2005 annual financial results presentation
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

2005 annual financial results presentation

on

  • 421 views

 

Statistics

Views

Total Views
421
Views on SlideShare
420
Embed Views
1

Actions

Likes
0
Downloads
2
Comments
0

1 Embed 1

http://www.slideshare.net 1

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

2005 annual financial results presentation Presentation Transcript

  • 1. 2005 annual financial results presentation
  • 2. Agenda Financial highlights Simon Ridley Business unit overviews - Personal & Business Banking Peter Wharton-Hood - Corporate & Investment Banking Ben Kruger Conclusion Jacko Maree 2
  • 3. Group financial highlights 2005 2005 2004 Objective Normalised Normalised Headline earnings growth (%) 20.0% 19.6% Headline eps (cents) 666.0 558.1 Headline eps growth (%) 13.9 19.3% 18.5% ROE (%) 22.5 25.2 24.2 NAV per share (cents) 2 830 2 464 Dividend cover (times) 2.5 2.5 Credit loss ratio (%) 0.75 0.41 0.43 Cost-to-income ratio (%) 55.5 56.6 58.0 3
  • 4. Group normalised headline earnings Weighted 2005 % number of Rm Change shares m Normalised headline earnings 9 013 20 1 353 Black Ownership Initiative 99 Dividend receivable on 8,5% pref shares 367 Dividend accrual on perpetual pref shares 3 Shares held in policyholders’ funds 49 Fair value movements and dividends received 179 Group headline earnings under IFRS 8 464 12 1 205 4
  • 5. Group financial highlights – IFRS 2005 Reported 2004 Reported under IFRS under IFRS Headline earnings growth (%) 12.3% 20.0% Headline eps (cents) 702.3 570.3 Headline eps growth (%) 23.1% 21.1% ROE (%) 27.8 26.0 NAV per share (cents) 2 729 2 320 5
  • 6. Group income statement review 2005 Rm % Change 2004 Rm Net interest income 12 987 13 11 492 Non-interest revenue 16 718 11 15 044 Credit impairment charges 1 207 15 1 050 Operating expenses 16 817 9 15 384 Normalised headline earnings 9 013 20 7 511 Standard Bank operations 8 490 19 7 156 Liberty Life 523 47 355 6
  • 7. Group headline earnings per share 19% 700 600 19% 19% 500 18% 400 18% 25% 300 27% 200 100 0 cents 1999 2000 2001 2002 2003 2004N 2005N Headline EPS 1st half Headline EPS 2nd half N - normalised 7
  • 8. Group dividends per share 300.0 5.0 4.5 250.0 145.0 4.0 3.3 3.3 3.3 3.2 181.0 3.5 200.0 3.1 3.0 2.5 2.5 150.0 2.5 109.5 2.0 90.0 122.0 100.0 74.0 1.5 63.0 50.0 1.0 50.0 50.5 0.5 34.0 41.5 18.0 22.0 28.0 0.0 0.0 cents 1999 2000 2001 2002 2003 2004 2005 times DPS 1st half DPS 2nd half Dividend cover 8
  • 9. Group return on equity 3 000 25.2 24.2 22.9 25.0 22.4 20.9 20.3 2 500 20.1 20.0 21.1 2 000 19.8 17.8 17.0 15.0 1 500 14.8 13.4 12.0 10.0 1 000 1 139 1 397 1 939 1 957 2 154 2 464 2 830 5.0 500 1% 23% 39% 1% 10% 14% 15% 0 0.0 Rm 1999 2000 2001 2002 2003 2004N 2005N % NAV per share ROE Ave cost of equity N - normalised 9
  • 10. Segmental reporting: the way forward Personal & Business Banking SA Personal & Business Banking Rest of Africa Corporate & Investment Corporate & Investment Banking SA Banking Corporate & Investment Banking International Stanlib Investment Management & Life Insurance Liberty Life 10
  • 11. Business unit review Normalised Normalised Normalised headline headline ROE earnings earnings growth Rm % % Personal & Business Banking 4 013 22 30.9 Corporate & Investment Banking 4 050 7 27.0 Central and other 330 > 100 n.a. Banking Activities 8 393 18 25.6 Investment Management & Life Insurance 620 51 24.1 Standard Bank Group 9 013 20 25.2 11
  • 12. Normalised headline earnings mix by major business unit Personal & Business Banking 7 (2004: 44%) 4 Corporate & Investment Banking (2004: 50%) 44 Central and other (2004: 1%) 45 Investment Management & Life Insurance (2004: 5%) 12
