interim 2008 results presentation 1 financial results for the six months ended 30 june 2008 2...
TRANSCRIPT
1
Financial results
For the six months ended 30 June 2008
2
Financial highlights
6 165157 104Headline earnings (Rm)
51,8
0,78
24,4
3 904
181,0
444,5
451,1
Jun 2007
40
7
7
7
change %
48,7Cost-to-income ratio (%)
1,27Credit loss ratio (%)
19,8ROE (%)
5 451NAVPS (cents)
193,0DPS (cents)
477,7Diluted HEPS (cents)
481,8Headline EPS (HEPS) (cents)
Jun 2008
Financial results are stated on a normalised basis where applicable
2
3
Group income statement highlights
11 5022514 426Non-interest revenue
2 1091134 497Credit impairment charges
11 4232414 167Operating expenses
10 3664014 497Net interest income
15
(46)
21
change%
6 1657 104Normalised group headline earnings
514279Liberty contribution – headline earnings
5 6516 825Banking activities – headline earnings
Jun2007
Jun 2008
4
Business unit review
22,2203 726Corporate & Investment Banking
15
(46)
21
>100
(3)
Headline earnings
growth %
19,87 104Standard Bank Group
14,0279Liberty Life
20,16 825Banking activities
9,4561Central
22,82 538Personal & Business Banking
ROE %
Headline earnings
Rm Jun 2008
3
5
Headline earnings contribution and growth by major business unit
-100
-80
-60
-40
-20
0
20
40
60
80
100
-50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100
Con
tribu
tion
to g
roup
Hea
dlin
e E
arni
ngs g
row
th (%
)
Headline Earnings growth (%)
CIB Outside Africa
PBB SA
CIBRest of Africa
CIB SA
LibertyLife
PBBRest of Africa
Con
tribu
tion
to c
hang
e in
gro
up h
eadl
ine
earn
ings
(%)
6
Loans and advances
5332265Customers
21465Instalment sales
91323Card debtors
28
19
4250
15
16
Jun on Dec change
%*
25
26
3127
21
20
Jun on Jun change
%
748Gross loans and advances
108Banks
373CIB50Other lending
235Mortgage loans
373PBB
Jun 2008 Rbn
* Annualised
4
7
Funding
1621191Wholesale priced
(6)419Securitisation
505635Money market
21
2712
14
15
Jun on Dec
change %*
23
2717
17
19
Jun on Jun
change %
780Deposit and current accounts
432CIB137Intragroup from CIB
163Retail priced
354PBB
Jun 2008 Rbn
* Annualised
3%
3%
19%
13%
5%28%
29%
Retail customers SecuritisationDebt issuance OtherForeign currency funding InstitutionsCorporate customers
SBSA funding mix
8
Margin on interest earnings assets
% = net interest margin analysis
10 967
15 360
2 272
795
(357)
63 431
273
414 502
9 500
10 500
11 500
12 500
13 500
14 500
15 500
16 500
Jun-07 Volume Impact ofequity
issuance toICBC
IAS 39discountunwind
Term fundingrepricingbenefit
Endowmentimpact
Acquisitions Other Surplusliquidity
Jun-08
Rm
3.92%
0.15%0.10% 0.02%
0.29%
0.05%0.04% (0.13%)
4.44%
5
9
Non-interest revenue
11 5022514 426Total non-interest revenue
–123Realised Visa profit
17
13
(>100)
21
(7)
42
21
change %
11 20913 072Total non-interest revenue excl acquisitions
437493Insurance related revenue
273(27)Property related revenue
262318Banking and other
972907Other revenue
3 6895 222Trading revenue
6 8418 297Net fee and commission revenue
Jun 2007
Jun 2008
10
Credit impairment charges
1,51,32,2NPLs as a % of book
180
0,78
470
278
1 361
2 109
7 850
Jun 2007
0,781,27Credit loss ratio (%)
8902781 052IAS 39 discount
152
20
112
113
109
change %
444453Unwind of IAS 39 discount in interest income (Rm)
826564Impairment on PLs
2 8742 881Impairment on NPLs
4 5904 497Credit impairment charges (Rm)
9 70216 444Non-performing loans (Rbn)
Dec 2007
Jun 2008
6
11
Credit impairment trends
0.560.74 0.71
1.07
1.60
1.27
1.060.94
1.020.86
0.40 0.35
0.600.78
1.27
15.617.9
19.5 20.121.6
17.9
14.5 13.815.8 15.0
11.3 10.6 11.213.2
14.8
0.0
0.4
0.8
1.2
1.6
2.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 HY080
5
10
15
20
25
Credit loss ratio Medium-term target Average prime lending rate in SA
% %
12
Operating expenses
● Improved cost-to-income
– Strong income growth– Cost containment initiatives
● Staff costs up 21%
– Excluding acquisitions up 14%
– Headcount in SA flat since December
● Other operating expenses up 29%
– Excluding acquisitions up 21%
