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STANDARD BANK INVESTMENT CORPORATION LIMITED - INTERIM RESULTS AND DIVIDEND

Release Date: 16/08/2001 08:16
Code(s): SBK
Wrap Text
ANNOUNCEMENT
INTERIM RESULTS AND DIVIDEND ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2001
Headline earnings 24% up
Headline earnings per share 21 higher
Cost-to-income ratio improved to 57,8%
Return on equity 21%
Interim dividend per share 27% higher
Difficult trading conditions

Domestic and African banking operations achieved good profit growth during the period. International operations, although negatively affected by the downturn in world markets, did well to maintain moderate growth in their contribution to group earnings.
In tandem with developments overseas, momentum in the domestic market slowed over the period, with forecasts of economic growth being continually
reduced. Demand for retail credit has shown only modest improvement, as consumers are still reluctant to incur additional debt in an uncertain economic and business environment. Certain sectors, such as home loans, have shown better growth and this selective improvement is expected to continue and broaden moderately over the remainder of the year.
Against this background, the group achieved good results for the six months. Performance highlights were as follows:
Headline earnings of R2 020 million were 24% higher;
Headline earnings per share of 154 cents were up by 21%; The cost-to-income ratio improved to 57,8%; and
The return on equity of 21,2% was in line with the comparable period, although lower than the previous year's 22,4%. Earnings Standard Bank operations
Headline earnings from banking operations for the six months of R1 800 million were 26% up on the comparable period. The impetus for this
performance was good growth in net interest and non-interest income and tight control over expenses, which more than offset the effects of the relatively slow growth in loans and advances and the small decline in interest margin.
Total income of R7 164 million, after provision for credit losses, was 13% higher.
Net interest income before credit provisions was 12% up. The interest margin for the period of 3,5% compares with 3,7% previously.
Non-interest income, which now comprises 51% of total income, was 14% higher.
Fees and commissions were 15% up due to new charges introduced and the re-pricing of existing services. The move by customers from paper-based to electronic transactions continues, with obvious cost benefits for the longer term.
Trading income was 13% higher. Good growth from foreign exchange and
interest rate products, and from customer businesses within international fixed income capital markets, was offset to some extent by a reduction in equity trading revenues.
The charge for credit losses of R747 million was 13% up and, as a percentage of loans and advances, declined marginally to 1,13% from 1,17% for the 2000 year. International and African operations, whilst comprising a small part of the overall provision, experienced a substantial increase in their level of provisioning. Provisions in respect of domestic operations were only 4% higher. Non-performing loans, as a percentage of average loans, reduced to 4,0% from 4,4% in December 2000 and 5,0% in June 2000. The quality of the loan book has continued to improve, as evidenced by the decline in the level of arrears across all loan categories.
Operating expenses for the period were 7% higher, with staff and other costs up 6% and 9% respectively. The cost-to-income ratio improved to 57,8% from 60,9% for the comparable period and 59,0% for the 2000 year.
The taxation charge for the period was 24% higher, with an effective rate, inclusive of indirect taxes, of 31,1%. Liberty Group
Liberty Group performed well over the period. Net income of R220 million has been included in Stanbic's headline earnings for the period, 8% higher than unadjusted earnings for the comparable period and 16% up on earnings
adjusted for the effect of the R3,5 billion distribution to shareholders in April 2001. The annualised return on equity for the period, calculated on continuing operations, increased to 24% from 17% for the previous year. Features in the performance for the period were:
The life fund operating surplus increased by 16%, primarily due to the turnaround in investment performance attributed to stronger local equity and bond markets over the period, as well as Liberty Asset Management's good relative performance;
New business increased by 18% from R4 091 million in the comparable
period to R4 824 million. Total new recurring premiums were 17% up, and single premiums 18% higher; and
Total embedded value of R13 441 million was up 13%.
Good progress has been made on implementing the strategies set for the year and Liberty is well on course to meet its stated objectives. Capital
Total assets R309,7 billion were 18% higher than at June 2000, with banking assets 20% up. Measured against December 2000, total assets were 9% higher. Total capital and reserves were 24% up, due mainly to the level of
earnings as well as capitalisation awards to shareholders in lieu of cash dividends.
