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SBK - Standard Bank - Audited results and dividend for the year ended 31
December 2006
Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Reg No 1969/017128/06)
Share code: SBK & ISIN: ZAE000057378
Audited results and dividend announcement
for the year ended 31 December 2006
Overview of audited financial results in terms of IFRS
Standard Bank Group is pleased to report another year of strong financial
performance, a year in which all financial targets were met. The group grew
headline earnings per share 19% to 837,4 cents per share and generated a
return on equity of 27,1%. These results were prepared in accordance with
International Financial Reporting Standards (IFRS).
The group`s key financial highlights were:
Audited Unaudited Objectives
IFRS normalised 2006(1)
* Return on equity (%) 27,1 25,2 24,0
* Headline earnings growth 20 20
(%)
* Headline earnings per share 837,4 796,4
(cents)
* Headline earnings per share 19 20 14,6(2)
growth (%)
* Cost-to-income ratio (%)(3) 54,3 53,8 =55,5
* Credit loss ratio (%) 0,68 0,67 <0,75
* Dividends per share (cents) 320,0
* Dividends per share growth 20
(%)
(1) Financial objectives are
based on normalised results.
(2) CPIX inflation of 4,6%
plus 10%.
(3) Capital profit on
MasterCard excluded from
income.
Certain of the accounting conventions under IFRS distort the results from an
economic perspective. On a normalised basis, headline earnings per share
grew 20% and a return on equity of 25,2% was achieved. The relevant
adjustments are more fully discussed in the normalised results section of
this announcement and all figures quoted below are on an unaudited
normalised basis.
The group`s diverse spread of businesses were buoyed by a widely favourable
operating environment and measured against a high base, the group`s
earnings growth target of 10% above CPIX inflation was exceeded by a
substantial margin.
Globally, economic growth continued to be robust and growth in developing
countries outpaced that of the developed world. As a result of heightened
risk aversion among investors, capital inflows to emerging economies
reduced during May and June. Equity markets recoiled sharply, but soon
stabilised and generally, earlier losses were recovered.
In South Africa the rand weakened and, against the backdrop of heightened
economic activity, inflation edged upwards. In response, monetary policy
was tightened and interest rates were increased by 200 basis points between
June and December 2006, moderating growth in consumer demand towards the
end of the year. A shift in the primary thrust of economic growth from
households to corporates became evident late in the year. Brisk growth in
total private sector credit extension masked a moderate deceleration in
household borrowings and there was an increased uptake in corporate debt.
Key factors impacting the results
The factors impacting the group`s results for the 2006 year are, to a large
extent, a continuation of those highlighted at the interim reporting stage.
* Healthy asset growth
Corporate & Investment Banking loans and advances grew by 32%, as a result of
renewed demand for corporate term lending in South Africa and
collateralised lending outside of Africa. Personal & Business Banking
reflected strong growth in lending assets of 32%, as a result of record
home loan registration volumes driven by strong demand for housing. Focused
customer acquisition strategies in the card business have been successful.
* Strong revenue growth
Robust asset growth in both current and prior years and buoyant transactional
activity from both consumers and corporates contributed to total banking
income rising 25% for the year under review. All revenue streams
contributed to this performance.
* Increased trading volumes and strong equity markets
Revenues from client related activities were positively impacted by rising
prices and volatility in commodity markets. Higher volatility in foreign
exchange and interest rate markets also spurred client trading volumes.
Investment Management & Life Insurance benefited from a strong South
African equity market and achieved a 33% weighted average investment
return.
* Increased credit impairment charges
As expected, the low level of credit losses experienced in 2005 was not
sustained in 2006. The return to a net credit impairment charge in
Corporate & Investment Banking contrasts with the substantial credit
recoveries made in the prior year. Personal & Business Banking`s credit
loss ratio increased significantly in card debtors following the group`s
focus on higher risk and higher yielding segments.
* Continued reliance on wholesale funding
The increasing need to utilise wholesale-priced funding to support asset growth
contributed to the contraction in the group`s overall margin despite
maintaining domestic market share of retail savings deposits. Although our
securitisation efforts have achieved funding diversification, driving
retail deposit growth through innovative savings and investment products
remains a priority.
* Continued investment in operations outside of South Africa
The group continues to scale up its operations outside of South Africa,
investing heavily in talent and infrastructure in both existing and new
operations. This investment has had the immediate impact of increasing cost
growth in 2006 while meaningful revenue benefits from this incremental
spend are expected to become apparent from 2007 onwards.