– Building capacity in chosen markets
56.955.7
56.9
55.2
52.751.6
48.7
0
5
10
15
20
25
30
35
2002 2003 2004 2005 2006 2007 HY0844
46
48
50
52
54
56
58
Cost-to-income ratio Total income growth
Total cost growth
% %
7
13
Net asset value movements summarised
Increase on opening
balance %
Jun 2008 Rbn
Opening balance – 1 Jan 2008 58,4
Transactions with shareholders 22,1 12,9
Shares issued 27,4 16,0
Dividends paid (5,3) (3,1)
Additional shareholder value 20,5 12,0
Headline earnings 12,2 7,1
Other earnings outside headline earnings 0,3 0,2
Currency translation movements including hedging activities 5,1 3,0
Net cash flow hedges 2,4 1,4
Other 0,5 0,3
Closing balance – 30 Jun 2008 42,6 83,3
14
Group return on equity
1 957 2 154 2 453 2 809 3 548 4 255 5 451
20.322.6
23.725.2 25.4 24.8
19.8
17.014.8
13.412.0 12.6 13.4 14.5
0
1 000
2 000
3 000
4 000
5 000
2002 2003 2004 2005 2006 2007 HY20080
5
10
15
20
25
30
NAV per share ROE Average cost of equity
cents %
8
15
Total capital adequacy ratio
14.4
11.3
13.9(1.3)
(0.7)(0.6)
(0.7)
(0.2)2.8
1.2 (0.5)
(0.5)
8
10
12
14
16
Basel I Dec2007
Risk-w eightedassets
increase
Equityreserves
disallow ed
Credit lossadjustments
Intangibleassets and
other
ProFormaBasel II Dec
2007
Risk-w eightedassets
increase
Issue ofshares to
ICBC
Profit for theperiod
Dividendspaid
Other Basel II Jun2008%
16
Capital adequacy and ICBC capital usage
2,5International – organic growth and conversion to Basel II
4,3Additional economic interest in Liberty Life
6,8To be utilised
15,9ICBC capital raised
1,5South Africa – organic growth and conversion to Basel II
0,8Africa – mainly CfC acquisition
9,1Utilised
RbnICBC capital usage as at 18 July 2008
8.5
11.22.5
2.3
0.3
0.4
0
2
4
6
8
10
12
14
Dec 2007 ProForma HY2008
Tier I Tier II
Tier III Regulatory min
%
11.3
13.9
9
Sim Tshabalala
18
0
4
8
12
16
20
Mar
02
Jun
02
Sep
02
Dec
02
Mar
03
Jun
03
Sep
03
Dec
03
Mar
04
Jun
04
Sep
04
Dec
04
Mar
05
Jun
05
Sep
05
Dec
05
Mar
06
Jun
06
Sep
06
Dec
06
Mar
07
Jun
07
Sep
07
Dec
07
Mar
08
0
2
4
6
8
10
Fixed investment spending (RHS) Spending by households Disposable income of households
Trading conditions in SA
% yoy
% yoy
10
19
Home Loans – South Africa
-20
-10
0
10
20
30
40
50
Mar
97
Sep
97
Mar
98
Sep
98
Mar
99
Sep
99
Mar
00
Sep
00
Mar
01
Sep
01
Mar
02
Sep
02
Mar
03
Sep
03
Mar
04
Sep
04
Mar
05
Sep
05
Mar
06
Sep
06
Mar
07
Sep
07
Mar
08
0
2
4
6
8
10
12
14
Residential building plans passed (3 quarter average)Mortgage lendingDebt servicing cost relative to income (RHS)
% yoy %
20
Macro environment in SA in 2008
● Significant forecast risk currently exists
● Base case scenario illustrated below
– 3% GDP growth expectation – Inflation
• Should start to decelerate from 4Q08• Meaningful deceleration in 1Q09• Potentially in target range late in 2009
– Interest rates• Flat rates for the rest of 2008• Possible easing from 2Q09
● Trade deficit continues to narrow as exports increase
● Steady formal sector labour market
● Existing fiscal policy good for business but also pro poor
11
21
Regulatory interventions in SA:Competition Commission
● No reference to abuse of market power or collusion
● Recommendations are balanced– Take into account the needs of customers, shareholders and other
stakeholders● Anticipate that it will take some time to fully implement the proposals
● Disagree with the principle of regulating unpaid debit order fees– These are legitimate and contractual fees– Standard Bank has been proactive in significantly reducing the impact of
these fees on the poor in recent years● The stability and integrity of the banking system is an imperative
– Confident that these principles will be upheld with regard to payment system access
● Banks and other stakeholders yet to receive the full report– Anticipate extensive engagement between interested stakeholders
22
Regulatory interventions in SA:Financial Sector Charter
● Continue to support the harmonisation process to align Financial Sector Charter with Codes of Good Practice
● Good progress continues to be made