  • 13. Business segment review (existing geographic segmentation) Normalised Normalised Normalised headline headline ROE earnings earnings growth Rm % % Domestic Banking 6 991 21 33.6 Personal & Business Banking SA 3 664 23 31.2 Corporate & Investment Banking SA 3 213 15 40.6 Rest of Africa 721 17 27.4 Corporate & Investment Banking International 465 (28) 8.2 Corporate & Investment Banking International USD 73 (28) 8.2 Stanlib 97 73 57.7 Central funding and eliminations 216 > 100 n.a. Standard Bank operations 8 490 19 25.8 Liberty Life 523 47 18.7 Standard Bank Group 9 013 20 25.2 13
  • 14. Group loans and advances Dec 2005 % Dec 2004 Rbn Change Rbn Domestic Banking 271 27 213 Personal & Business Banking SA 194 28 151 Corporate & Investment Banking SA 77 24 62 Rest of Africa 14 18 12 Corporate & Investment Banking International 49 44 34 Standard Bank Group 334 29 259 14
  • 15. Personal & Business Banking SA loans and advances Dec 2005 % Dec 2004 Rbn Change Rbn Home loans 121 32 92 Card debtors 12 55 8 Vehicle and asset finance 39 16 33 Other lending 24 20 20 Provisions (2) - (2) Net loans and advances 194 28 151 15
  • 16. Domestic margin analysis % Restated margin year ended Dec 2004 3.40 Lending (0.01) Funding (0.25) Endowment effect – equity (0.04) Other activities 0.07 Change in composition of balance sheet (0.01) Margin year ended Dec 2005 3.16 16
  • 17. Group credit loss trends 5.00 4.00 % of Advances 3.00 2.00 1.00 1.28 1.07 1.00 1.08 0.91 0.43 0.41 0.00 1999 2000 2001 2002 2003 2004 2005 Income statement charge Balance sheet provision NPLs 17
  • 18. Group credit provisioning Percentage of advances Dec 2005 2005 Dec 2004 2004 NPL Charge NPL Charge Domestic Banking 1.2 0.50 1.5 0.41 Personal & Business Banking SA 1.5 0.73 1.7 0.59 Corporate & Investment Banking SA 0.5 (0.00) 1.0 0.05 Rest of Africa 2.2 0.28 1.7 0.38 International 0.8 (0.22) 1.3 0.37 Standard Bank operations 1.2 0.41 1.5 0.43 18
  • 19. Group non-interest revenue 18 000 70 16 000 65 14 000 57 60 56 12 000 53 53 55 51 52 10 000 49 50 8 000 45 6 000 40 4 000 2 000 35 0 30 Rm 1999 2000 2001 2002 2003 2004 2005 % Fees & commission Other NIR NIR as a % of total income 19
  • 20. Group operating expenses 30 64 61.8 25 62 20 60 58.8 58.0 15 57.4 57.3 58 56.6 56.2 10 56 5 54 0 52 % 1999 2000 2001 2002 2003 2004 2005 % growth ratio Income growth Cost growth Cost-to-income ratio 20
  • 21. Group cost vs revenue growth Revenue Cost Cost-to- growth growth income ratio % % % Domestic Banking 15 9 52.9 Personal & Business Banking SA 20 13 59.2 Corporate & Investment Banking SA 4 3 41.1 Rest of Africa 11 15 62.7 Corporate & Investment Banking International (5) 9 80.7 International USD (4) 11 80.7 Standard Bank operations 12 9 56.6 21
  • 22. Risk-weighted assets ↑ 20% 4 784 300 000 ↑ 12% 5 238 40 644 250 000 41 340 200 000 Other 150 000 Trading book 251 442 100 000 201 689 Banking book 50 000 0 Rm 2004 2005 22
  • 23. Capital adequacy of banking operations Dec 2005 Dec 2004 % % Group Tier I 10.5 11.0 Tiers II & III 3.7 4.0 Total 14.2 15.0 SBSA Tier I 8.6 9.1 Tiers II & III 3.9 4.3 Total 12.5 13.4 23
  • 24. Personal & Business Banking Peter Wharton-Hood
  • 25. Personal & Business Banking Group reporting - Headline earnings up 22% - ROE 30.9% (2004: 34.2%) - Cost-to-income ratio 60.0% (2004: 62.8%) 25
  • 26. Personal & Business Banking environment South Africa - Excellent conditions for retail banking - Consumer fundamentals remain healthy - Resilient real income growth - 19.6% increase in Private Sector Credit Extension in 2005 underpinned by structurally lower interest rates Rest of Africa - Sustained disinflation and positive GDP growth trends - Margin contraction as country Treasury Bill rates decrease - Exacerbated by the low loan to deposit ratio 26
  • 27. Highlights South Africa - Service levels maintained despite increased volumes and new legislation - Improved customer segmentation - 28% advances growth - Sensible rationalisation of the network staffing levels Rest of Africa - Good progress made on systems upgrades and standardisation - Fee and commission income up 15% - Good results from - Botswana up 39%, Mozambique up 87% and Zambia up 25% - Strengthening of in-country finance and banking skills - Countries’ retail product strategies gaining momentum 27
