| Wed 13 Mar 2002, 0:00 | | Standard Bank Investment Corporation Limited - Res |
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Announcement For The Year Ended 31 December 2001
Standard Bank Investment Corporation Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration No. 1969/017128/06)
Share code: SBC
ISIN code: ZAE000014858
* Headline earnings per share 19% up
* Total dividends per share 20% higher
* Cost-to-income ratio improved to 57.3%
* Total return on equity 39%
* Translation gain of R4 billion taken directly to reserves
Commentary
Trading conditions
The major markets in which the group operates were all affected by the
global economic slowdown. These effects were more pronounced in the group's
international banking operations, with domestic operations less impacted
despite subdued business conditions.
The diversity and breadth of the group's earnings stream continue to be a
particular strength of the Standard Bank group and have contributed to the
achievement of good overall results for the year, with highlights as
follows:
* Headline earnings of R4 438 million, 21% higher;
* Headline earnings per share of 337 cents, 19% up;
* The cost-to-income ratio improved to 57.3%;
* Shareholders' funds of R26.0 billion, 42% higher; and
* Total return on equity of 39%, inclusive of translation gains of
R4 billion.
Headline earnings from domestic banking operations for the year were 24%
higher with all divisions contributing to this good performance. As was
indicated in November 2001, trading conditions in international and African
operations deteriorated in the second half as was evidenced by the lower
headline earnings growth achieved of 14% and 5% respectively.
The results for 2001 are a continuation of the group's performance over many
years. The ten-year compound annual growth rate for headline earnings is
24%.
Translation gain
The fall in the value of the rand over the year gave rise to a gain of
R4.0 billion on translation of shareholders' funds, which has been taken
directly to reserves in accordance with the group's accounting policy. This
gain is an enhancement to shareholder value and is the result of the group's
strategy of international diversification over many years.
Earnings
Standard Bank operations
Headline earnings from banking operations for the year of R3 980 million
were 23% higher. Features in this performance were the strong growth in non-
interest revenue and good control over expenses, particularly in domestic
operations, which helped counter margin erosion and moderate growth in
certain domestic asset categories.
Total income, after provision for credit losses, of R15 415 million was 19%
higher.
Net interest income before provisions was 13% up. The interest margin
reduced from 3.7% to 3.3% over the year mainly as a consequence of
declining interest rates and growth in lower margin high grade assets in
International Operations. Total advances at the year-end of
R157.8 billion were 24% higher. Growth in the domestic market, which
accounted for 79% of total advances, was 11%.
* Non-interest revenue of R8 879 million was 23% higher and now comprises
52% of total income compared with 50% in 2000.
* Fees and commissions, which constitute 62% of non-interest revenue,
were 16% higher with domestic banking 17% up.
Trading income was 35% up with International Operations sharply higher as a
result of the expansion of activities and the exchange rate effect.
* The balance of non-interest revenue was 45% higher with this strong
growth due to wealth creation and investment income, and property and
investment realisations.
The charge for credit losses of R1 603 million was 14% higher, with the
specific provision 10% up, and the general provision 52% higher due partly
to the introduction of minimum regulatory requirements. As a percentage of
advances, the total charge has reduced from 1.2% in 2000 to 1.1% and further
improvement is anticipated in the year ahead.
The improvement in the overall quality of the loan book is illustrated by
the decline in the overall level of arrears and by the reduction in non-
performing loans as a percentage of average loans to 3.3% from 4.4% in the
previous year. The group's exposure to the micro lending industry is not
material.
Operating expenses for the year of R9 744 million were 15% higher, with
staff and other operating costs 17% and 13% higher respectively. Costs
domestically were restricted to an increase of 9%. The cost-to-income ratio
improved further to 57.3% from 58.8% in the previous year. Excluding the
effects of acquisitions and exchange rate movements, the cost increase for
the year was 11%.
The group has benefited over the past two years from a pension contribution
holiday agreed with relevant stakeholders in 1999. In terms of this,
domestic pension contributions in 2000 and 2001 of R142 million and R158
million respectively, were not paid by the company but were met out of the
employer's reserve in the pension fund. The passing into law of the Pension
Funds Second Amendment Act on 7 December 2001 will materially alter the
circumstances surrounding the future use of pension fund surpluses. We
believe that the processes followed and authorities obtained with regard to
past contribution holidays were proper and in accordance with the sentiments
of the new act and that accordingly there should be no adjustments in
respect of past contribution holidays.
The tax charge for the period, inclusive of indirect taxes, was 32% higher
with an effective rate of 30.6% compared with 29.0% in the previous year.