– Black managers now comprise 51% of the bank’s management• Of these black managers, 53% are female
– Number of Mzansi accounts now 694 000– R12bn in Affordable housing loans since 2004– R40m invested in corporate social investment for the period under review– Weighted procurement spend from black suppliers increased by 35% in
the period under review
12
23
Regulatory interventions in SA:Other pending legislation
● Other pending legislation
– National Environmental Management Act• Waste Management Bill
– Expropriation Bill– Companies Bill– Consumer Protection Bill– Competition Amendment Bill
We expect the level of regulation to continue to increase
24
Key highlights for SBSA
● PBB
– Excellent earnings from transactional products mitigated reducedearnings from lending businesses
● CIB
– Positive outcomes from commitment to client centric model and expansion of the Investment Banking franchise
– New customer wins– Increased linkages into Rest of Africa and International facilitating
noticeable increase in cross border activity
● Successful in talent retention and continued progress in transformation
● Maintained investment in key IT initiatives
● Continued progress in bedding down Basel II related processes
● Effective focus on cost containment
13
25
Abridged SBSA income statement
7 113107 812Non-interest revenue
7 45488 074Operating expenses
6
112
28
change%
4 1384 376Headline earnings
1 8623 953Credit impairment charges
7 89610 116Net interest income
Jun 2007Rm
Jun 2008Rm
0,971,68Credit loss ratio (%)
49,444,8Cost-to-income ratio (%)
29,725,3ROE (%)
26
Abridged SBSA balance sheet
Dec 2007%
Jun 2007%
Jun 2008%
44217518Loans and advances
8,17,98,8Tier I capital adequacy ratio
302437Ordinary shareholder equity
11,411,411,9Total capital adequacy ratio
90
17
change%
8390Loan to deposit ratio
492575Deposits and current accounts
Jun 2007Rbn
Jun 2008Rbn
*
* Based on Basel I
*
14
27
Lending products in SAPersonal & Business Banking
● Home Loans– Median house price down 3% yoy in July– Value of new business registered down 28%– Reduced prepayments
● VAF– New passenger car sales down 19% ytd in July– Value of new loans in motor book down 32%– Motor: Non-motor split 49:51 (2007: 60:40)
● Card– Card turnover down 6%– Number of accounts down 2% but customers utilising limits
● Other lending– Small loans business in its infancy– Increased usage of overdraft facilities
28
Lending and other margin related products in SACorporate & Investment Banking
● Growth in income earning assets
– Activity in infrastructure related lending– BEE lending– Building manufacturing capacity
● Increased cost of funding generally in wholesale markets due to liquidity and market volatility
● Increased cost of carry on non-interest generating assets negatively impacting margin
15
29
Lending products in SACredit risk
● Credit experience to date has been very different for CIB and PBB
● Credit risk remains high given macro conditions
– Financial stress increasingly evident across corporate customer base in sectors impacted by the deteriorating economic environment
● 2008 outcome difficult to predict
30
Transaction products in SAPersonal & Business Banking
● Retail sales down 4% yoy in May
● Number of current accounts up 10%
● Number of other transaction and savings accounts up 4%
● Branch based transaction volumes
– Teller volumes up 3%– Enquiry volumes up 1%
● Call centre volumes up 4%
● Internet users up 19%
● ATM volumes down 2%
16
31
Transaction products and other services in SACorporate & Investment Banking
● Transactional products experiencing slower growth in volumes
– continue to generate attractively priced funding
● Continued growth in funds under custody
● Significant increase in fees generated throughout investment banking value chain
– Most notable in Mergers and Acquisitions, Leveraged Finance Solutions and Structured Trade Finance
● High levels of market volatility for the foreseeable future
– Primary market activities significantly lower given market illiquidity
