Wrap Text
Standard Bank Group Limited - Interim results and dividend announcement
for the six months ended 30 June 2005
Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Reg No 1969/017128/06)
JSE Limited
Share code: SBK
ISIN: ZAE000057378;
Share code SBKP
ISIN: ZAE000038881; and
Share code SBPP
ISIN: ZAE000056339
Namibian Stock Exchange
Share code: SNB
ISIN: ZAE000057378
INTERIM RESULTS AND DIVIDEND ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE
2005
Headline earnings of R4 billion, up 18% (23% normalised*)
Headline earnings per share 31% higher (22% normalised*)
ROE of 26,7% (23,7% normalised*)
Credit loss ratio of 0,46%
Dividend cover maintained at 2,5 times
Dividends per share up from 50,5 cents to 122,0 cents (based on revised
interim dividend policy)
Overview of financial results
Standard Bank Group headline earnings per share for the six months to June
2005 increased by 31% to 327,4 cents per share and a return on equity of
26,7% was achieved. These earnings reflect the consequences of applying a
number of accounting conventions which distort both the legal and economic
substance.
In order to correct these distortions, this effect has been adjusted in
arriving at normalised earnings (see details elsewhere). On this basis
normalised headline earnings per share growth was 22% and return on equity
a more realistic 23,7%.
The South African economic environment continued to be favourable for the
group"s domestic banking operations. Low nominal interest rates combined
with robust growth in property and equity markets, continued to boost
consumer credit demand. For the six months under review, inflation
(measured by CPIX) averaged 3,6% and interest rates reduced by a further
50 basis points. Domestic corporates benefited from strong household
consumption and pressure on exporters reduced as the rand weakened by 19%
against the dollar at period end. However, higher liquidity in the
corporate market kept credit demand at subdued levels.
Retail Banking increased headline earnings by 30% over the comparable
period, benefiting from continued focus on customer service and low credit
default experience. Retail loan growth of 33% was underpinned by a 26%
year-on-year increase in residential property prices and a 28% growth in
new motor vehicle sales. Buoyant consumer activity increased transaction
volumes across most products, resulting in fee and commission income
growing by 16% despite modest price increases.
Corporate and Investment Banking increased headline earnings by 10%. The
division reported satisfactory growth in trading revenue and continued
gains from listed property investments. Net interest income was negatively
impacted by tighter margins as competitive pressures increased, however
this effect was mitigated by further credit recoveries.
International"s headline earnings were 2% lower in US dollars. In common
with many competitors active in emerging markets, pricing pressures and
low client activity levels resulted in lower than expected revenues.
Trading revenue reduced by 27% in rand terms, mainly due to substantially
lower trading opportunities in fixed income and credit markets, but also
due to intentional reductions in proprietary risk. Recoveries of
previously provisioned non-performing exposures provided a boost to
results. Translated into rand at a stronger average rate, earnings from
this entity decreased by 8%.
Earnings from Africa (excluding South Africa) grew by 16%. Alignment of
Africa"s retail and corporate business activities with operations in South
Africa is gaining momentum and we continue to deploy domestic technology
and expertise. Fee income generation was a highlight across the network,
but higher credit impairment charges off a low base dampened the rate of
earnings growth.
Liberty Group Limited (Liberty Life) increased its contribution to
normalised headline earnings by 87% during a period characterised by
stronger local equity markets and good growth in new business.
Implementation of IFRS
The group has implemented International Financial Reporting Standards
(IFRS) effective 1 January 2005. Details relating to the changes resulting
from the adoption of IFRS are set out in a separate announcement published
alongside this interim results announcement. The most significant impact
on the group"s published results is that Standard Bank Group and Liberty
Holdings shares held by Liberty Group for the benefit of its policyholders
are now deemed to be treasury shares for accounting purposes.
The adoption of IFRS in general, and the treatment of deemed treasury
shares in particular, have increased the potential for greater volatility
in reported earnings. As IFRS are implemented internationally, new
accounting interpretations could be issued or existing interpretations
revised and these may impact reported results.
* Normalised headline earnings
As indicated previously, normalised headline earnings have been adjusted
for required accounting conventions that do not reflect the underlying
legal and economic substance of transactions. A common element in these
transactions relates to shares in issue deemed by accounting convention to
be treasury shares. Consequently the number of shares used for per share
calculation purposes are materially understated resulting in inflated per
share ratios. With regard to segmental reporting, normalised adjustments
have been made centrally and the business unit results are therefore not
affected.
