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AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 1998
STANDARD BANK INVESTMENT CORPORATION LIMITED
(REGISTRATION NUMBER 69/17128/06)
FINANCIAL HIGHLIGHTS
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HEADLINE EARNINGS 8 PER CENT HIGHER
TOTAL DIVIDENDS 53 CENTS PER SHARE
TOTAL ASSETS R160 BILLION
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COMMENT
EARNINGS AND DIVIDEND
1998 WAS ESSENTIALLY A STANDSTILL YEAR FOR PROFIT - THE FIRST SINCE 1981.
HEADLINE EARNINGS FOR THE YEAR OF R2 059 MILLION WERE 8 PER CENT UP ON THE
PREVIOUS YEAR WITH HEADLINE EARNINGS PER SHARE REFLECTING A SIMILAR INCREASE.
RESULTS FOR THE YEAR WERE AFFECTED BY THE TURMOIL THAT ENGULFED EMERGING
MARKETS IN THE SECOND HALF OF THE YEAR AND, IN PARTICULAR, BY THE RUSSIAN DEBT
DEFAULT IN AUGUST 1998. THESE EVENTS WERE MOST EVIDENT IN THE RESULTS OF THE
GROUP'S INTERNATIONAL OPERATIONS WITH A LOSS OF GBP 31 MILLION INCURRED FOR THE
YEAR. THE GROUP'S DOMESTIC BANKING OPERATIONS TRADED WELL AND ACHIEVED
EXCELLENT RESULTS. TRADING CONDITIONS ELSEWHERE IN AFRICA DETERIORATED AS THE
YEAR PROGRESSED BUT THE AFRICA BANKING GROUP STILL POSTED A SATISFACTORY
INCREASE IN EARNINGS FOR THE YEAR.
NET INTEREST INCOME OF R5 972 MILLION BEFORE PROVISION FOR CREDIT LOSSES WAS 17
PER CENT UP WITH A NET INTEREST MARGIN OF 4.0 PER CENT COMPARED WITH 3.9 PER
CENT IN 1997. THE PROVISION FOR CREDIT LOSSES OF R1 804 MILLION WAS 68 PER CENT
HIGHER. MOST OF THIS INCREASE WAS DUE TO THE PROVISION RAISED BY STANDARD BANK
LONDON FOR ITS RUSSIAN COUNTERPARTY EXPOSURES. THE PROVISION FOR CREDIT LOSSES
AS A PERCENTAGE OF YEAR END LOANS AND ADVANCES WAS 1.53 PER CENT COMPARED WITH
1.03 PER CENT FOR THE PREVIOUS YEAR. THE GENERAL CREDIT PROVISION WAS INCREASED
BY R153 MILLION DURING THE YEAR.
NON-INTEREST INCOME OF R5 297 MILLION WAS 25 PER CENT UP AND COMPRISED 47 PER
CENT OF TOTAL INCOME COMPARED WITH THE PREVIOUS YEAR'S 45 PER CENT. FEES AND
COMMISSION WERE 21 PER CENT HIGHER, MAINLY DUE TO THE COST-BASED REPRICING OF
CERTAIN SERVICES AS WELL AS AN INCREASE IN TRANSACTION VOLUMES. TRADING INCOME
REFLECTED A RELATIVELY MODEST INCREASE OF 13 PER CENT, BEING INDICATIVE OF THE
VOLATILE MARKET CONDITIONS THAT PREVAILED IN THE SECOND HALF. THE BALANCE OF
NON-INTEREST INCOME WAS 77 PER CENT HIGHER, ASSISTED BY GAINS ON THE SALE OF
EQUITY INVESTMENTS AND HIGHER EARNINGS FROM ELECTRONIC BANKING TRANSACTIONS.