Loans and advances were 15% higher, with domestic growth restricted to 7%. The group remains well capitalised, with total regulatory capital at 13,8% of risk-weighted assets and tier one capital at 11,1%. The regulatory minimum capital requirement will be raised to 10% from October 2001. Interim dividend
An interim dividend of 28 cents per share (2000:22 cents) has been declared to shareholders. The amount of the interim dividend has been determined in accordance with the group's policy of declaring approximately one third of the previous year's total dividend per share at the half year. Prospects
Trading forecasts in the major markets of the world have been progressively downgraded over the course of the year to date and an end to this trend is not yet in sight. This is likely to affect trading results over the
remaining months of the year, particularly in those of the group's
operations that are more exposed to world markets. Similar growth in
earnings to that achieved in the first half is achievable in the second half of the year, but this could be adversely impacted by further negative developments in international markets. Derek Cooper, Chairman Jacko Maree, Chief Executive 15 August 2001 Segmental report
The contribution by individual business unit to total income and headline earnings is set out below.
Banking operations performed well, with headline earnings 26% higher and the contribution to the group's headline earnings increased from 88% to 89%. Domestic Banking's headline earnings were 25% up, with revenue growth of 12% exceeding the increase in debt provisioning and operating expenses of 4% and 8% respectively. Net interest income was 8% higher, with the domestic margin a little lower than in the comparable period. Non-interest income was 16% up, with fees and commissions, which comprise 38% of total revenues, 20% higher. The cost-to-income ratio at 57,2% was 2,1 percentage points lower than at June 2000.
Retail Banking again produced good results, with headline earnings 30% up. Factors in this performance were strong growth in non-interest income, and the continued focus on cost efficiencies that assisted in restricting the growth in expenses to 9%. The provision for credit losses was 2% lower than the comparable period. Net interest income was 8% up with this performance a reflection of the subdued lending environment. The cost-to-income ratio was 2,4 percentage points lower at 65,5%.
SCMB's headline earnings of R490 million were 25% higher and continued the trend of strong results from this operation. Testing and very competitive market conditions limited the growth in total revenues. Operating expenses for the period were only 4% higher, with the cost-to-income ratio one percentage point lower at 48,1%.
Commercial Banking was heavily exposed to the slowdown in domestic business activity but produced good results for the period, with headline earnings 25% higher. Total revenues were 17% higher and operating expenses 2% up. The provision for credit losses was R54 million higher, reflecting the stress still being experienced by mid-size corporates. This division enjoys the lowest cost-to-income ratio in the group and, at 38,4%, was 5,5 percentage points better than the comparable period.
International Operations' headline earnings grew by 13% in rand terms despite difficult trading conditions as a result of the slowdown in global markets and the resultant uncertainty created in emerging markets.
Significant increases in earnings occurred in the customer businesses of Capital Markets and Precious Metals with the customer base expanded. As can be expected, proprietary trading income was well down due to the continuing uncertainty in emerging markets and the sell-off in the US high yield market.
Stanbic Africa's headline earnings of R184 million were 20% higher for the period, with strong performances from operations in Botswana, Namibia, Swaziland, Uganda and Zambia. Earnings were boosted by initiatives to develop non-funds income and by stringent cost controls. The credit
provision for the period was R15 million higher. The cost-to-income ratio at 54,2% was 4,0 percentage points lower than the comparable period. Total assets of R14,2 billion were 16% up on June 2000.
Six months ended Year ended 30 June 30 June 31 December 2001 2000 2000 % R million R million R million Change Unaudited Unaudited Audited Segmental report Total income
Domestic Banking 12 6165 5498 11423 Retail Banking 13 4063 3591 7015 Wholesale Banking 11 2152 1944 4388 - SCMB 7 1261 1184 2246 - Commercial Banking 17 891 760 2142 Central services (50) (37) 20 International Operations 10 1117 1011 2013 Stanbic Africa 11 673 605 1276 Centralised funding (44) (108) (272) Standard Bank operations 13 7911 7006 14440 Liberty Group 8 220 204 447 Stanbic Group 13 8131 7210 14887 Headline earnings