Black Ownership Initiative
In terms of the accounting treatment of the Black Ownership Initiative
concluded in October 2004, preference share funding to the empowerment
participants by the group is not recognised as an asset but deducted from
equity. Income legally accrued on these preference shares is not
reflected in income. Perpetual preference shares raised to fund the
transaction is classified as equity and thus dividends are only accounted
for when declared. The delivery of the ordinary shares to the black
participants, although legally affected, are deemed treasury shares for
accounting purposes until eventual redemption or refinancing of the
preference share funding. The "normalised" calculation adjusts headline
earnings for preference dividends receivable but not in income and
reverses the elimination of preference shares against equity. Dividends
declared on perpetual preference shares are adjusted to an accrual basis.
In addition, in calculating normalised headline earnings per share, the
number of shares held by black participants is added back to the weighted
number of shares in issue.
Deemed treasury shares
Group companies" shares held by Liberty Life are invested for the risk and
reward of its policyholders, not its shareholders, and consequently the
group"s shareholders are exposed to an insignificant portion of the fair
value changes on these shares. In terms of IFRS, Standard Bank and
Liberty Holding shares held by Liberty Life on behalf of policy holders
are deemed treasury shares and the investment in these shares is
accordingly set off against equity in the group"s financial statements.
The cost price of these shares is eliminated against ordinary shareholders
funds and minority interests on consolidation. The elimination is
attributable to Standard Bank ordinary shareholders to the extent of the
effective holding in Liberty Life (30%). The weighted average number of
shares in issue for earnings per share is calculated by deducting the full
number of group shares held (100%), as the accounting standard IAS 33:
Earnings per share, does not contemplate minority portions of treasury
shares. For purposes of calculating the normalised numbers and ratios,
the adjustments described above are reversed and the group shares held are
treated as assets invested on behalf of policyholders. The results of the
adjustments are as follows.
Normalised headline earnings
Weighted Headline Growth on
number of earnings June 2004
shares
`000 Rm %
Disclosed in terms of IFRS 1 203 776 3 941 18
Black Ownership Initiative
Dividend receivable on 8,5% 99 190 182
preference shares
Dividend payable on 2
perpetual preference shares
adjusted to an accrual
basis
Group shares held on behalf 50 738
of policy holders
Fair value movements on (30)
group shares held on behalf
of policyholders
Dividends received on group 31
shares held on behalf of
policyholders
Normalised for Black 1 353 704 4 126 23
Ownership Initiative and
group shares held on behalf
of policyholders
Headline earnings per share 327,4 31%
as disclosed (cents)
Normalised headline 304,8 22%
earnings per share (cents)
Income statement analysis
Net interest income - up 11%
Growth in net interest income was supported by strong asset growth in all
domestic asset classes. Significant growth areas were mortgage lending,
card debtors, instalment finance and medium-term finance for corporates.
Following a further 70 basis point reduction in the domestic average prime
interest rate, interest margins in Domestic Banking reduced by 26 basis
points. The negative impact of the lower prime rate on margins was
exacerbated by increased reliance on more expensive wholesale funding to
support the retail lending growth combined with a strategy to lengthen the
term structure of the funding book in line with prudent internal liquidity
guidelines. The increased utilisation of mortgage originators further
reduced Retail Banking lending margins.
In International, high levels of liquidity and competition in emerging
markets caused significant pricing pressure but satisfactory loan growth
and increases in LIBOR rates resulted in some increase in net interest
income.
Impairment charges on loans and advances - reduced 23%
The group"s credit loss experience has benefited in recent years from a
combination of improved internal risk processes and a benign credit
environment. The credit loss ratio of 0,46% compares to a ratio of 0,72%
for the first half of 2004 and 0,43% for the 2004 year. A sequential
comparison of the six month periods may be more instructive: credit
experience improved from the first half of 2004 to an exceptionally
favourable position in the second half of 2004, and has subsequently
deteriorated in 2005. Nevertheless, the position at 30 June is better than
our expectations.
Impairment charges for non-performing loans of R496 million were 22% lower
than for the first six months of 2004. This reduction was mainly as a
result of net recoveries and rehabilitation of previously impaired
corporate loans in International and Corporate and Investment Banking.
Impairment charges for performing loans, now calculated on an incurred
loss method under IFRS, were R142 million for the period, 26% lower than
in the prior period. Lower current loss experience which is used to model
losses in the performing book was slightly offset by a larger provision
requirement due to the strong growth of the domestic lending books.