Income statement analysis
Net interest income
Growth of 27% was achieved with strong increases recorded across the group`s
operations: Personal & Business Banking was up 25% and Corporate &
Investment Banking up 29% boosted by good growth in operations outside
Africa. Net interest income benefited from strong growth in average assets
of 36%.
The group`s net interest margin reflects an 18 basis points decline for the year
to 2,79% mainly due to the fast growing portfolio of lower margin corporate
assets, R115 billion of trading assets compared to R74 billion the previous
year and an R11 billion increase in surplus liquidity assets.
In banking activities related to lending and funding, the endowment benefits of
higher interest rates on shareholders` funds and transactional deposits
more than compensated for the negative margin pressure caused by increased
reliance on wholesale funding.
Non-interest revenue
Non-interest revenue comprised 53,7% (2005: 54,4%) of total banking income and
rose 23% following growth in fee and commission revenue of 18%, trading
revenue of 30%, and other revenue of 39%.
Personal & Business Banking increased fee and commission revenue by 17%. Growth
of 23% was achieved in card-based fees as cardholder turnover rose by 21%
following a 21% increase in the number of credit card accounts. The largest
contributors to fee and commission revenue were fees initiated through
customer interactions with the branch and ATM network (point of
representation fees), which grew 11%. This growth was mainly driven by
higher transaction volumes and values off a larger current account base
while price increases were generally sub-inflation. Corporate & Investment
Banking fees increased by 25%. Strong growth occurred in arranging and
underwriting fees in specialised and project finance following the
completion of a number of large transactions.
The group benefited from the robust commodity cycle coupled with increased
customer flows, and commodity trading revenue grew by 50%. A good
performance was recorded in base metal trading as volatility was spurred by
significant increases in demand. Precious metal trading enjoyed increased
client volumes as silver and gold prices touched 25-year highs. Foreign
exchange trading was 20% higher, benefiting from rand volatility, increased
trading volumes and market share gains outside South Africa. Trading
revenue in debt securities was higher as volatility in emerging market debt
encouraged clients to divest or hedge their exposures.
Growth in other revenue is attributable to higher bancassurance income and an
improved short-term insurance underwriting performance. Other income was
further increased by fair value gains from infrastructure funds and
dividends from project finance and property related investments. These
gains were partly offset by reduced fair value gains in the group`s listed
property portfolio. The group realised R157 million capital profit on the
sale of 59% of its investment in MasterCard as part of its initial public
offering. This investment is considered to be of an infrastructural nature
and is classified as an available-for-sale asset thereby excluding the
realised gain from headline earnings.
Credit impairment charges
Credit impairment charges rose 126% off a low base following large corporate
recoveries in 2005. This resulted in a credit loss ratio of 0,67% (2005:
0,40%).
Credit impairment charges in Personal & Business Banking comprise 85% of the
group`s charge and this unit`s credit loss ratio increased from 0,71% to
1,00%. As anticipated, the credit loss ratio for card products increased
from 3,32% to 7,03% as higher yielding customer accounts comprised a larger
portion of the card portfolio. Lending balances which grew rapidly in prior
years are now maturing and this contributed to the increase. Credit losses
for mortgages increased at a slightly lower rate than asset growth
resulting in a slight reduction in the credit loss ratio from 0,29% to
0,27%, and instalment sale and finance leases increased from 0,78% to 1,09%
following the impact of higher interest rates and specific impairments in
some African countries. Impairments against performing portfolios were
impacted by the anticipated effects of longer recovery periods given the
requirements of the National Credit Act, and closer alignment with Basel II
in defining the concept of default.
Corporate & Investment Banking`s credit loss ratio increased to 0,19% following
net recoveries in 2005. The increase reflects a credit loss more in line
with expectations and includes impairments in agriculture, fishing,
construction and mining exposures in operations outside South Africa.
Portfolio provisions against performing loans in Corporate & Investment
Banking reflect the larger advances book and take account of the recent
changes in domestic interest rates.
Total non-performing loans increased by 29% but remained unchanged as a
percentage of the lending book at 1,2%.
Operating expenses
Operating expenses in the group`s banking operations grew by 20% against income
growth of 25%. The resultant "jaws" gap of 5% improved the group`s
normalised cost-to-income ratio from 56,1% to 53,5%. Staff costs were 17%
higher and other operating expenses rose 22%.
Staff cost growth was driven mainly by the investment in skills in Corporate &
Investment Banking outside Africa. In this operation staff numbers grew by
21% compared with 4% growth for the banking operations in total.