● Equity investments suffered as a consequence of weaker local markets,in particular the listed property investments
32
Costs in SA
● Total costs increased below inflation
● Staff costs up 5%
– PBB up 6%, CIB up 10%, Central costs down 10%– Freeze on external hires across most areas of the bank
● Other operating expenses up 12%
– PBB up 6%, CIB up 13% – Some cost pressures have increased
• Infrastructure and premises • Operational risk losses • ATM bombings• Alternative power supplies• Industrial action
17
33
Outlook
● Need to be cautious
● But we are optimistic
– Global financial crisis not at an end, but far advanced– Upturn in the SA business cycle in mid-2009
• Pending fall in inflation and policy relief• Good pipeline in our Investment Banking franchise
– Investment trend to lock in higher secular growth rates– Broad political policy continuity anticipated
● The South African business is important as a base for our global businesses
– Strong links exist between our biggest business and our biggest growth businesses
– Increase in cross border activity across all product areas in CIB– Matrix management structure
Peter Wharton-Hood
18
35
PBB abridged income statement and key ratios
Jun 2008Rm
change%
Jun 2007Rm
Net interest income 9 355 34 6 973
Non-interest revenue 6 524 20 5 422
Total income 15 879 28 12 395
Credit impairment charges 4 012 110 1 913
Operating expenses 7 948 22 6 538
Normalised headline earnings 2 538 (3) 2 623
ROE (%) 22,8 28,7
Credit loss ratio (%) 2,18 1,31
Cost-to-income ratio (%) 49,7 52,4
36
Net interest income and margin
● Strong net interest income growth of 34%
– Average asset growth of 27%– Acquisitions contributing 7% of the absolute growth
● Increase of 24bps in net interest margin to 4,87% mainly due to the favourable endowment effect, slightly negated by an erosion in net lending yields
● Net loans and advances increased by 19%
– Excluding acquisitions the growth was 17%– Annualised growth of 15% from December 2007
19
37
Non-interest revenue
● Non-interest revenue up 20%
– Net fee and commission revenue up 18%• Account transaction fees rose by 11%• Strong volume growth from expanded footprint• Card based fees up 19% with a large contribution from outside South
Africa– Other non-interest revenue up 21%
• Higher bancassurance commissions• Offset slightly by short-term insurance investment portfolio
38
Operating expenses
● Operating expenses up 22%
– Staff costs up 22%• Acquisitions contributing 11% to overall increase• >100% increase in the Rest of Africa and International operations
– Other operating expenses up 22%• Acquisitions accounting for 11% of the increase• Premises expenses increased by 37%
● Cost-to-income ratio down 270bps to 49,7%
● Cost containment and capacity management initiatives continue
20
39
Credit impairments – a consequence of business strategy
● Deliberate decision in 2002 to rebuild domestic franchise and market shares to take advantage of a growing and transforming South African marketplace
● Segment and product specific long-term growth strategies successful
– Significant increase in mortgage lending and card franchises– Substantial rise in transactional volumes and asset base– Provided knowledge and experience for international expansion
● As part of the strategy
– Increase in credit risk appetite (new customer base and 3rd party origination)
– Coupled with risk based pricing, reflected in revenue growth
● Growth momentum slowed in 2H07 due to macro conditions and reduction in risk appetite
● However, the unanticipated speed and magnitude of deterioration in customer disposable income resulted in increased delinquencies across portfolios
40
PBB credit loss ratios by product
Jun 2008%
Jun 2007%
Dec 2007%
Mortgage lending 1,30 0,61 0,54
Instalment sale and finance leases 2,00 1,38 1,49
Card products 9,44 6,34 7,20
Other loans and advances 3,16 2,04 2,01
Personal & Business Banking 2,18 1,31 1,34
21
41
PBB credit impairment charges by product
Jun 2008Rm
Jun 2007Rm
Dec 2007Rm