  • 28. Retail market shares – South Africa Card 35% Home Loans 27% 32 Home Loans adjusted for securitisation 28% 27 Other lending 28% Deposits 27% 22 Total vehicle and asset finance 20% Total vehicle and asset 17 finance adjusted for 2001 2002 2003 2004 2005 securitisation 21% % 28
  • 29. % of Advances 0 1 2 3 4 January '03 March '03 May '03 July '03 September'03 November '03 Early arrears as a % of book January '04 Card Personal & Business Banking SA March '04 May '04 July '04 September'04 Home Loans November '04 January'05 VAF March '05 May '05 July '05 September'05 November'05 29
  • 30. Home loans – South Africa Sustained strong volume increases, optimal market share levels out - Number of applications up 35% - Number of registrations up 11% - Rand value of registrations up 25% - 32% increase in the book Credit - Improved NPLs as a % of total advances 1.21% (2004: 1.51%) - Number of Properties in Possession down 48.5% to 539 (2004: 1 047) - Average LTV 70% (2004: 69%) - Average ITI 22% (2004: 20%) Sensible origination and concession strategies Improving internal operational processing efficiencies Successful residential mortgage backed securitisation of R4.5bn 30
  • 31. Vehicle & Asset Finance – South Africa Mixed fortunes - Motor book grew by 29% against growth of 26% in motor industry sales - Non-motor market share dropped from 36% to 33% - Dominate Industrial with 44% share, Sea and Water at 29% whilst “other” dropped from 11% to 8% Sales focus - Grown sales-force across all channels - Re-entry into the dealer network with considered dealer sales strategy Successful implementation of the electronic application process Turnaround times have improved markedly, but require further improvement Improved collections capability and low loss ratios Successful asset backed securitisation of R3bn 31
  • 32. Card – South Africa Performance in line with strategy adopted in 2002 Profit strategy allowing for increasing bad debts - Cards in issue 1.9m up 44% for the year - Ave debit balance R8.8bn up 52% for the year - Cardholder spend up 30% for the year - Headline earnings up 46% after a 54% increase in NPLs Launched Edcon co-branded cards in October, currently ahead of targets Further card JV initiatives in the pipeline Credit loss ratio at 3.7% (2004: 2.9%) well within internal targets and below international benchmarks Growth primarily from first-time credit card holders rather than multiple cards issued to existing holders 32
  • 33. Volume growth – South Africa Good volume growth in transaction accounts - 15% growth in number of current accounts - 5% growth in number of active E-Plan accounts, 24% growth in balances - 33% growth in number of Maestro accounts, usage up 48% - 55% growth in number of cheque cards, usage up 69% Strong growth in lending products - 21% growth in balances - 16% increase in number of customers 29% increase in retail deposits Distribution - 12% increase in number of ATM transactions - Branch service levels improved - Regulatory operational requirements implemented 33
  • 34. Personal & Business Banking in the Rest of Africa Headline earnings up 19% Completed country specific high level strategic approaches Simple customer segmentation in initial implementation 3 successful sales campaigns yielded significant sales lift Delivered successful product initiatives in transactibility, prepaid, personal lending and money transfers (Moneygram) Service levels improved to 8.97* from 8.42* IT standardisation project to drive application consistency across countries Successfully opened 4 branches and deployed 69 new ATMs Significant leadership and skills uplift * As measured by the Customer Evaluation of Banks Survey 34
  • 35. Looking forward Rest of Africa - Concentrate on the basics of service and sales - Continued investment in infrastructure required South Africa - Emphasis on service, sales and customer acquisition proving profitable - JV opportunities starting to show upside - Credit policies remain appropriate while balancing risk appetite and absolute returns - Opportunities for further operational efficiency improvements still untapped - Product set and innovation levels congruent with customer demands Personal & Business Banking has a solid base from which it can pursue revenue and operational efficiencies 35