Domestically, additional staff were employed to accelerate the
implementation of IT systems to meet regulatory requirements and to boost
collection capability. This growth was partly offset by a lower staff
complement in the local branch network. In South Africa, the net increase
in people employed by the bank was 840. Staff incentive costs were higher
across the bank in line with business performance. Non-guaranteed
remuneration as a percentage of basic salary costs across the bank is now
28%, up from 25% in 2005.
The larger cost categories within other operating expenses which outpaced
average growth over the year were IT costs, premises costs, marketing and
advertising costs and professional fees, which together comprise 53% of the
banking operation`s cost base. IT costs grew by 22% as a result of spending
on systems relating to regulatory compliance (including the National Credit
Act and Basel II); analysis relating to the implementation of SAP core
banking systems in Personal & Business Banking in South Africa; initial
investment in an integrated new test environment in Personal & Business
Banking in South Africa and continued standardisation of systems in the
rest of Africa. In Corporate & Investment Banking in South Africa, IT spend
included the development of market risk management systems and a credit
trading system. Premises costs grew by 27% due to increased space under
lease, expansion of the ATM network, refurbishment of points of
representation and costs relating to new signage following the
modernisation of the bank`s logo. Marketing and advertising costs grew by
25% as a result of increased sponsorship commitments, including the Africa
Cup of Nations, and marketing campaigns outside South Africa. Expenses were
also increased by professional fees related to the preparation for Basel II
and the National Credit Act.
Business units
Personal & Business Banking contributed 45% to group headline earnings (2005:
43%); Corporate & Investment Banking 46% (2005: 46%); and Investment
Management & Life Insurance 8% (2005: 7%).
Personal & Business Banking grew headline earnings by 24%. The business unit
benefited from continued strong growth across most consumer lending
products. Interest margins were tighter due to competitive pressures,
higher origination costs and pricing concessions, and increased levels of
wholesale-priced funding. Credit loss impairments increased sharply
following high growth in card debtors and the alignment of impairment
policies in the rest of Africa with the domestic operation. Buoyant
domestic economic activity led to strong growth in transactional fee income
and countered the impact of lower price increases. Income from short-term
insurance activities grew strongly following low loss ratios and increased
policy sales. Income from associates and joint ventures grew marginally off
the high base set in 2005. During the year the joint venture with ABIL in
microlending was terminated, which will allow Standard Bank to drive its
lending strategy more independently in the mass market, where it is
believed substantial growth potential exists.
Corporate & Investment Banking achieved a 20% increase in headline earnings,
with good contributions across all revenue streams. Net interest income
grew by 29% during 2006, largely attributable to higher current account
balances, structured finance transactions, growth in the term and property
lending books in South Africa and significant growth in collateralised
lending business outside Africa. A strong trading performance was achieved
on the back of turbulent base metal, precious metal and energy markets, in
addition to increased volumes and volatility in the forex and interest rate
trading desks. Overall trading revenue grew by 33%. Fee and commission
income benefited from increased transaction volumes across the operations
and fees earned on specialised and energy finance transactions. Other
income grew by 35%, off a high base, following increased dividend flows and
favourable fair value adjustments on infrastructure and unlisted equity
investments, partly offset by lower gains on a listed property portfolio.
Earnings were adversely impacted by higher impairments on non-performing
loans outside South Africa and an increase in the performing loan portfolio
impairment in South Africa. Staff costs grew by 31% due to increased
headcount, primarily outside Africa, and incentive provisions in line with
business growth.
Investment Management & Life Insurance grew its contribution to headline
earnings by 36% to R843 million, despite the significant changes the
industry is facing. Recurring expenses directly attributable to insurance
operations remained flat year on year. BEE normalised return on embedded
value increased to 22,4% from 20,1% in 2005. This higher return is a
consequence of improved capital management combined with sustained positive
investment market performance. Notwithstanding cash returned to
shareholders through dividends and a capital reduction during the year, the
BEE normalised embedded value per share grew by 12,5% to R82,55.
Acquisition of BankBoston Argentina
Approval from both the South African and Argentinian regulators for the proposed
acquisition by Standard Bank of BankBoston Argentina has been received and
the three-month formal process for the transfer of the agreed assets and
liabilities has commenced. The effective date of the transaction is
expected to be 1 April 2007 and the prospects for this operation continue
to improve. Due to acquisition and initial rebranding costs, the impact on
the group`s financial performance is not expected to be significant in
2007.