Liberty Group
Liberty performed well over the year. Earnings of R458 million have been
included in Stanbic's headline earnings, 2% higher than the unadjusted
earnings for the previous year and, on a like for like basis, 14% up on
earnings adjusted for the effect of the R3.5 billion distribution to
shareholders in April 2001. The return on equity for the year from
continuing operations was 25% compared with 16% for the previous year.
Features in this performance were:
* The life fund operating surplus increased by 14%;
* The recovery in the JSE in the last quarter of the year coupled with
the continuing success of Liberty Asset Management's investment performance;
* The total value of new business was 16% higher and included, for the
first time, an allowance for the effects of capital gains taxation;
The increase of 24% in total embedded value from R11.9 billion in the
previous year to R14.8 billion; and
* Significant increases in market share.
The recently announced merging of Stanbic and Liberty's asset management and
wealth creation businesses is expected to confer substantial benefits over
time. Combined funds under management at the outset will exceed
R135 billion with a further R13 billion under administration. The unit trust
business will be the largest in the country in terms of gross sales.
Balance sheet
Total assets of R395.8 billion were 39% higher with banking assets of
R306.4 billion reflecting an increase of 47%. The sharp fall in the value of
the rand over the closing months of the year, together with substantially
higher hard currency assets in International Operations, contributed to this
rapid growth.
Total capital and reserves of R26.0 billion were 42% higher, due mainly to
the level of profit retention and the R4.0 billion translation gain from
foreign business units. Of total shareholders' funds at the year-end,
approximately one-third was invested in hard currencies.
The group remains adequately capitalised. At the year-end, total regulatory
capital was 14.4% of risk-weighted assets compared with a blended
requirement in the various jurisdictions of approximately 11%. Additional
tier two capital of R2.4 billion was raised during the year, bringing the
total amount of subordinated bonds issued over the past two years to
R5.9 billion.
Final dividend
A final dividend of 74 cents per share (2000: 63 cents) has been declared to
shareholders, bringing the total dividend for the year to 102 cents per
share (2000: 85 cents).
Prospects
The year ahead is expected to see the start of an economic recovery in the
major western countries which will, with some delay, begin to confer
benefits on the domestic economy and other emerging market economies. The
group is well positioned in all of its operations to take advantage of
anticipated higher levels of economic activity and, provided there are no
unforeseen adverse developments, it is expected that the rate of real growth
in earnings for the year ahead should be in line with the group's historic
trend.
Derek Cooper, Chairman
Jacko Maree, Chief Executive
Segmental report
The contribution by individual business units to headline earnings is set
out below.
Domestic Banking's headline earnings were 24% up. All business units
contributed strongly to this result with the focus on cost efficiencies and
non-interest revenue generation in the face of intense rate competition. The
cost-to-income ratio continued the trend of past years with an improvement
to 56.0% from 58.3% in the previous year. The effective tax rate, inclusive
of indirect taxes, of 30.7% was 2.9 percentage points higher.
The operations of Melville Douglas, a highly regarded private client asset
management business, were acquired with effect from 1 April 2001.
* Retail Banking's headline earnings of R1 512 million were 23% up. Total
revenue growth of 11% was indicative of very competitive conditions in the
retail banking market and pressure on interest income as a result of margin
concession and the endowment effect. The provision for credit losses was 4%
lower than the previous year with effective credit management an important
factor. Operating costs for the year were 10% higher with the cost-to-income
ratio improving to 63.9%.
* SCMB's headline earnings of R985 million were 30% higher and continued
the trend of strong results from this operation. Almost all areas within
SCMB reported increased revenues, improved market penetration and better
efficiencies. The provision for credit losses was 22% lower due to
concerted and pro-active attention given to asset quality. Operating
expenses were 10% up and the cost-to-income ratio at 50.7% was 5.0
percentage points lower.
* Commercial Banking's headline earnings of R443 million were 38% higher,
with the relatively low growth in revenues of 11% bolstered by the flat
level of credit provisioning and the 4% decline in operating expenses. The
restructuring of the business at the end of 2000 has been successful in
aligning skills and lowering the cost base. The cost-to-income ratio at
39.0% was 6.1 percentage points lower than the previous year.
Standard Bank Properties' headline earnings of R120 million were 35% higher,
notwithstanding difficult market conditions characterised by a general
oversupply of office and retail space.
* International Operations endured a year of extreme volatility and
uncertainty in financial markets. Headline earnings for the year were 14%
higher in rand terms but 3% lower in Sterling terms. Despite the difficult
operating environment, revenue growth was strong. The customer businesses of
Capital Markets and Precious Metals enjoyed a record trading year, with
Treasury, Trade Finance and Offshore Banking also performing well.