OPERATING EXPENSES FOR THE YEAR OF R7 018 MILLION WERE 18 PER CENT HIGHER, WITH
EMPLOYEE COMPENSATION AND OTHER OPERATING EXPENSES REFLECTING INCREASES OF 14
PER CENT AND 23 PER CENT RESPECTIVELY. THIS RELATIVELY HIGH RATE OF COST
INCREASE WAS DUE IN PART TO EXPENSES INCURRED IN INTERNATIONAL OPERATIONS WHICH
WERE 29 PER CENT HIGHER IN RAND TERMS DUE PARTLY TO THE DECLINE IN THE VALUE OF
THE CURRENCY AND THE EXPANSION OF OPERATIONS. COSTS INCURRED LOCALLY WERE 16
PER CENT HIGHER. THE GROUP'S RATIO OF OPERATING EXPENSES TO TOTAL INCOME SHOWED
AN IMPROVEMENT TO 62.3 PER CENT FROM 63.4 PER CENT IN THE PREVIOUS YEAR AND
THIS TREND IS EXPECTED TO CONTINUE. THIS RATIO FOR DOMESTIC ACTIVITIES AT 61.2
PER CENT HAS ALSO IMPROVED IN LINE WITH PLANS. INCOME FROM ASSOCIATES, WHICH
INCLUDED EARNINGS FROM LIBERTY LIFE AS WELL AS FROM CERTAIN BANKING ASSOCIATES
IN AFRICA, WAS 20 PER CENT HIGHER.
A FINAL DIVIDEND OF 37 CENTS PER SHARE (1997: 35.7 CENTS) HAS BEEN DECLARED TO
SHAREHOLDERS, BRINGING THE TOTAL DIVIDENDS FOR THE YEAR TO 53 CENTS PER SHARE
(1997: 49.3 CENTS). DIVIDEND COVER REMAINS UNCHANGED AT 3.2 TIMES.
BALANCE SHEET
TOTAL ASSETS AT THE YEAR END OF R160.4 BILLION WERE 15 PER CENT HIGHER THAN THE
PREVIOUS YEAR. LOANS AND ADVANCES WERE 13 PER CENT UP WITH SUBDUED GROWTH
EVIDENT IN MOST LOAN CATEGORIES IN RESPONSE TO THE DETERIORATION IN ECONOMIC
CONDITIONS.
THE GROUP'S CAPITAL BASE AT 11.2 PER CENT OF RISK WEIGHTED ASSETS REMAINS ABOVE
THE STATUTORY REQUIREMENT OF 8 PER CENT, WITH TIER ONE CAPITAL AT 10.1 PER CENT
AS AGAINST THE STATUTORY REQUIREMENT OF 4 PER CENT.
YEAR 2000 COMPLIANCE
THE GROUP WILL SUBSTANTIALLY ACHIEVE YEAR 2000 COMPLIANCE THROUGHOUT ALL
BUSINESS OPERATIONS BY 30 JUNE 1999. DETAILED ACTION PLANS THAT REQUIRE THE
TESTING AND UPGRADING WHERE NECESSARY OF BOTH COMPUTER HARDWARE AND SOFTWARE,
AND LIAISON WITH THIRD PARTIES, ARE IN PROGRESS. THE BOARD AND AUDIT COMMITTEE
HAVE BEEN KEPT INFORMED OF DEVELOPMENTS IN THIS REGARD. BASED ON ASSESSMENTS TO
DATE AND SUBJECT TO COMPLIANCE BY MATERIAL ENTITIES WITH WHOM THE GROUP
TRANSACTS, IT IS NOT EXPECTED THAT THE YEAR 2000 ISSUE WILL HAVE A MATERIALLY
ADVERSE EFFECT ON THE GROUP'S BUSINESS OR FINANCIAL RESULTS.
THE ESTIMATED TOTAL COST TO BE INCURRED IN ACHIEVING YEAR 2000 COMPLIANCE IS
R130 MILLION WITH R90 MILLION INCURRED TO DATE.
PROSPECTS
ALTHOUGH EXPECTATIONS FOR ECONOMIC GROWTH IN 1999 ARE ESSENTIALLY MODEST, IT IS
ANTICIPATED THAT THE PROFIT GROWTH TREND OF THE PAST WILL RESUME. THE GROUP IS
WELL POSITIONED TO BENEFIT FROM WHATEVER IMPROVEMENT OCCURS IN SOCIO-ECONOMIC
CONDITIONS WORLD-WIDE.