Balance sheet analysis
Banking assets increased by 29%, driven by a 32% growth in loans and advances in
both Personal & Business Banking and Corporate & Investment Banking.
Personal & Business Banking`s mortgage book grew 37% due to a still buoyant
residential market. The value of registrations for the year was up 43%
following growth of 16% in both average registration values and number of
new registrations. The instalment finance book increased by 23% benefiting
from a growth of 14% in the number of new vehicle sales in South Africa.
The card debtors book was up 42% as new accounts increased due to strategic
partnerships, a higher level of revolving facilities and increased consumer
activity.
The group`s South African market share in mortgage lending and instalment
finance remained stable during 2006, at 26% and 21% respectively. Market
share in credit card debtors increased marginally to 36% from 35% in the
prior year.
Corporate & Investment Banking experienced 32% loan growth largely due to growth
of 54% in operations outside Africa. This strong growth, though somewhat
flattered by a weakening exchange rate, occurred in trade finance lending,
collateralised lending and structured commodity finance following the
conclusion of a number of large new deals. In South Africa, term loan
growth benefited from the conclusion of a number of large corporate
transactions including empowerment financing transactions. Overnight
lending decreased by 31% as clients moved to fixed rate lending in a
firming interest rate environment and decreased use of overdraft
facilities.
The group`s ordinary shareholders` equity grew by 27% on a normalised basis.
This resulted from retained earnings growth and a R2,2 billion increase in
the foreign currency translation reserve. Included in retained earnings is
the R157 million capital profit realised on the sale of a portion of shares
held in MasterCard. The remaining unrealised portion is marked to market
and resulted in a R354 million gain accounted for directly in equity for
the year, bringing the total gain for the year to R511 million.
Capital management
The group has made considerable progress in preparing for the implementation of
Basel II and ensuring capital management processes meet global standards.
During the year the group issued preference share capital in two tranches
to the value of R2,5 billion and subordinated debt qualifying as Tier II
banking capital to the value of R4,7 billion.
Dividends
The dividend cover ratio of 2,5 times normalised headline earnings per share has
been maintained. A final dividend of 176 cents per share (2005: 145 cents)
has been declared, an increase of 21%. The total dividends declared in
respect of the 2006 year increased by 20% to 320 cents per share (2005: 267
cents).
Financial Sector Charter progress
Standard Bank`s overall Financial Sector Charter (charter) score (audited) has
improved to 91,28 points as at 31 December 2006 from 52,94 points as at 31
December 2004 (out of a maximum available 100 points), as the group`s
efforts in this regard have gained traction. Notably, given the importance
to sustainable economic development of developing black small and medium
enterprises (BSMEs), 10 million ordinary shares were allocated to 250
qualifying BSMEs. This formed part of the group`s Tutuwa Community Trust
initiative. The bank has made progress in employment equity and black
managers now represent 44% of the bank`s management compared with 37% the
previous year. A full, audited Financial Sector Scorecard will be available
in the group`s Sustainability and BEE Report to be published at the same
time as the group`s annual report. This scorecard will be submitted to the
Charter Council for verification.
Prospects
The global economy has continued to enjoy robust growth over the last three
years despite very high oil prices, global political uncertainty and
generally tighter monetary conditions. Global growth is expected to slow in
2007 due to an easing US economy, the correction of current global
imbalances and softer commodity prices. While growth in developing
economies is expected to moderate, it should remain relatively strong.
In South Africa, the increasing interest rate cycle appears to be approaching
its peak. The higher interest rates, combined with a record-high household
debt-to-income ratio, are expected to curb durable consumer spending. The
impact of this on retail activity should be felt towards the end of 2007.
However, as the momentum in consumer spending decreases, a shift from
consumer-led to corporate-led economic growth is occurring. The supply side
of the economy is expected to be the main driver of growth, which is likely
to see current domestic growth levels maintained. This will be supported by
focused initiatives including the South African Government`s Accelerated
and Shared Growth Initiative for South Africa (ASGISA).
In this environment, lending growth in Personal & Business Banking is set to
slow off its high base. Higher interest rates will benefit interest margins
but this will be offset to some degree by increased credit losses. A
slowdown in consumer spending and below inflation fee increases are likely
to restrain growth in fee income and will require focused cost management.
Cost pressures from regulatory related system and procedural
implementations are expected to continue.
