 20
International Operations 10 1117 1011 2013
Stanbic Africa 11 673 605 1276
Centralised funding (44) (108) (272)
Standard Bank operations 13 7911 7006 14440
Liberty Group 8 220 204 447
Stanbic Group 13 8131 7210 14887
Headline earnings
Domestic Banking 25 1377 1100 2461
Retail Banking 30 646 498 1142
Wholesale Banking 25 763 610 1297
- SCMB 25 490 391 765
- Commercial Banking 25 273 219 532
Central services (32) (8) 22
International Operations 13 276 244 567
Stanbic Africa 20 184 153 311
Centralised funding (37) (69) (113)
Standard Bank operations 26 1800 1428 3226
Liberty Group 8 220 204 447
Stanbic Group 24 2020 1632 3673
CONSOLIDATED BALANCE SHEET
30 June 30 June 31 December
2001 2000 2000
R million R million R million
Unaudited Unaudited Audited
ASSETS
Standard Bank operations 231224 192280 208277
Cash and short-term funds 34751 32592 34178
Investment and trading
securities 23117 15074 16488
Loans and advances 136725 119208 126890
Other assets 33391 22249 27329
Interest in associated
undertakings 93 63 100
Property and equipment 2895 2680 2906
Acceptances outstanding 252 414 386
Liberty Group operations 78452 69331 75948
Current assets 2945 7232 3914
Investments 74986 61746 71543
Intangible assets 44 22 58
Goodwill 115 10 123
Equipment and furniture 362 321 310
Total assets 309676 261611 284225
EQUITY AND LIABILITIES
Capital and reserves 19886 16000 18300
Share capital 140 138 139
Share premium 2006 1527 1648
Reserves 17740 14335 16513
Minority interest 5271 6496 6816
Liabilities 284519 239115 259109
Standard Bank operations 213469 179023 192779
Deposit and current accounts 184972 156880 168845
Other liabilities and provisions 24948 20529 20091
Bonds 3297 1200 3457
Acceptances outstanding 252 414 386
Liberty Group operations 71050 60092 66330
Life funds 66187 56428 62138
Long-term liabilities 1906 1643 1828
Other liabilities 2957 2021 2364
Total equity and liabilities 309676 261611 284225
CONTINGENT LIABILITIES AND
CAPITAL COMMITMENTS
Contingent liabilities
- letters of credit 3151 1812 2159
- guarantees 15962 13153 18333
Capital commitments
- contracted 163 148 168
- authorised but not yet
contracted 230 121 57
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 23025 18651 21194
CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30 June 30 June 31 December
2001 2000 2000
% R million R million R million
Change Unaudited Unaudited Audited
Standard Bank operations
Interest income 11 11077 10022 20697
Interest expense 10 7195 6542 13465
Net interest income before
provision for credit losses 12 3882 3480 7232
Provision for credit losses 13 747 661 1405
Net interest income 11 3135 2819 5827
Non-interest income 14 4029 3526 7208
Total income 13 7164 6345 13035
Operating expenses 7 4570 4270 8518
Employee compensation and
benefits 6 2364 2237 4473
Other operating expenses 9 2206 2033 4045
Operating profit 25 2594 2075 4517
Income from associated
undertakings 18 10 16
Exceptional items (4) (23) (37)
Income before taxation 26 2608 2062 4496
Taxation 24 806 652 1294
Income after taxation 28 1802 1410 3202
Attributable to outside and
preference shareholders 6 5 13
Standard Bank income attributable
to ordinary shareholders 28 1796 1405 3189
Liberty Group operations
Operating profit 9 1112 1022 2162
Exceptional items (316) - (6)
Income before taxation 796 1022 2156
Taxation 374 334 662
Income after taxation 422 688 1494
Attributable to outside and
preference shareholders 315 484 1049
Net income before investment
surplus/(deficit) 107 204 445
Net income from continuing
operations 16 206 177 388
Net income from unbundled
operations 14 27 59
Exceptional items (113) - (2)
Investment surplus/(deficit) 158 (150) (235)
Liberty Group income attributable
to ordinary shareholders 265 54 210
Group income attributable to
ordinary shareholders 41 2061 1459 3399
HEADLINE EARNINGS
Group income attributable to
ordinary shareholders 2061 1459 3399
Liberty investment (surplus)/deficit (158) 150 235
Standard Bank income adjusted for: 4 23 37
- net deficit on the sale
of investments - - 14
- goodwill amortised 4 - - -
costs associated with
the take-over defence - 23 23
Liberty Group income adjusted for: 113 - 2
- secondary tax on companies
relating to capital reduction 111 - -
- goodwill amortised 2 - 2
Headline earnings 24 2020 1632 3673
FINANCIAL STATISTICS
Six months ended Year ended
30 June 30 June 31 December
2001 2000 2000
% R million R million R million
Change Unaudited Unaudited Audited
Stanbic Group
Shares in issue (millions)
Number of ordinary shares
in issue