Domestic Banking 25 1377 1100 2461 Retail Banking 30 646 498 1142 Wholesale Banking 25 763 610 1297 - SCMB 25 490 391 765 - Commercial Banking 25 273 219 532 Central services (32) (8) 22 International Operations 13 276 244 567 Stanbic Africa 20 184 153 311 Centralised funding (37) (69) (113) Standard Bank operations 26 1800 1428 3226 Liberty Group 8 220 204 447 Stanbic Group 24 2020 1632 3673 CONSOLIDATED BALANCE SHEET
30 June 30 June 31 December 2001 2000 2000 R million R million R million Unaudited Unaudited Audited ASSETS
Standard Bank operations 231224 192280 208277 Cash and short-term funds 34751 32592 34178 Investment and trading
securities 23117 15074 16488 Loans and advances 136725 119208 126890 Other assets 33391 22249 27329 Interest in associated
undertakings 93 63 100 Property and equipment 2895 2680 2906 Acceptances outstanding 252 414 386 Liberty Group operations 78452 69331 75948 Current assets 2945 7232 3914 Investments 74986 61746 71543 Intangible assets 44 22 58 Goodwill 115 10 123 Equipment and furniture 362 321 310 Total assets 309676 261611 284225 EQUITY AND LIABILITIES
Capital and reserves 19886 16000 18300 Share capital 140 138 139 Share premium 2006 1527 1648 Reserves 17740 14335 16513 Minority interest 5271 6496 6816 Liabilities 284519 239115 259109 Standard Bank operations 213469 179023 192779 Deposit and current accounts 184972 156880 168845 Other liabilities and provisions 24948 20529 20091 Bonds 3297 1200 3457 Acceptances outstanding 252 414 386 Liberty Group operations 71050 60092 66330 Life funds 66187 56428 62138 Long-term liabilities 1906 1643 1828 Other liabilities 2957 2021 2364 Total equity and liabilities 309676 261611 284225 CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS Contingent liabilities
- letters of credit 3151 1812 2159 - guarantees 15962 13153 18333 Capital commitments
- contracted 163 148 168 - authorised but not yet
contracted 230 121 57 Ordinary shareholders' funds adjusted for the increase in market value over the carrying value of subsidiaries and associates and over the book value of investments
and property 23025 18651 21194 CONSOLIDATED INCOME STATEMENT
Six months ended Year ended 30 June 30 June 31 December 2001 2000 2000 % R million R million R million Change Unaudited Unaudited Audited Standard Bank operations
Interest income 11 11077 10022 20697 Interest expense 10 7195 6542 13465 Net interest income before
provision for credit losses 12 3882 3480 7232 Provision for credit losses 13 747 661 1405 Net interest income 11 3135 2819 5827 Non-interest income 14 4029 3526 7208 Total income 13 7164 6345 13035 Operating expenses 7 4570 4270 8518 Employee compensation and
benefits 6 2364 2237 4473 Other operating expenses 9 2206 2033 4045 Operating profit 25 2594 2075 4517 Income from associated
undertakings 18 10 16 Exceptional items (4) (23) (37) Income before taxation 26 2608 2062 4496 Taxation 24 806 652 1294 Income after taxation 28 1802 1410 3202 Attributable to outside and
preference shareholders 6 5 13 Standard Bank income attributable
to ordinary shareholders 28 1796 1405 3189 Liberty Group operations
Operating profit 9 1112 1022 2162 Exceptional items (316) - (6) Income before taxation 796 1022 2156 Taxation 374 334 662 Income after taxation 422 688 1494 Attributable to outside and
preference shareholders 315 484 1049 Net income before investment
surplus/(deficit) 107 204 445 Net income from continuing
operations 16 206 177 388 Net income from unbundled
operations 14 27 59 Exceptional items (113) - (2) Investment surplus/(deficit) 158 (150) (235) Liberty Group income attributable
to ordinary shareholders 265 54 210 Group income attributable to
ordinary shareholders 41 2061 1459 3399 HEADLINE EARNINGS Group income attributable to
ordinary shareholders 2061 1459 3399 Liberty investment (surplus)/deficit (158) 150 235 Standard Bank income adjusted for: 4 23 37 - net deficit on the sale
of investments - - 14 - goodwill amortised 4 - - - costs associated with
the take-over defence - 23 23 Liberty Group income adjusted for: 113 - 2 - secondary tax on companies
relating to capital reduction 111 - - - goodwill amortised 2 - 2 Headline earnings 24 2020 1632 3673 FINANCIAL STATISTICS
Six months ended Year ended 30 June 30 June 31 December 2001 2000 2000 % R million R million R million Change Unaudited Unaudited Audited Stanbic Group Shares in issue (millions) Number of ordinary shares in issue Before deduction of treasury shares:
- end of period 1423 1399 1408 - weighted average 1413 1383 1394 After deduction of treasury shares:
- end of period 1322 1301 1309 - weighted average 1314 1286 1296 Cents per ordinary share
Earnings 39 157 113 262 Fully diluted earnings 38 154 112 259 Headline earnings 21 154 127 283 Dividend 27 28 22 85 Net asset value 22 1503 1229 1397 Adjusted net asset value 21 1741 1433 1619 Financial performance (%)
Return on equity 21,2 21,4 22,4 Standard Bank operations Selected returns and ratios (%)