Mortgage lending 1 518 551 1 056
Instalment sale and finance leases 669 387 909
Card products 1 108 606 1 480
Other loans and advances 717 369 795
Personal & Business Banking 4 012 1 913 4 240
42
PBB South Africa mortgage book maturing
● Average loan to value of new business 81% (Jun 2007: 83%)
● Average balance to original value 67% (Jun 2007: 67%)
49 43 35
26 3033
25 27 32
0
20
40
60
80
100
Jun 2007 Dec 2007 Jun 2008
≤ 1 year 1 - 2 years > 2 years
Mortgage lending age distribution
%
22
43
PBB South Africa mortgage lending book
Gross advances
Current Early arrears(30-89 days)
Impaired (90+days)
30 June 2008
Value (Rm) 228 881 212 555 6 398 9 928
As % of total 92,9% 2,8% 4,3%
Number of accounts 527 576 493 681 13 140 20 755
31 December 2007
Value (Rm) 213 612 206 044 2 316 5 252
As % of total 96,5% 1,1% 2,4%
Number of accounts 515 005 496 809 4 946 13 250
30 June 2007
Value (Rm) 189 033 181 496 3 286 4 251
As % of total 96,0% 1,7% 2,3%
Number of accounts 491 450 472 097 7 474 11 879
44
PBB South Africa mortgage lendingIncome statement impairment charges
0
200
400
600
800
1 000
1 200
1 400
1 600
Jun 2007 Jun 2008
Actual Write-Offs
Write-offs = R49m Write-offs = R66m
Rm
23
45
PBB South Africa mortgage lendingIncome statement impairment charges
105 210213
401225
905
0
200
400
600
800
1 000
1 200
1 400
1 600
Jun 2007 Jun 2008
Performing Loans Impaired Loss
Discounting of expected recoveries Actual Write-Offs
Rm
543
1 516
46
Mortgage lending is still an attractive business
● Mortgages remain the foundation of our domestic asset base and franchise, both commercially and socially
● Key acquisition channel for cross sell and non-funded income
● The business makes a significant contribution through the cycle notwithstanding funding pressures and credit provisions
Jun 2008 Dec 2007 Dec 2006 Dec 2005
Mortgage lending
Total income 1 675 3 356 2 797 2 351
Credit impairment charge (net of recoveries) 1 518 1 056 390 319
Contribution before operating expenses 157 2 300 2 407 2 032
24
47
Credit environment – strategic response
● Significant focus on collections across the businesses
– 44% increase in headcount to almost 2 000, since June 2007– 19% increase in efficiency
● Proactive rehabilitation policies and processes
● Appropriate risk appetite for current cycle
● Continual re-evaluation of the depth and duration of the downturn
● Sales infrastructure focused on available quality lending and transaction volume growth
● Responsible capacity management in line with current and future volumes
● South African lessons learnt transferred into the Rest of Africa and International
48
Product reporting
Total income Headline earnings
Jun 2008Rm
change %
Jun 2007Rm
Jun 2008Rm
change %
Jun 2007Rm
Mortgage lending 1 675 7 1 565 (212) (>100) 361
Instalment sale and finance leases 1 339 38 971 85 (16) 101
Card products 2 404 31 1 833 118 (17) 142
Transactional and lending products 9 552 32 7 212 2 224 30 1 709
Bancassurance 909 12 814 323 4 310
Personal & Business Banking 15 879 28 12 395 2 538 (3) 2 623
25
49
Argentina
● People, process and risk integration complete
● Business model appropriate and core Global Markets expertise being transferred
● Short-term political turmoil and liquidity challenges led to reduced risk appetite
– Corporate loan book pulled back and retail expansion plan on hold– Small exposure to public sector
● Global Markets team performed extremely well
● Retail segmentation and product offering remains appropriate in the circumstances
● Produced attributable profit of US$18m for the 6 months to June 2008
50
Outlook
● 3% reduction in headline earnings in an extremely difficult environment is testimony to the solid and diversified franchise built over the years
● Asset and volume growth will moderate
● Continued focus on customer debt management
● Consolidate and improve service levels
● Risk management, including regulatory compliance, remains an imperative
● Sharp focus on countries and segments yielding the highest earning potential