C B STRAUSS, CHAIRMAN
M H VOSLOO, GROUP CHIEF EXECUTIVE
DECLARATION OF DIVIDEND NO. 59
NOTICE IS HEREBY GIVEN THAT A FINAL ORDINARY DIVIDEND NO. 59 OF 37 CENTS PER
ORDINARY SHARE HAS BEEN DECLARED PAYABLE ON 19 MARCH 1999 TO SHAREHOLDERS
REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS ON 26 FEBRUARY
1999. THE REGISTER OF MEMBERS WILL BE CLOSED FROM 27 FEBRUARY 1999 TO 7 MARCH
1999, BOTH DATES INCLUSIVE.
WHERE APPLICABLE, DIVIDENDS WILL BE TRANSFERRED ELECTRONICALLY ON OR ABOUT DUE
DATE TO SHAREHOLDERS' BANK ACCOUNTS. IN THE ABSENCE OF SUITABLE MANDATES,
DIVIDEND CHEQUES WILL BE POSTED TO SHAREHOLDERS.
BY ORDER OF THE BOARD
K D CURR, GROUP SECRETARY
9 FEBRUARY 1999
SHARE TRANSFER SECRETARIES REGISTERED OFFICE
RAND REGISTRARS LIMITED 9TH FLOOR
BLOCK C 100 NORTHERN PARKWAY STANDARD BANK CENTRE
ORMONDE 5 SIMMONDS STREET
JOHANNESBURG JOHANNESBURG 2001
P O BOX 82549 P O BOX 7725
SOUTHDALE 2135 JOHANNESBURG 2000
CONSOLIDATED INCOME STATEMENT
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1998 1997 %
R'M R'M INCREASE
AUDITED AUDITED
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INTEREST INCOME 21888 18616 18
INTEREST EXPENSE 15916 13521 18
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NET INTEREST INCOME BEFORE
PROVISION FOR CREDIT LOSSES 5972 5095 17
PROVISION FOR CREDIT LOSSES 1804 1072 68
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NET INTEREST INCOME 4168 4023 4
NON-INTEREST INCOME 5297 4248 25
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TOTAL INCOME 9465 8271 14
EMPLOYEE COMPENSATION AND BENEFITS 3575 3123 14
OTHER OPERATING EXPENSES 3443 2798 23
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OPERATING EXPENSES 7018 5921 18
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OPERATING PROFIT 2447 2350 4
EXCEPTIONAL ITEMS (17) 93
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INCOME BEFORE TAXATION 2430 2443
TAXATION 665 683
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INCOME AFTER TAXATION 1765 1760
SHARE OF INCOME FROM
ASSOCIATED UNDERTAKINGS 295 246 20
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NET INCOME 2060 2006 3
ATTRIBUTABLE TO
-OUTSIDE AND PREFERENCE SHAREHOLDERS 8 3
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-ORDINARY SHAREHOLDERS 2052 2003 2
ORDINARY DIVIDENDS 640 594
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RETAINED SURPLUS 1412 1409
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HEADLINE EARNINGS
NET INCOME ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 2052 2003 2
ADJUSTED FOR EXCEPTIONAL ITEMS: 17 (93)
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-RESTRUCTURING COSTS 29 -
-NET SURPLUS ON THE SALE OF SUBSIDIARY
UNDERTAKINGS, LONG-TERM INVESTMENTS,
INVESTMENT SECURITIES AND PREMISES (48) (93)
-GOODWILL ON ACQUISITION OF
SUBSIDIARIES 36 -
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TAXATION ON EXCEPTIONAL ITEMS (10) -
2059 1910 8
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1998 1997 %
R'M R'M INCREASE
AUDITED AUDITED
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FINANCIAL STATISTICS
SHARES IN ISSUE
NUMBER OF ORDINARY SHARES IN ISSUE
- END OF PERIOD (MILLIONS) 1207 1205
- WEIGHTED AVERAGE (MILLIONS) 1206 1204
EARNINGS
HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS) 170,7 158,6 8
EARNINGS PER ORDINARY SHARE (CENTS) 170,1 166,4 2
DIVIDENDS PER ORDINARY SHARE (CENTS) 53,0 49,3 8
NET ASSET VALUE PER ORDINARY
SHARE (CENTS) 1043,5 844,0 24
EFFECTIVE TAXATION RATE (PER CENT) 27,4 28,0