Non-performing loans increased over the period across most asset classes
but as a percentage of the book have remained constant. Non-performing
loans are well covered as the gross coverage ratio, calculated as
impairment of non-performing loans as a percentage of these loans before
deducting security, increased from 48% to 49% while the net coverage ratio
remained at 100%.
Non-interest revenue - up 11%
Fees and commission revenue increased by 15%, other sources of non-
interest income grew by 40% against a reduction in trading revenue of 5%.
Strong growth in fee revenue was experienced in all major product
categories, assisted by growth in both transaction volumes and the retail
customer base. Card-based commission grew by 22% and the number of current
accounts increased by 14% contributing to a 13% increase in revenues from
branch related transactions. Good internet transaction growth for both
retail and corporate banking resulted in a 15% growth in electronic
banking revenue. Fee revenue in Africa grew by 22%, benefiting from higher
transaction volumes and a review of fee structures across the network.
Trading income in International reduced by 22% in dollar terms. Commodity
trading income was lower due to subdued deal flow compared to a strong
performance in the previous year. Domestically, trading income grew by
21%, mainly as a result of the bank"s strong presence in local interest
rate and foreign exchange markets.
Growth in other income resulted mainly from gains in listed property
investments.
Operating expenses - up 13%
Costs increased by 16% in Domestic Banking and Africa and 7% in dollar
terms in International.
Staff costs increased by 15% and other operating expenses by 10%, domestic
staff costs being significantly impacted by additional staff required to
comply with FICA and other regulations, and by increased business volumes.
Staff costs include the amortised cost of the group"s share option scheme
in terms of IFRS and the amortisation of equity rights granted to black
managers under the group"s Black Ownership Initiative.
In an increasingly competitive environment, a high level of staff
productivity needs to be maintained. Consequently the group has initiated
a managerial productivity assessment of approximately 4 000 managerial and
executive positions in the group"s head office. Furthermore a separate
review is underway on domestic regional structures. These assessments will
take place by September and any resultant headcount reduction should be
known by the end of the year.
Growth in other operating expenses resulted mainly from increased
communication costs in call centres where FICA requirements were the main
driver of increased communication volumes. Increased IT production and
development activity resulted in increased expenses on software purchases
and hardware maintenance costs.
Taxation
Tax charges include both banking operations and total shareholder and
policyholder taxes from the life operations. The banking operations"
effective tax rate for the period ended 30 June 2005 reduced to 26,8%
(June 2004: 30,3%). The direct tax rate reduced from 26,9% to 22,0% year-
on-year primarily as a result of the decrease in the SA corporate tax rate
and a corresponding reduction in the deferred tax liability released to
the income statement offset to some extent by an increase in STC as a
result of the lower dividend cover. The indirect tax rate increased from
3,4% to 4,8%. Although the VAT recovery rate remained relatively constant,
increased taxable expenditure raised input VAT payable resulting in higher
VAT absorbed costs.
Balance sheet
The domestic loans and advances book continued its strong growth fuelled
by a buoyant property market and record sales of private new vehicles. The
key lending product categories performed as follows:
-mortgage loans were 38% higher, with an increase of 14% in the number of
new mortgage loans and a 30% increase in average loan value;
-instalment finance loans increased by 19%; and
-card debtor balances grew by 47% reflecting high consumer spending,
increased usage of revolving facilities and a 20% increase in new account
openings.
Corporate loan growth increased by 12% primarily driven by an increase in
term lending.
The substantial growth in domestic loans and advances necessitated a
concerted programme to maintain liquidity within prudent targets. This
included large increases in short-term money market instruments and liquid
government stock coupled with a lengthening of the domestic funding
profile. Accordingly, cash and short-term negotiable securities increased
significantly and treasury term deposits grew by 46%.
Despite a slow-down in the general level of domestic consumer savings in
South Africa, customer deposits and current accounts grew by 19%,
reflecting Retail Banking"s increased focus on deposit taking activities.
Ordinary shareholders" equity grew by 2% since June 2004 to R30 billion
after the impairment arising from the Black Ownership Initiative concluded
in October 2004 of R4 billion and the elimination of group shares of R1
billion that are held for the benefit of Liberty Life policyholders and
now deemed to be treasury shares for accounting purposes. The weaker
closing rand/dollar exchange rate increased the group"s foreign currency
translation reserve by R1 billion.