● Strong focus on sensible cost containment
● Further develop bancassurance rollout and other opportunities with Liberty
26
Ben Kruger
52
Overview
● Global financial markets characterised by continuing high levels of volatility
● Strong revenue growth through the cycle
● Benefiting from product and geographic diversification
● Focus on risk, capital and liquidity remains a priority
● Evolving with our customer base by providing solutions required for the successful development of their businesses
27
53
CIB abridged income statement and key ratios
Jun 2008Rm
change%
Jun 2007Rm
Net interest income 4 435 49 2 968
Non-interest revenue 7 612 24 6 156
Total income 12 047 32 9 124
Credit impairment charges 485 147 196
Operating expenses 6 380 32 4 831
Normalised headline earnings 3 726 20 3 099
ROE (%) 22,2 26,9
Credit loss ratio (%) 0,29 0,16
Cost-to-income ratio (%) 52,8 52,4
54
Net interest income and margin
● Net interest income up 49% to R4 435m (Jun 2007: R2 968m)
● Margin increased by 21 basis points to 1,68% (Jun 2007: 1,47%) due to positive endowment effect and improved lending yields
● Advances and balances with banks up 26% since Jun 07 and 19% up annualised since Dec 07, reflecting surplus liquidity management
● Gross loans and advances to customers up 32% since Jun 07 and 53% annualised since Dec 07, mainly due to project and infrastructure finance loans and overdrafts
● Good growth in all geographies, with South Africa up 31% and Outside Africa 22% since Jun 07
● Strong loan growth of 97% in Rest of Africa, up 44% with the exclusion of acquisitions
● Good growth in cash management, overnight and term deposit balances
28
55
Non-interest revenue
● Non-interest revenue up 24% to R7 612m (Jun 2007: R6 156m)
● Net fee and commission revenue up 35% to R2 563m (Jun 2007: R1 905m)– Growth in arranging and advisory revenue driven by deal flow in Investment
Banking– Transactional products
● Other revenue down 46% to R272m (Jun 2007: R501m)– Adverse fair value movements in equity investments on the back of falling
markets
● Trading revenue up 27% to R4 777m (Jun 2007: R3 750m)– Strong trading performance and improved client franchise across all regions– Good contribution from Commodities, Foreign Exchange and Debt Securities,
with subdued performance from Equities– Higher levels of principal account trading profitability capitalising on market
dislocation opportunities, but risk levels well contained
56
VaR and income of trading units
-100
-50
0
50
100
150
200
Income of trading units Normal VaR (including diversification benefit)
Rm Jun 07 Dec 07 Jun 08
29
57
Distribution of trading units for the period ended 30 June 2008
0
2
4
6
8
10
12
14
16
18-4
5-4
0-3
5-3
0-2
5-2
0-1
5-1
0 -5 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
105
110
115
120
125
130
135
140
145
150
155
160
165
170
175
180
Freq
uenc
y of
trad
ing
day s
Rm
58
Credit losses
● Credit impairment charges increased to R485m (Jun 2007: R196m), comprising
– Non-performing loans of R223m– Performing loans of R262m
● Credit loss ratio increased to 0,29% (Jun 2007: 0,16%), as a result of increased provisions on African exposures resulting in provision levels of 1,18% in the Rest of Africa
● Performing loan provision increased in line with the deteriorating financial and economic environment
● Credit portfolio actively managed and monitored
30
59
Operating expenses
● Operating expenses up 32% to R6 380m (Jun 2007: R4 831m)
● Staff costs increased 25% to R3 861m (Jun 2007: R3 090m)
– Increased headcount as a result of acquisitions– Provision for performance related costs
● Other operating expenses up 45% to R2 519m (Jun 2007: R1 741m)
– Higher costs associated with integration of acquisitions and geographic expansion
– Continued investment in infrastructure and IT, most notably in Rest of Africa
● Benefits from cost containment initiatives clearly evident in established businesses
60
Product reporting
Total income Headline earnings
Jun 2008Rm
change %
Jun 2007Rm
Jun 2008Rm