  • 36. Corporate & Investment Banking Ben Kruger
  • 37. Corporate & Investment Banking Group reporting - Headline earnings up 7% - ROE 27.0% (2004: 27.2%) - Cost-to-income ratio 54.0% (2004: 51.5%) A year of integration, reflection and restructuring Client transactions and teams of people less constrained by geographical boundaries Announced amendments to exchange control regulations for banks will lead to more efficient use of capital and more business booked on the South African balance sheet Global heads of common areas 37
  • 38. Corporate & Investment Banking - SA Better than expected results off a high base Good growth in the lending books towards year end Challenges in funding group asset growth, compressing margins Well provisioned credit position Good results from - Structured Debt, Project and Acquisition Finance - Equity Derivatives and Securitisation - Property Finance - Custody - Electronic Banking 38
  • 39. Corporate & Investment Banking - SA Good volume growth in foreign exchange trading at compressed spreads Good control of operating expenditure Increased headcount on systems and infrastructure projects Strong deal pipeline 39
  • 40. Corporate & Investment Banking - Rest of Africa Good growth in loans and advances Strong revenue growth in foreign exchange income with increased volumes traded and elements of currency volatility in some countries Cost growth due to investment in IT systems and processes as well as continuous upskilling of treasury and corporate banking staff Product and functional alignment with the rest of Corporate and Investment Banking businesses 40
  • 41. Corporate & Investment Banking - International Disappointing results, but no major mistakes - Revenue down 4% (USD) - Costs up 11% (USD) Lower revenue generated across all trading areas against trending and buoyant emerging and commodity markets Continued the shift from proprietary to client trading In hindsight, too low levels of market risk utilisation (VAR $5m) 41
  • 42. Corporate & Investment Banking - International Good growth in Banking and Trade Finance business Provision releases on rehabilitated accounts Good gains realised on Private Equity investments as well as mark to market on portfolio of commodity investments Increased tax charge due to adverse ruling on remuneration practices of UK based companies relating to prior years (Dextra case) High staff costs due to headcount growth in IT, Operations and revised incentive structures Quantum leap investment in IT and Operations 42
  • 43. Emerging markets competitive environment Stylised growth-cycle of wholesale banking markets Letter of credit Struct. trade finance Syndicated lending Bonds Equity Competition from commercial banks Competition from global investment banks & hedge funds Emerging markets now largely investment grade, improving macro economics, increasing country risk appetite in search of yield New competitors in the form of hedge funds and established investment banks, no longer “niche” Emerging market client banks being acquired by established first world banks leads to loss of banking client base and requires direct penetration of corporate market Increased product sophistication and client expectations 43
  • 44. GEM Corporate & Investment Banking Scale of Emerging Markets by Country and Product vs SA 10 8 6 4 2 0 Korea China Ru Mex Braz Tur HK India Hu S’pore Malay Chile Phil SA Total financing Loan syndication Bonds Equity 44
  • 45. GEM Corporate & Investment Banking Are we in the right markets? Are we up-to-scale? 12% Hu 10% Total financing (%GDP) HK 8% Ch Phi Mal 6% S'pore Tu 4% Ru Is Kor Cz Thai SA Br Mx 2% Mor Peru Pol Ind Egypt Indon Ch Arg 0% 0 5,000 10,000 15,000 20,000 25,000 30,000 Total financing (US$m) 45