Liberty Life
After taking goodwill impairments into account, embedded value per share
rose by 8% since the 2004 comparative period. Liberty"s market share of
new individual life single premiums improved to 32% during the period and
market share of new individual life recurring premiums declined from 28%
at March 2004 to 25% at March 2005.
The Liberty Life interim results to 30 June 2005 include the results of
Capital Alliance (CAHL) for 3 months since the effective acquisition date
of 1 April 2005. Goodwill on the R3 billion acquisition of R312 million
has been fully impaired, as the CAHL policy portfolios are to be fully
absorbed into Liberty"s operations and consequently their future cash
flows will not be separately tracked.
Capital
The group"s primary capital adequacy reduced from 11,0% at December 2004
to 10,8% due to the combined effect of growth in risk-weighted assets, the
reduction in the group"s dividend cover and share buy-backs. The group
repurchased approximately 4,4 million shares during the period under
review in order to partially counter the dilutive effect of shares issued
on exercise of share options. The group"s total capital adequacy ratio
remained unchanged at 15,0% due to net increases in Tier II capital.
Dividends
In March 2005 the group announced a revised dividend policy using a
dividend cover ratio for both interim and year-end dividends. Due to the
increased number of shares eliminated in terms of IFRS, dividend cover
will now be applied to normalised headline earnings per share for the
purpose of arriving at dividend declarations. At December 2004 the cover
ratio was 2,5 times and this ratio has been maintained for the interim
dividend. This is in contrast to the previous interim dividend policy
which was based on one third of the prior year"s total dividend.
Accordingly, a dividend of 122,0 cents (June 2004: 50,5 cents) has been
declared, an increase of 142%.
Prospects
The group"s 2005 growth expectations remain positive notwithstanding an
anticipated marginal contraction in global economic growth. Domestically
margins are likely to remain under pressure and credit charges, still
historically low, are expected to increase. Retail lending and
transactional income streams should however continue to benefit from
buoyant consumer activity and domestic cost growth is receiving increased
focus. Internationally, high levels of global liquidity and increased
competition in emerging markets are expected to dampen interest and
trading margins but there are some recent signs of improvement in client
deal flow. The group"s operations in other African countries are expected
to continue their growth trend.
Whilst credit charges at the interim stage are substantially lower than
the comparative period, it is nevertheless expected that credit charges
for the full year will show a significant increase over the prior year.
Accordingly, growth in normalised headline earnings per share for the full
year is unlikely to be as high as in the first half and should be more in
line with our published growth objective of CPIX plus 10%.
As noted above, the introduction of IFRS is likely to result in greater
volatility in reported earnings.
Jacko Maree, Chief Executive Derek Cooper, Chairman
Declaration of dividends
Notice is hereby given that the following interim dividends have been
declared:
- ordinary dividend No. 72 of 122,0 cents per ordinary share (share
codes: SBK and SNB, ISIN: ZAE000057378), payable on Monday, 19 September
2005, to ordinary shareholders recorded in the books of the company at
the close of business on the record date, Friday 16 September 2005. The
last day to trade to participate in the dividend is Friday, 9 September
2005. Ordinary shares will commence trading ex-dividend from Monday, 12
September 2005;
-6,5% first cumulative preference shares (first preference shares)
dividend No. 72 of 3,25 cents per first preference share (share code:
SBKP, ISIN: ZAE000038881), payable on Monday, 12 September 2005, to
holders of first preference shares recorded in the books of the company
at the close of business on the record date, Friday 9 September 2005. The
last day to trade to participate in the dividend is Friday, 2 September
2005. First preference shares will commence trading ex-dividend from
Monday, 5 September 2005; and
-non-redeemable, non-cumulative, non-participating preference shares
(second preference shares) dividend No. 2 of 374,74 cents per second
preference share (share code: SBPP, ISIN: ZAE000056339), payable on
Monday, 12 September 2005, to holders of second preference shares
recorded in the books of the company at the close of business on the
record date, Friday 9 September 2005. The last day to trade to
participate in the dividend is Friday, 2 September 2005. Second
preference shares will commence trading ex-dividend from Monday, 5
September 2005.