FINANCIAL PERFORMANCE
RETURN ON AVERAGE ORDINARY
SHAREHOLDERS' FUNDS (PER CENT)* 18,1 20,7
RETURN ON AVERAGE TOTAL
ASSETS (PER CENT)* 1,4 1,5
OPERATING COSTS TO TOTAL
INCOME (PER CENT) 62,3 63,4
CAPITAL ADEQUACY
CAPITAL RATIO RELATIVE TO 8 PER
CENT BANKS ACT REQUIREMENT
-PRIMARY CAPITAL 10,1 9,3
-TOTAL CAPITAL 11,2 11,5
*CALCULATION BASED ON HEADLINE EARNINGS
CONSOLIDATED BALANCE SHEET
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1998 1997
R'M R'M
AUDITED AUDITED
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ASSETS
CASH AND SHORT-TERM FUNDS 19966 15839
INVESTMENT AND TRADING SECURITIES 6448 5859
LOANS AND ADVANCES 115106 101853
OTHER ASSETS 13117 10921
INTEREST IN ASSOCIATED UNDERTAKINGS 2733 2253
FIXED ASSETS 2648 2602
CUSTOMERS' ACCEPTANCE LIABILITIES 366 532
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TOTAL ASSETS 160384 139859
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LIABILITIES
DEPOSIT AND CURRENT ACCOUNTS 135660 119050
OTHER LIABILITIES AND PROVISIONS 11502 9426
DEBENTURES 194 620
ACCEPTANCES OUTSTANDING 366 532
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TOTAL LIABILITIES 147722 129628
SHAREHOLDERS' FUNDS
SHARE CAPITAL 129 128
SHARE PREMIUM 1645 1630
RESERVES 10829 8419
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TOTAL SHAREHOLDERS' FUNDS 12603 10177
OUTSIDE SHAREHOLDERS' INTEREST 59 54
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TOTAL LIABILITIES AND SHAREHOLDERS' FUNDS 160384 139859
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CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
CONTINGENT LIABILITIES
-LETTERS OF CREDIT 1901 2113
-GUARANTEES 10972 12123
CAPITAL EXPENDITURE
-INCURRED 678 518
-CONTRACTED 107 100
-AUTHORISED BUT NOT YET CONTRACTED 10 7
SHAREHOLDERS' FUNDS
ADJUSTED FOR INCREASE IN MARKET VALUE
OVER THE CARRYING VALUE OF ASSOCIATED
UNDERTAKINGS AND OVER THE BOOK VALUE OF
INVESTMENTS AND PROPERTY. 14123 13571
CONSOLIDATED CASH FLOW STATEMENT
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1998 1997
R'M R'M
AUDITED AUDITED
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OPERATING ACTIVITIES
CASH RECEIPTS FROM CUSTOMERS 26538 22335
CASH PAID TO CUSTOMERS, EMPLOYEES
AND SUPPLIERS (22429) (18967)
DIVIDENDS ON INVESTMENT SECURITIES
AND PREFERENCE SHARES 451 358
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CASH INFLOW FROM OPERATING ACTIVITIES 4560 3726
CHANGES IN OPERATING FUNDS
INCREASE IN INCOME-EARNING ASSETS (17654) (15982)
INCREASE IN DEPOSITS AND OTHER
LIABILITIES AND PROVISIONS 18341 17659
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CASH INFLOW FROM OPERATING FUNDS 687 1677
TAXATION PAID (553) (537)
NET CASH USED IN INVESTING ACTIVITIES (367) (112)
FINANCING ACTIVITIES
PROCEEDS FROM ISSUE OF SHARE CAPITAL 16 17
REDEMPTION OF DEBENTURES (230) -
DIVIDENDS PAID (623) (523)
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NET CASH USED IN FINANCING ACTIVITIES (837) (506)
EFFECTS OF EXCHANGE RATE CHANGES ON
CASH AND SHORT-TERM FUNDS 637 66
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NET INCREASE IN CASH AND SHORT-TERM
FUNDS 4127 4314
CASH AND SHORT-TERM FUNDS AT BEGINNING
OF YEAR 15839 11525
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CASH AND SHORT-TERM FUNDS AT END
OF YEAR 19966 15839
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THIS ANNOUNCEMENT, TOGETHER WITH A FINANCIAL PRESENTATION, IS AVAILABLE ON THE
STANDARD BANK WEBSITE AT HTTP://WWW.STANDARDBANK.CO.ZA
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