Proprietary trading activities suffered as a result of continuing market
uncertainties. Debt provisioning increased, due mainly to the effect of
depressed commodity prices on mining finance activities. The cost-to-income
ratio at 63.8% was 0.9 percentage points higher than in 2000. The return on
equity, in Sterling terms, was 12.7% for the year. The operations of Jardine
Fleming Bank in Hong Kong were acquired during the year and consolidated
with effect from 1 July 2001.
Stanbic Africa's headline earnings of R327 million were 5% higher. Trading
conditions over the year were difficult with a number of countries not
delivering on expectations. This was countered to an extent by excellent
contributions from Namibia, Mozambique, Swaziland and Zambia. The unsettled
socio-political situation in Zimbabwe had a major effect on the external
value of the Zimbabwe currency, and earnings from this operation in rand
terms declined from R95 million in 2000 to R38 million. A 60% holding in
Commercial Bank of Malawi was acquired during the year and consolidated with
effect from 1 July 2001.
In accordance with past years, operations in Zimbabwe have been accounted
for on a consolidated basis. The group's consolidated investment in Zimbabwe
at the year-end has declined from R129 million in 2000 to
R46 million.
Segmental report
2001 2000
% R million R million
Change Audited Audited
Headline earnings
Domestic Banking 24 3049 2461
Retail Banking 23 1512 1230
Wholesale Banking 33 1548 1166
- SCMB 30 985 755
- Commercial Banking 38 443 322
- Properties 35 120 89
Central services (11) 65
International Operations 14 648 567
Stanbic Africa 5 327 311
Central funding (44) (113)
Standard Bank operations 23 3980 3226
Liberty Group earnings 2 458 447
Standard Bank Group 21 4438 3673
CONSOLIDATED INCOME STATEMENT
2001 2000
% R million R million
Change Audited Audited
Standard Bank operations
Interest income 24298 20654
Interest expense 16159 13465
Net interest income before
provision for credit losses 13 8139 7189
Provision for credit losses 14 1603 1406
Net interest income 13 6536 5783
Non-interest revenue 23 8879 7201
Total income 19 15415 12984
Operating expenses 15 9744 8462
Staff costs 17 5242 4477
Other operating expenses 13 4502 3985
Operating profit 25 5671 4522
Income from associated undertakings 49 16
Exceptional items (65) (37)
Income before taxation 26 5655 4501
Taxation 32 1718 1299
Income after taxation 23 3937 3202
Attributable to outside and
preference shareholders 22 13
Standard Bank income attributable to
ordinary shareholders 23 3915 3189
Liberty Group operations
Operating profit 2557 1992
Exceptional items (324) (6)
Income before taxation 2233 1986
Taxation 1018 492
Income after taxation 1215 1494
Attributable to outside and preference
shareholders 873 1049
Net income before investment surplus/(deficit) 342 445
Net income from continuing operations 14 444 388
Net income from unbundled operations 14 59
Exceptional items (116) (2)
Investment surplus/(deficit) 287 (235)
Liberty Group income attributable to
ordinary shareholders 629 210
Group income attributable to ordinary
shareholders 34 4544 3399
HEADLINE EARNINGS
2001 2000
% R million R million
Change Audited Audited
Group income attributable to ordinary
shareholders 4544 3399
Standard Bank income adjusted for: 65 37
- Net surplus on the sale of investments - 14
- Goodwill amortised 65 -
Costs associated with take-over defence - 23
Liberty Group income adjusted for: 116 2
- Secondary tax on companies relating to
capital reduction 111 -
- Goodwill amortised 5 2
Investment (surplus)/deficit (287) 235
Headline earnings 21 4438 3673
CONSOLIDATED BALANCE SHEET
2001 2000
R million R million
Audited Audited
ASSETS
Standard Bank operations 306411 209014
Cash and short-term funds 43365 30754
Investment and trading securities 45730 16488
Loans and advances 157841 127057
Other assets 55194 31323
Interest in associated undertakings 187 100
Goodwill 403 -
Property and equipment 3376 2906
Acceptances outstanding 315 386
Liberty Group operations 89402 75966
Current assets 3230 3911
Investments 85617 71564
Intangible assets 70 58
Goodwill 113 123
Equipment and furniture 372 310
Total assets 395813 284980
EQUITY AND LIABILITIES
Capital and reserves 26046 18300
Share capital 140 139
Share premium 2047 1648
Reserves 23859 16513
Minority interest 5973 6816
Liabilities 363794 259864
Standard Bank operations 282739 193516
Deposit and current accounts 236553 168845
Other liabilities and provisions 39972 20828
Bonds 5899 3457
Acceptances outstanding 315 386
Liberty Group operations 81055 66348