Return on equity 20,9 21,2 22,0 Return on total assets 1,6 1,5 1,6 Cost-to-income ratio 57,8 60,9 59,0 Effective tax rate 31,1 31,8 28,9 Capital adequacy (%) Capital ratio*
- primary capital 11,1 10,6 - total capital 13,8 13,5 *Calculated in accordance with new regulations STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
Six months ended Year ended 30 June 30 June 31 December 2001 2000 2000 R million R million R million Unaudited Unaudited Audited Shareholders' funds at beginning of the period
Previously reported 18300 13944 13944 Effect of changes in accounting policies:
- ordinary dividends payable (AC107) - 640 640 - provision for leave pay
(AC116 revised) - (154) (154) Restated 18300 14430 14430 Movements in share capital and share premium
Shares issued 359 529 651 Movements in reserves 1227 1041 3219 Retained earnings 1236 819 2473 Group income attributable to
ordinary shareholders 2061 1459 3399 Ordinary dividends payable (825) (640) (926) Translation of financial statements
of foreign entities - 168 723 Capital surpluses and other
movements (9) 54 23 Shareholders' funds at
end of the period 19886 16000 18300 CONSOLIDATED CASH FLOW INFORMATION Net cash inflow/(outflow)
from operating activities 2048 (796) 126 Net cash inflow/(outflow)
from investing activities 493 (1648) (2618) Net cash (outflow)/inflow
from financing activities (2861) 930 2700 ACCOUNTING POLICIES
The financial statements have been prepared under the historic cost
convention as modified by the revaluation of certain trading and insurance assets and liabilities. The accounting policies adopted for purposes of reporting comply in all material respects with South African Statements of Generally Accepted Accounting Practice as well as with the South African Companies Act of 1973.
These accounting policies are consistent with those applied at 31 December 2000 except for:
Adoption of the new accounting statement on Events after the balance sheet date (AC107). In terms of this statement, dividends proposed or declared after the balance sheet date and related secondary tax on companies are not recognised as a liability at the balance sheet date but only on the date of proposal or declaration. This change in recognition of liabilities relating to dividends has been applied retrospectively and comparative amounts have been restated; and
Adoption of the revised accounting statement on Employee benefits
(AC116). In terms of this statement, leave provisions in respect of past service of employees have been recognised. This change has been applied retrospectively and comparative amounts, as well as retained earnings in respect of 2000, have been restated.
In addition to the above, comparative amounts have been restated where necessary to permit more meaningful comparison of performance. Strate
Stanbic is scheduled to move to the Strate system during December 2001. Dematerialisation will start from 3 December 2001, with electronic trading commencing on 27 December 2001 and the first electronic settlement taking place on 7 January 2002. Paper scrip will not be accepted for settlement after 27 December 2001. Shareholders who have not yet done so, are urged to appoint a Central Securities Depository Participant as soon as possible. Declaration of dividend No 64
Notice is hereby given that an interim dividend, No 64, of 28 cents per ordinary share, has been declared payable on 21 September 2001 to
shareholders registered in the books of the company at the close of business on 31 August 2001.
Where applicable, dividends will be transferred electronically to
shareholders' bank accounts on or about due date. In the absence of suitable mandates, dividend cheques will be posted to shareholders. By order of the board K D Curr, Group Secretary 15 August 2001 Board of Directors DE Cooper (Chairman) EAG Mackay (Joint Deputy Chairman) SJ Macozoma (Joint Deputy Chairman) JH Maree* (Chief Executive) RC Andersen* DDB Band E Bradley AR Evans DA Hawton RJ Khoza WS MacFarlane BJM Masekela RP Menell RA Plumbridge PC Prinsloo* M Rapp# A Romanis# CL Stals CB Strauss EP Theron * Executive director # British Group Secretary KD Curr Standard Bank Investment Corporation Limited (Incorporated in the Republic of South Africa) (Registered bank controlling company) (Reg No 1969/017128/06) Registered office 9th Floor, Standard Bank Centre 5 Simmonds Street, Johannesburg, 2001 P O Box 7725, Johannesburg, 2000 Share transfer secretaries In South Africa Mercantile Registrars Limited
10th Floor, 11 Diagonal Street, Johannesburg, 2001 P O Box 1053, Johannesburg, 2000 In Namibia Transfer Secretaries (Proprietary) Limited Shop 12, Kaiserkrone Centre Post Street Mall, Windhoek, P O Box 2401, Windhoek,
This announcement, together with a financial presentation, is available on the Standard Bank website at: http://www.standardbank.co.za

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