Before deduction of
treasury shares:
- end of period 1423 1399 1408
- weighted average 1413 1383 1394
After deduction of
treasury shares:
- end of period 1322 1301 1309
- weighted average 1314 1286 1296
Cents per ordinary share
Earnings 39 157 113 262
Fully diluted earnings 38 154 112 259
Headline earnings 21 154 127 283
Dividend 27 28 22 85
Net asset value 22 1503 1229 1397
Adjusted net asset value 21 1741 1433 1619
Financial performance (%)
Return on equity 21,2 21,4 22,4
Standard Bank operations
Selected returns and ratios (%)
Return on equity 20,9 21,2 22,0
Return on total assets 1,6 1,5 1,6
Cost-to-income ratio 57,8 60,9 59,0
Effective tax rate 31,1 31,8 28,9
Capital adequacy (%)
Capital ratio*
- primary capital 11,1 10,6
- total capital 13,8 13,5
*Calculated in accordance with
new regulations
STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
Six months ended Year ended
30 June 30 June 31 December
2001 2000 2000
R million R million R million
Unaudited Unaudited Audited
Shareholders' funds at beginning
of the period
Previously reported 18300 13944 13944
Effect of changes in accounting
policies:
- ordinary dividends payable (AC107) - 640 640
- provision for leave pay
(AC116 revised) - (154) (154)
Restated 18300 14430 14430
Movements in share capital and
share premium
Shares issued 359 529 651
Movements in reserves 1227 1041 3219
Retained earnings 1236 819 2473
Group income attributable to
ordinary shareholders 2061 1459 3399
Ordinary dividends payable (825) (640) (926)
Translation of financial statements
of foreign entities - 168 723
Capital surpluses and other
movements (9) 54 23
Shareholders' funds at
end of the period 19886 16000 18300
CONSOLIDATED CASH FLOW INFORMATION
Net cash inflow/(outflow)
from operating activities 2048 (796) 126
Net cash inflow/(outflow)
from investing activities 493 (1648) (2618)
Net cash (outflow)/inflow
from financing activities (2861) 930 2700
ACCOUNTING POLICIES
The financial statements have been prepared under the historic cost
convention as modified by the revaluation of certain trading and insurance
assets and liabilities. The accounting policies adopted for purposes of
reporting comply in all material respects with South African Statements of
Generally Accepted Accounting Practice as well as with the South African
Companies Act of 1973.
These accounting policies are consistent with those applied at 31 December
2000 except for:
Adoption of the new accounting statement on Events after the balance sheet
date (AC107). In terms of this statement, dividends proposed or declared
after the balance sheet date and related secondary tax on companies are not
recognised as a liability at the balance sheet date but only on the date of
proposal or declaration. This change in recognition of liabilities relating
to dividends has been applied retrospectively and comparative amounts have
been restated; and
Adoption of the revised accounting statement on Employee benefits
(AC116). In terms of this statement, leave provisions in respect of past
service of employees have been recognised. This change has been applied
retrospectively and comparative amounts, as well as retained earnings in
respect of 2000, have been restated.
In addition to the above, comparative amounts have been restated where
necessary to permit more meaningful comparison of performance.
Strate
Stanbic is scheduled to move to the Strate system during December 2001.
Dematerialisation will start from 3 December 2001, with electronic trading
commencing on 27 December 2001 and the first electronic settlement taking
place on 7 January 2002. Paper scrip will not be accepted for settlement
after 27 December 2001. Shareholders who have not yet done so, are urged to
appoint a Central Securities Depository Participant as soon as possible.
Declaration of dividend No 64
Notice is hereby given that an interim dividend, No 64, of 28 cents per
ordinary share, has been declared payable on 21 September 2001 to
shareholders registered in the books of the company at the close of business
on 31 August 2001.
Where applicable, dividends will be transferred electronically to
shareholders' bank accounts on or about due date. In the absence of suitable
mandates, dividend cheques will be posted to shareholders.
By order of the board
K D Curr, Group Secretary
15 August 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,
P O Box 2401, Windhoek,
This announcement, together with a financial presentation, is available on
the Standard Bank website at: http://www.standardbank.co.za