Life funds 75918 62138
Long-term liabilities 2874 1828
Other liabilities 2263 2382
Total equity and liabilities 395813 284980
Ordinary shareholders' funds
Adjusted for the increase in market value over the
carrying value of Liberty Group and over the book value
of investments and property 28330 21194
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
2001 2000
R million R million
Audited Audited
Balance at beginning of the year 18300 13944
Changes in accounting policies - 486
Restated balance at beginning of the year 18300 14430
Group income 4544 3399
Dividends paid (1196) (926)
Translation gains 4037 723
Issue of share capital and share premium 462 721
Elimination of treasury shares (62) (70)
Capital (deficit)/surplus (39) 23
Balance at end of the year 26046 18300
CONSOLIDATED CASH FLOW INFORMATION
2001 2000
R million R million
Audited Audited
Cash flows from operating activities 11937 11080
Cash flows used in operating funds (12144) (12250)
Net cash used in investing activities (2431) (2618)
Net cash (used in)/from financing activities (858) 2700
CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
Contingent liabilities
- letters of credit 5449 2159
- guarantees 19199 18333
24648 20492
Capital commitments
- contracted capital expenditure 84 168
- capital expenditure authorised but not yet contracted 38 57
122 225
FINANCIAL STATISTICS
2001 2000
% R million R million
Change Audited Audited
Standard Bank Group
Shares in issue (millions)
Number of ordinary shares in issue
- end of period 1325 1309
- weighted average 1319 1296
Cents per ordinary share
Headline earnings 19 336,5 283,4
Dividends 20 102,0 85,0
Earnings 31 344,6 262,3
Fully diluted earnings 31 339,3 258,9
Net asset value 41 1965 1397
Adjusted net asset value 32 2138 1619
Financial performance (%)
Headline return on equity 20,0 22,4
Total return on equity 38,5 25,2
Standard Bank operations
Financial performance (%)
Headline return on equity 19,8 22,0
Total return on equity 39,2 26,7
Headline return on assets 1,5 1,6
Total return on assets 3,1 2,0
Cost-to-income ratio 57,3 58,8
Effective tax rate 30,6 29,0
Capital adequacy (%)
Capital ratio
- primary capital 11,2 11,1
- total capital 14,4 14,0
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.
The 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 (AC 107), in terms of which 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; and
Adoption of the revised accounting statement on Employee Benefits
(AC 116), in terms of which leave pay provisions in respect of past
service of employees have been recognised. The provisions of AC 116 with
regard to the recognition of pension fund surpluses as assets have not
at this stage been given effect to in view of the prevailing uncertainty
over aspects of the new legislation.
In addition to the above, comparative amounts have been restated where
necessary to allow for more meaningful comparison of performance.
Declaration of dividend No. 65
Notice is hereby given that a final dividend, No. 65, of 74 cents per
ordinary share, has been declared payable on 15 April 2002 to shareholders
recorded in the books of the company at the close of business on the record
date, 12 April 2002. The last day to trade to participate in the dividend is
5 April 2002. Shares will commence trading ex-dividend from Monday 8 April
2002.
The relevant dates for the payment of the dividend are as follows:
Last day to trade "CUM" dividend 5 April 2002
Shares trade "EX" dividend 8 April 2002
Record date 12 April 2002
Payment date 15 April 2002
Share certificates may not be dematerialised or rematerialised between
Thursday 28 March 2002 and Friday 12 April 2002, both days inclusive.
By order of the board,
Kathryn Curr, Group Secretary
12 March 2002
Board of Directors
DE Cooper (Chairman)
EAG Mackay (Deputy Chairman)
SJ Macozoma (Deputy Chairman)
JH Maree* (Chief Executive)
MJD Ruck* (Deputy Chief Executive)
RC Andersen*
DDB Band
E Bradley
AR Evans
DA Hawton
RJ Khoza
WS MacFarlane
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)
Share code: SBC
ISIN code: ZAE000014858
Registered office
9th Floor, Standard Bank Centre
5 Simmonds Street, Johannesburg, 2001
PO Box 7725, Johannesburg, 2000
Share transfer secretaries
In South Africa
Mercantile Registrars Limited
10th floor, 11 Diagonal Street
Johannesburg, 2001
PO Box 1053, Johannesburg, 2000
In Namibia
Transfer Secretaries (Proprietary) Limited
Shop 12, Kaiserkrone Centre
Post Street Mall, Windhoek
PO Box 2401, Windhoek
This announcement, together with a financial presentation, is available on
the Standard Bank website at: http://www.standardbank.co.za