  • 46. Actions for sustainable growth We are in the right markets, but significantly below scale Grow the regions with people on the ground as opposed to the centre Reduce the number of counterparties and countries covered Complete migration from transaction focus to customer focus Increase scope and extent of private equity business to improve ROE Complete the IT infrastructure implementation and leverage off South African infrastructure Maintain standardised risk and compliance methodology Improve performance in 2006, but still further investment needed in people and infrastructure 46
  • 47. Looking Forward South Africa - Business well positioned for growth on the back of black economic empowerment and infrastructure related projects with a good pipeline of deals - Staff highly motivated to continue strong performance of recent years Rest of Africa - Restructured and better positioned to leverage off the core group Corporate & Investment Banking skills and products International - IT implementation and infrastructure roll out on track - Greater focus on growing the international regions and increasing revenue - Complete the program of hiring and up-skilling staff - Maintain risk profile and external credit ratings - Internationally staff morale vastly improved and better positioned for future growth 47
  • 48. Conclusion Jacko Maree
  • 49. Looking back to 2000 Underperforming Retail business in SA Multiple silos to be integrated Fledgling operations outside South Africa Large opportunities for process improvements Recently acquired control of Liberty Question mark around risk management Talent deficit Skills deficit Invigorated by bid 49
  • 50. Currently Most South African businesses firing on all cylinders Appropriate levels of integration/co-operation between businesses Understand the challenges of operating internationally Much better at processing Actively involved in Liberty and Stanlib strategy Top class risk management Deeper talent pools Better and exportable skills Invigorated by the challenge of growth 50
  • 51. Vision We are committed to making a real difference to financial services in South Africa and other emerging markets Headquartered in the Johannesburg CBD Listed on JSE 51
  • 52. Standard Bank in South Africa The home base is strong and growing We are well positioned in South Africa across virtually all our businesses The black middle class is growing Infrastructure spending (and financing) is key to the country’s future Liberty can become more efficient and then focus on growth Our South African business has not run out of road 52
  • 53. But ultimately, given our size Our South African growth should revert to - CPIX + GDP growth not - CPIX + 10% There are limited acquisition opportunities in South Africa 53
  • 54. Beyond our borders We have international experience - Positive and negative We understand emerging markets We have exportable skills We have simplified our structures - Personal & Business Banking and Corporate & Investment Banking We are committed long term players We can be bolder 54
  • 55. Beyond our borders – acquisitions Not limited to Africa Only emerging markets Opportunistic Good businesses rather than broken banks Approximately 5 transactions by 2010, generating significant profits 55
  • 56. Beyond our borders – current priorities Argentina - Very good bank, challenging but fast growing economy - Relatively small capital commitment - Far advanced Nigeria - Various opportunities - $185m commitment made - Early stages 56
  • 57. Delivering to our shareholders We understand that we earn the right to exist by providing appropriate long-term returns to our shareholders Balancing - ROE (short term) - Growth (long term) 57
  • 58. Financial objectives 2006 Medium term objective objective Normalised ROE 24.0% 22.5% Normalised growth in headline earnings per share CPIX + 10% CPIX + 10% Credit loss ratio 0.75% 1.00% Continuous Cost-to-income ratio 55.5% improvement CPIX is forecast to be 4.3% in 2006 58