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Standard Bank Corporate and Investment Banking South Africa
David Munro
12 May 2008
Standard Bank – a growth story
Strong South African base
Selected acquisitions in Africaand other emerging marketsEstablishment of operations
in key emerging markets
International operationsnow showing strong growthafter substantial investment
Standard Bank has grown HEPS and DPSby an average of 20% per annum over the past 20 years
2
335396
471558
666
796
961
124 151232 267
320386
102 0
200
400
600
800
1 000
1 200
2001 2002 2003 2004 2005 2006 2007
Headline EPS DPS
cents
Group headline earnings and dividends per share
CAGR 19%
CAGR 25%
Group return on equity
1 939 1 957 2 154 2 464 2 830 3 548 4 255
20.1 20.322.6 23.7
25.225.4 24.8
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2001 2002 2003 2004 2005 2006 20070
10
20
30
40
NAV per share ROE
cents %
CAGR 14%
3
Business unit review
22
15
22
34
18
Headlineearnings
growth %
24.813 153Standard Bank Group
25.8973Liberty Life
24.712 180Banking activities
(246)Central & other
27.36 765Corporate & Investment Banking
28.15 661Personal & Business Banking
ROE %
Headline earnings
Rm 2007
Business unit review - geographic snapshot
581 269Rest of Africa
1510 805South Africa
22
98
15
15
Headline earnings
growth %
13 153Standard Bank Group
(150)Central funding
1 229Outside Africa
973South Africa (Liberty Life)
9 832South Africa (Banking operations)
Headline earnings
Rm 2007
4
Headline earnings mix by major business unit
-1%(2006: 1%)
51%(2006: 46%)
7%(2006: 8%)
43%(2006: 45%)
Personal & Business Banking Corporate & Investment BankingCentral & other Liberty Life
Recent developments
• 2007
- Acquired a 77% stake in BankBoston Argentina in April
- Acquired a 61% share of Dundas Unlü Securities in Turkey in September
- Acquired a 50,1% stake in IBTC Chartered Bank Plc in Nigeria in September
• 2008
- Industrial and Commercial Bank of China invested R36,7bn in Standard Bank for a 20% shareholding implemented in March
- In process of acquiring a 60% stake in CFC Bank Ltd in Kenya
5
Current market conditions
• Significant subprime and secondary effects: a global phenomenon of falling asset prices and failing liquidity
• Constrained liquidity globally
• Heightened risk aversion, banks & investors: future not clear
• Effective closure of Securitisation Markets, global capital constraints
• Spiralling energy costs, electricity tariffs skewing the South African landscape
• Dramatically weaker US real economy
• Global Inflation?
• Knock-on effects of US slowdown on emerging markets
• Commodities still strong, but for how long?
• South African markets weaker since October: FX, Credit spreads, Yield curve
• Some markets seem to be powering ahead: should we be concerned?
Global financial crises
South Africa Sovereign 5-yr CDS vs.iTraxx Europe Crossover Series 7 and EMBI+ Spreads
Normalised Indices
0
100
200
300
400
500
600
700
800
04 M
ay 07
01 Ju
n 07
29 Ju
n 07
25 Ju
l 07
22 A
ug 07
17 S
ep 07
12 O
ct 07
07 N
ov 07
03 D
ec 07
28 D
ec 07
23 Ja
n 08
18 Feb
08
14 M
ar 08
09 A
pr 08
Spreads
SA 5-yr CDSiTraxx CrossoverEMBI+
6
SA macroeconomic outlook
• Slowdown in the SA economy becoming more evident– Prospective performance below trend
• Marked retrenchment in consumer spending
• Planned government infrastructure spend could provide an underpin to Wholesale banking growth in current conditions
2003 a 2004 a 2005 a 2006 a 2007 a 2008 f 2009 f 2010 f
GDP (% y/y) 3.1% 4.9% 5.0% 5.4% 5.1% 3.2% 3.9% 5.0%CPIX (annual average) 6.8% 4.3% 3.9% 4.6% 6.5% 9.2% 6.4% 5.0%Prime interest rate (year end) 11.5% 11.0% 10.5% 12.5% 14.5% 15.5% 14.0% 13.0%Average R/$ exchange rate 7.55 6.43 6.33 6.77 7.05 7.80 7.62 7.74
Source: South African Reserve Bank (SARB) Quarterly bulletin; Standard Bank Group Economics
Global emerging markets
7
Focus is on Global Emerging Markets
Brazil, Russia, China, India forecast as “G6” economies by 2050
Latin America / E. Europe / Asia / Africa / Middle East axis increased trade, capital flow
Development of financial markets, bank sector
Major commodity producing economies; significant infrastructure requirements
African and International footprint- in key markets
- franchise established
South African heritage- non-aligned, within axis
- appropriate product capability
Experience of developing financial markets – wholesale, retail
Core product expertise
Economic growth in the developing world:
The position for Standard Bank:
London
New York
Lima
Buenos Aires
Sao Paulo
Sydney
Prague
Milan Istanbul
Moscow
Tehran
DubaiShanghai
Hong Kong
Singapore Kuala Lumpur
Bucharest
Mexico City
Securities dealerBanking license
Representative office
Isle of Man
Jersey
Bank and Trust Licences
Outside Africa representation
8
• Standard Bank started focusing on the African continent in 1992, when Standard Bank acquired the African operations of ANZ Grindlays Bank in 8 African countries (Botswana, Kenya, Uganda, Zaire, Zambia and Zimbabwe, with minority holdings in Ghana and Nigeria)
• Standard Bank is the Largest African banking group by assets, market capitalization and earnings
African representation
• Standard Bank Africa employs over 6 900 staff in Africa, with more than 50% of the staff based in Uganda, Namibia, Zimbabwe and Malawi. More than 98 % of the employees in country is local staff
• Standard Bank Africa’s main competitors on the continent are the International Banks, such as Citi, Barclays and Standard Charter, as well as the various local Banks in Country
African representation
9
Our Structure
18
Corporate and Investment Banking SA
Coverage and
Distribution
Investment Banking
Global Markets
Transactional Products and
Services
Business Risk Director
Chief Operations
Officer
10
Our Brand of Corporate and Investment Banking
Transactional Ability
Idea Advisory Balance SheetCarry /
Risk Transfer
Client Relationship Management
Client centric model
• Two basic underpins
– A client centric business model in South Africa focused on sustainability and growth;
and
– Connectivity and integration with our International and African businesses
11
Keys to 2008 CIB SA
• Safety first: Liquidity, Credit, Market and Operational risk
• Strength of our client franchise and transactional underpin
• Volatility of markets
• Opportunity for significant transactions:– BEE– FDI– Infrastructure– M&A
• Quality of our Capital Management: BII & Ecap
• Quality of our management of other scarce resources
Motivation of our staff: Finding the BalanceFocus on the Client
CIB’s brand of Corporate and Investment Banking
Intimately linked to highly sustainable transactional services
Allows us to maximise the value in our client relationships in the local market while
At the same time leveraging and being leveraged by our International and African operations
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