Corporate & Investment Banking is expected to benefit from growth in South
African infrastructural and empowerment financing and a continued increase
in corporate credit demand. Trading desks locally and internationally
should continue to enjoy active client flow from the commodity and foreign
exchange markets.
Investment Management & Life Insurance earnings are linked to the performance of
South African investment markets. Despite the recent volatility in equity
markets, South Africa`s economic prospects remain favourable which should
have a positive impact on investment performance in 2007. Liberty Life is
confident that, subject to actuarial assumptions being met, real growth in
embedded value will be achieved in the year ahead.
In the year ahead economic conditions in the markets in which the group operates
are thus likely to be less favourable than in the last few years. We are
nevertheless confident that with the high calibre of our staff and our
portfolio of growing businesses, we will be able to deliver on our
financial objectives. The group`s principal financial objectives for 2007
remain unchanged: a normalised return on equity of 24%, and normalised
headline earnings per share growth of South African inflation (CPIX) plus
10 percentage points.
Jacko Maree Chief executive
Derek Cooper Chairman
Johannesburg
6 March 2007
Unaudited normalised results
International Financial Reporting Standards (IFRS) results have been adjusted in
arriving at normalised results for the following required accounting
conventions that do not reflect the underlying economic substance of
transactions:
Black Economic Empowerment Ownership (Tutuwa) initiative
In terms of the accounting treatment of the Tutuwa initiative concluded in
October 2004, preference share funding to the empowerment participants by
the group is not recognised as an asset but deducted from equity. Income
legally accrued on these preference shares is therefore not reflected in
income. Perpetual preference share capital raised to fund the transaction
is classified as equity and thus dividends are only accounted for when
declared. The ordinary shares delivered to the Tutuwa participants,
although legally effected, are deemed to be treasury shares for accounting
purposes until eventual redemption or refinancing of the preference share
funding. The "normalised" calculation adjusts results for preference
dividends receivable but not included in income and reverses the
elimination of preference shares against equity. Dividends declared on
perpetual preference shares are adjusted to an accrual basis. In addition,
in calculating normalised headline earnings per share, the number of shares
held by the Tutuwa participants is added back to the weighted number of
shares in issue.
Group companies` shares held for the benefit of policyholders
Group companies` shares held by Liberty Life are invested for the risk and
reward of its policyholders, not its shareholders, and consequently the
group`s shareholders are exposed to an insignificant portion of the fair
value changes on these shares. In terms of IFRS, with effect from January
2005, Standard Bank and Liberty Holdings shares held by Liberty Life on
behalf of policyholders are deemed to be treasury shares and the investment
in these shares is accordingly set off against equity in the group`s
financial statements. The cost price of these shares is eliminated against
ordinary shareholders` funds and minority interests on consolidation. Fair
value movements are eliminated from the income statement and dividends
received are eliminated against dividends paid without a corresponding
elimination in policyholders` liabilities resulting in a mismatch in the
group`s income statement. The elimination is attributable to Standard Bank
ordinary shareholders to the extent of the effective holding in Liberty
Life (approximately 30%).
The weighted average number of shares in issue for earnings per share is
calculated by deducting the full number of group shares held (100%), as the
accounting standard IAS 33: Earnings per share, does not contemplate
minority portions of treasury shares. This treatment exaggerates the
reduction in the weighted number of shares used for per share calculations.