change%
Jun 2007Rm
Global markets 4 987 30 3 827 1 555 29 1 202
Investment Banking 4 243 23 3 455 1 233 (2) 1 256
Transactional products and services 2 817 53 1 842 938 46 641
Corporate & Investment Banking 12 047 32 9 124 3 726 20 3 099
31
61
Nigeria
● Profit after tax of US$74m against a full year target of US$100m for 2008
● Stanbic IBTC officially launched and a number of key deals concluded
● Strong performance from CIB, most notably Global Markets, Corporate Finance and Custody
● Wealth and Asset Management performed well, with growth of 28% in assets under management
● Investment in PBB infrastructure and network proving to be more challenging and slower than anticipated
● Heightened focus on risk management following the implementation of the Group Risk Framework
● Nigeria is an exciting country with excellent growth prospects
– We are well positioned in this market
62
Group liquidity
● Consolidated liquidity risk management remained a key focus for the Group
● Structural liquidity mismatch maintained within internal limits and guidelines, with a strong focus on increasing our long term funding ratio
● Maintained a well diversified funding base with no undue depositor concentration or reliance on inter-bank funding market
● Group surplus liquidity buffer maintained at a level in excess of 10% of the funding base
● A variety of stress tests on bank specific and systemic stress scenarios are performed as part of our ongoing liquidity management
● Funding plan in place to support our business
32
63
Outlook
● We expect turbulent market conditions to remain
● Maintain heightened awareness on risk and liquidity management
● Increase focus on cost discipline and efficiency
● Growth through scaling up key regions, most notably Brazil, Russia, Turkey, Nigeria and Angola
● Improve our coverage and positioning of Africa with regard to China and other markets as a major differentiator in our business model
● Capitalise on the opportunity to attract good staff
● Ensure that we remain relevant to customers’ needs through the cycle
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Liberty Life
● Contribution to headline earnings down 46%
– 4% of group headline earnings
● Poor performance of SA financial and industrial equities contributed significantly to the shareholder investment portfolio losses
● Normalised EPS before capital gains/losses on shareholders’ portfoliodown 10,3%
● Stanlib pre-tax profit up 18%
● Group-wide sales up 28% to R78,7bn
● Normalised embedded value per share up 5%
● Cost per policy pressures due to lapses
● CAR cover improves to 2,49 times
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The strategy is working
● CIB strength supporting PBB and Liberty in tough times
● Non-South African operations growing at a faster rate than South Africa
– Strong performance from Rest of Africa, particularly in Nigeria– CIB International resilient in exceptionally difficult global environment
● Increased shareholding in Liberty acquired at opportune time to drive a more integrated comprehensive wealth offering
● Developing a good track record in integrating acquisitions
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ICBC – “the honeymoon is over”
● A compelling business partnership
● Transaction concluded in March 2008
● Relationships at all levels very positive and proactive
● We are already interacting with more than 80 major Chinese clients (in China) and many more in Africa
● Standard Bank Beijing team of approximately 20 people is planned
● Biggest challenge is sheer enormity of the opportunity
● Committed to meeting projected co-operation benefits announced in November 2007
– measured from 1 July 2008
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Looking ahead
● Projections very difficult in current conditions
● Voluntary trading update – late October
● Primary focus on doing the basics right
● Pushing ahead with our strategic initiatives
● Growing in developing markets
● Capital and liquidity strength