For purposes of calculating the normalised numbers and ratios, the adjustments
described above are reversed and the group shares held are treated as
assets invested on behalf of policyholders. The result of these adjustments
is as follows:
Normalised financial statistics
for the year ended 31 December
%
change 2006 2005
Standard Bank Group
Ordinary shares in issue
(000`s)
- weighted average 1 358 1 353
415 382
- diluted weighted average 1 380 1 377
416 085
Cents per ordinary share
Headline earnings 20 796,4 666,0
Diluted headline earnings 20 783,7 654,5
Dividends 20 320,0 267,0
Earnings 24 820,7 663,6
Diluted earnings 24 807,6 652,2
Net asset value 26 3 579 2 830
Financial performance (%)
ROE 25,2 25,2
Net interest margin 2,79 2,97
Credit loss ratio 0,67 0,40
Cost-to-income ratio 53,5 56,1
Cost-to-income ratio excluding 53,8 56,1
capital profit on MasterCard
Normalised headline earnings
Weighted Growth on
average Headline 31 December
number
of shares earnings 2005
`000 Rm %
Disclosed in terms of 1 216 687 10 188 20
IFRS
Tutuwa initiative 99 190 361
Group shares held for 42 538 269
the benefit of Liberty
Life policyholders
Normalised 1 358 415 10 818 20
Normalised headline earnings contribution by business unit
for the year ended 31 December
%
Rm change 2006 2005
Personal & Business Banking 24 4 828 3 879
Corporate & Investment Banking 20 5 033 4 185
Central and other (65) 114 329
Central and other - IFRS >100 (220) (16)
Tutuwa adjustments (3) 334 345
Banking activities 19 9 975 8 393
Investment Management & Life 36 843 620
Insurance
Investment Management & Life 31 547 416
Insurance - IFRS
Policyholder`s deemed treasury 45 296 204
shares and Tutuwa adjustment
Standard Bank Group 20 10 818 9 013
Audited results prepared in accordance with International Financial
Reporting Standards
Consolidated income statement
for the year ended 31 December
% 2006 2005
Rm change Audited Audited
Income from banking activities 25 36 366 28 981
Net interest income 28 16 654 13 015
Interest income 32 50 855 38 625
Interest expense 34 34 201 25 610
Non-interest revenue 23 19 712 15 966
Income from investment 12 59 344 53 066
management and life insurance
activities
Total income 17 95 710 82 047
Credit impairment charges >100 2 733 1 207
Benefits due to policyholders 15 47 896 41 529
Income after credit impairment 15 45 081 39 311
charges and policyholders`
benefits
Operating expenses in banking 20 19 652 16 441
activities
Operating expenses in investment (19) 6 486 8 006
management and life insurance
activities
Net income before goodwill 27 18 943 14 864
Goodwill impairment (96) 15 421
Net income before associates and 31 18 928 14 443
joint ventures
Share of profit from associates 22 275 226
and joint ventures
Net income before indirect 31 19 203 14 669
taxation
Indirect taxation 8 841 778
Profit before direct taxation 32 18 362 13 891
Direct taxation 36 5 852 4 312
Profit for the year 31 12 510 9 579
Attributable to minorities 87 1 723 921
Attributable to preference 19 269 226
shareholders
Attributable to ordinary 25 10 518 8 432
shareholders
Headline earnings
for the year ended 31 December
% 2006 2005
Rm change Audited Audited
Group profit attributable to 25 10 518 8 432
ordinary shareholders
Headline earnings adjustable (601) 293
items added back or reversed(1)
Goodwill impairment (96) 15 421
Impairment of intangibles 9 -
Profit on sale of properties and 17 (53) (64)
equipment
Gains on disposal of businesses (374) -
and divisions
Recycled investment gains on >100 (198) (64)
available-for-sale assets
Taxation on headline earnings (30) 14 20
adjustable items
Minority share of headline (>100) 257 (281)
earnings adjustable items
Headline earnings 20 10 188 8 464
(1) These headline earnings adjustable items have been included in the
calculation of normalised headline earnings disclosed above.
Segment report
for the year ended 31 December
Headline earnings contribution by business unit
% 2006 2005
Rm change Audited Audited
Personal & Business Banking 24 4 828 3 879
Corporate & Investment Banking 20 5 033 4 185
Central and other >100 (220) (16)
Banking activities 20 9 641 8 048
Investment Management & Life 31 547 416
Insurance
Standard Bank Group 20 10 188 8 464
Statement of changes in shareholders` funds
for the year ended 31 December
Preference
Ordinary share
share capital
holders`funds and Minority Total
premium interest equity
Rm Audited Audited Audited Audited
Balance at 1 January 28 163 2 991 3 722 34 876
2005
Consolidation of 2 449 2 449
minority property
partnerships and
mutual funds
Restated balance at 28 163 2 991 6 171 37 325
1 January 2005
Profit for the year 8 432 226 921 9 579
Net dividends paid (3 747) (226) (637) (4 610)
Net translation gain 397 (21) 376
and hedging
Issue of share 246 71 317
capital and share
premium
Share buy-backs (677) (677)
Other reserve 117 (735) (618)
movements
Balance at 31 32 931 2 991 5 770 41 692
December 2005
Balance at 1 January 32 931 2 991 5 770 41 692
2006
Profit for the year 10 518 269 1 723 12 510
Net dividends paid (3 555) (269) (1 380) (5 204)
Net translation gain 2 174 10 2 184
and hedging
Issue of share 299 2 518 57 2 874
capital and share
premium
Share buy-backs (102) (102)
Other reserve 1 061 (6) 235 1 290
movements
Balance at 31 43 326 5 503 6 415 55 244
December 2006
Consolidated balance sheet
as at 31 December
% 2006 2005
Rm change Audited Audited
Assets
Cash and balances with banks 4 74 154 71 244
Short-term negotiable securities 13 29 175 25 931
Derivative assets (1) 100 832 101 502
Trading assets >100 81 569 38 387
Investments 27 186 896 147 146
Investment property 4 13 200 12 637
Loans and advances 32 448 411 338 773
Current and deferred taxation 5 1 043 990
Other assets 28 16 975 13 237
Non-current assets for disposal (100) - 2 380
Interest in associates and joint 34 8 584 6 417
ventures
Goodwill and other intangible 19 2 910 2 453
assets
Property and equipment 14 5 242 4 593
Total assets 27 968 991 765 690
Equity and liabilities
Equity 33 55 244 41 692
Equity attributable to ordinary 32 43 326 32 931
shareholders
Preference share capital and 84 5 503 2 991
premium
Minority interest 11 6 415 5 770
Liabilities 26 913 747 723 998
Derivative liabilities - 103 122 103 482
Trading liabilities 71 36 790 21 462
Deposit and current accounts 32 545 164 413 623
Current and deferred taxation 14 7 880 6 926
Other liabilities 44 34 323 23 759
Non-current liabilities for (100) - 1 267
disposal
Policyholders` liabilities 20 168 898 140 835
Subordinated debt 39 17 570 12 644
Total equity and liabilities 27 968 991 765 690
Contingent liabilities and capital commitments
as at 31 December
2006 2005
Rm Audited Audited
Contingent liabilities
Letters of credit 9 133 5 398
Guarantees 23 367 16 309
Irrevocable unutilised facilities 51 436 26 417
83 936 48 124
Capital commitments
Contracted capital expenditure 309 552
Capital expenditure authorised but 1 682 876
not yet contracted
1 991 1 428
Consolidated cash flow information
for the year ended 31 December
2006 2005
Rm Audited Audited
Net cash from operating activities 23 763 19 311
Net cash (used in)/from operating (9 601) 23 767
funds
Net cash used in investing activities (13 511) (5 521)
Net cash from/(used in) financing 2 187 (2 054)
activities
Financial statistics
for the year ended 31 December
% 2006 2005
change Audited Audited
Standard Bank Group
Number of ordinary shares in
issue (000`s)
- weighted average 1 216 1 205
687 169
- diluted weighted average 1 282 1 261
478 527
Cents per ordinary share
Headline earnings 19 837,4 702,3
Diluted headline earnings 18 794,4 670,9
Dividends 20 320,0 267,0
Basic earnings 24 864,5 699,7
Diluted earnings 23 820,1 668,4
Net asset value 30 3 537 2 729
Financial performance (%)
ROE 27,1 27,8
Net interest margin 2,75 2,92
Credit loss ratio 0,68 0,40
Cost-to-income ratio 54,0 56,7
Capital adequacy (%)
Capital ratio
- primary capital 10,8 10,5
- total capital 14,8 14,2
Declaration of dividends
Notice is hereby given that the following final dividends have been declared:
* Ordinary dividend No. 75 of 176 cents per ordinary share (share codes: SBK and
SNB, ISIN: ZAE000057378), payable on Monday, 16 April 2007, to ordinary
shareholders recorded in the books of the company at the close of business
on the record date, Friday, 13 April 2007. The last day to trade to
participate in the dividend is Wednesday,
4 April 2007. Ordinary shares will commence trading ex-dividend from Thursday, 5
April 2007;
* 6,5% first cumulative preference shares (first preference shares) dividend No.
75 of 3,25 cents per first preference share (share code: SBKP, ISIN:
ZAE000038881), payable on Monday, 2 April 2007, to holders of first
preference shares recorded in the books of the company at the close of
business on the record date, Friday, 30 March 2007. The last day to trade
to participate in the dividend is Friday, 23 March 2007. First preference
shares will commence trading ex-dividend from Monday, 26 March 2007; and
* Non-redeemable, non-cumulative, non-participating preference shares (second
preference shares) dividend No. 5 of 412,31 cents per second preference
share (share code: SBPP, ISIN: ZAE000056339), payable on Monday, 2 April
2007, to holders of second preference shares recorded in the books of the
company at the close of business on the record date, Friday, 30 March 2007.
The last day to trade to participate in the dividend is Friday, 23 March
2007. Second preference shares will commence trading ex-dividend from
Monday, 26 March 2007.
The relevant dates for the payment of the dividends are as follows:
Non-
redeemable,
non-
cumulative,
non-
6,5% participating
preference preference
shares shares
(First (Second
Ordinary preference preference
shares shares) shares)
JSE Limited
(JSE)
Share code SBK SBKP SBPP
ISIN ZAE000057378 ZAE000038881 ZAE000056339
Namibian Stock
Exchange (NSX)
Share code SNB
ISIN ZAE000057378
Dividend number 75 75 5
Dividend per 176 3,25 412,31
share (cents)
Dividend
payment dates
Last day to Wednesday Friday Friday
trade
"CUM" dividend 4 April 2007 23 March 23 March 2007
2007
Shares trade Thursday Monday Monday
"EX" dividend 5 April 2007 26 March 26 March 2007
2007
Record date Friday Friday Friday
13 April 2007 30 March 30 March 2007
2007
Payment date Monday Monday Monday
16 April 2007 2 April 2007 2 April 2007
Ordinary share certificates may not be dematerialised or rematerialised between
Thursday, 5 April 2007 and Friday, 13 April 2007, both days inclusive.
Preference share certificates (first and second) may not be dematerialised
or rematerialised between Monday, 26 March 2007 and Friday, 30 March 2007,
both days inclusive.
Where applicable, dividends in respect of certificated shares will be
transferred electronically to shareholders` bank accounts on payment date.
In the absence of specific mandates, dividend cheques will be posted to
shareholders. Preference shareholders who have dematerialised their share
certificates will have their accounts at their CSDP or broker credited on
Monday, 2 April 2007. Ordinary shareholders who have dematerialised their
share certificates will have their accounts at their CSDP or broker
credited on Monday, 16 April 2007.
On behalf of the board
Loren Wulfsohn
Group secretary
Accounting policies
Basis of preparation
The consolidated financial statements are prepared in accordance with, and
comply with International Financial Reporting Standards (IFRS) and the
South African Companies Act of 1973. The consolidated financial statements
are prepared in accordance with the going concern principle under the
historical cost basis as modified by the revaluation of assets and
liabilities where required in terms of IFRS. The accounting policies are
consistent with those adopted in the previous year except for the adoption
of accounting standards and interpretations issued with effective date of 1
January 2006. The adoption of these standards and interpretations has not
had a material effect on the results, nor has it required any restatements
of the results.
Reclassifications
The group reclassified certain balance sheet and income statement items relating
to 2005 to more appropriate line items to conform with presentation in the
current year. The most significant reclassifications are:
* Stanlib, the group`s asset management operation, has been reclassified from
banking activities to Investment Management & Life Insurance activities to
better reflect the revised operating structure of the group. This
reclassification impacted certain individual banking and insurance income
statement and balance sheet line items.
* Certain collateral amounts paid and received were previously netted against
the corresponding derivative liability and asset positions and have now
been disclosed separately under loans and advances or deposit and current
accounts respectively.
* An investment in a consolidated special purpose entity was previously
disclosed under short-term negotiable securities and has now been
reclassified to investments to better reflect the underlying nature of the
assets consolidated.
* Following a review of the percentage ownership, interests of the group`s
insurance operation in unincorporated property partnerships and mutual
funds have been consolidated and the opening balance of minority interest
restated accordingly.
These reclassifications did not impact profit or equity attributable to ordinary
shareholders of the group.
Audit opinion
These abridged financial statements have been extracted from the audited
financial statements on which KPMG Inc. and PricewaterhouseCoopers Inc.
have issued an unqualified audit report. This report is available for
inspection at the company`s registered office.
Board of directors
DE Cooper (Chairman), JH Maree* (Chief executive), DDB Band,
E Bradley, TS Gcabashe, DA Hawton, SE Jonah KBE +, Sir Paul Judge#,
SJ Macozoma, RP Menell, Adv KD Moroka, AC Nissen, MC Ramaphosa,
Dr MA Ramphele, MJD Ruck, MJ Shaw, Sir Robert Smith#, EM Woods
*Executive director #British +Ghanaian
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 2004 (Proprietary) Limited
70 Marshall Street, Johannesburg 2001.
PO Box 61051, Marshalltown, Johannesburg 2107.
Namibia
Transfer Secretaries (Proprietary) Limited
Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek.
PO Box 2401, Windhoek.
www.standardbank.co.za
Date: 07/03/2007 07:59:57 Produced by the JSE SENS Department.