Ordinary shares 6,5% Non-
cumulative redeemable,
preference non-
shares (First cumulative,
preference non-
shares) participating
preference
shares
(Second
preference
shares)
JSE Limited (JSE)
Share code SBK ZAE000057378 SBKP SBPP
ISIN ZAE000038881 ZAE000056339
Namibian Stock Exchange(NSX)
Share code
ISIN SNB ZAE000057378
Dividend number 72 72 2
Dividend per share (cents) 122.0 3.25 374.74
Dividend payment dates
Last day to trade "CUM" Friday Friday Friday
dividend 9 September 2005 2 September 2 September
2005 2005
Shares trade "EX" dividend Monday Monday Monday
12 September 5 September 5 September
2005 2005 2005
Record date Friday Friday Friday
16 September 9 September 9 September
2005 2005 2005
Payment date Monday Monday Monday
19 September 12 September 12 September
2005 2005 2005
Ordinary share certificates may not be dematerialised or rematerialised
between Monday, 12 September 2005 and Friday, 16 September 2005, both days
inclusive.
Preference share certificates (first and second) may not be dematerialised
or rematerialised between Monday, 5 September 2005 and Friday, 9 September
2005, both days inclusive.
Where applicable, dividends in respect of certificated shares will be
transferred electronically to shareholders" bank accounts on payment date.
In the absence of specific mandates, dividend cheques will be posted to
shareholders. Preference shareholders who have dematerialised their share
certificates will have their accounts at their CSDP or broker credited on
Monday, 12 September 2005. Ordinary shareholders who have dematerialised
their share certificates will have their accounts at their CSDP or broker
credited on Monday, 19 September 2005.
By order of the board,
Loren Wulfsohn,
Group Secretary
Financial statistics
% Six months Six months Year ended
change ended ended
June 2005 June 2004 Dec 2004
R million R million R million
Unaudited Unaudited Audited
Standard Bank Group
Shares (millions)
Number of ordinary shares
end of period 1 202 1 346 1 253
weighted average 1 204 1 342 1 322
Cents per ordinary share
Headline earnings 31 327,4 249,0 570,3
Dividends >100 122,0 50,5 231,5
Earnings 29 322,0 248,9 581,4
Fully diluted earnings 25 309,1 247,8 573,8
Net asset value 14 2 536 2 225 2 320
Financial performance (%)
Return on equity 26,7 22,7 26,0
Standard Bank operations
Financial performance (%)
Return on equity 26,6 24,0 27,2
Cost-to-income ratio 57,0 56,2 58,0
Effective tax rate (including
indirect taxes) 26,8 30,3 28,3
Capital adequacy (%)
Capital ratio
primary capital 10,8 11,3 11,0
total capital 15,0 14,9 15,0
Consolidated balance sheet
June 2005 June 2004 Dec 2004
% R million R million R million
change Unaudited Unaudited Audited
Assets
Cash and balances with banks 50 60 994 40 561 37 842
Short-term negotiable securities 71 28 060 16 362 21 040
Derivative assets 36 103 434 76 199 124 236
Trading assets 5 33 550 31 965 32 204
Investments 31 141 923 108 585 121 897
Loans and advances 26 291 879 231 447 257 151
Current and deferred tax assets >100 1 382 658 1 094
Other assets 23 31 219 25 315 18 578
Interest in associates and joint 36 330 242 296
ventures
Goodwill and other intangible >100 2 105 821 918
assets
Property and equipment (2) 4 031 4 102 4 114
Total assets 30 698 907 536 257 619 370
Equity and liabilities
Equity 3 37 642 36 521 38 533
Equity attributable to ordinary 2 30 498 29 953 29 064
shareholders
Ordinary share capital 135 135 135
Ordinary share premium (1) 2 405 2 427 2 541
Reserves 2 27 958 27 391 26 388
Preference share capital and >100 2 991 8 2 991
premium
Minority interest (37) 4 153 6 560 6 478
Liabilities 32 661 265 499 736 580 837
Derivative liabilities 46 103 322 70 672 116 212
Trading liabilities >100 28 992 12 751 14 410
Deposit and current accounts 25 366 495 294 148 316 592
Current and deferred tax 94 5 332 2 745 4 176
liabilities
Other liabilities and provisions (17) 21 892 26 450 22 454
Policyholder liabilities 47 124 177 84 595 97 500
Subordinated bonds 32 11 055 8 375 9 493
Total equity and liabilities 30 698 907 536 257 619 370
Consolidated income statement
% Six months Six months Year
change ended ended ended
June 2005 June 2004 Dec 2004
R million R million R million
Unaudited Unaudited Audited
Income from banking activities 11 13 951 12 540 26 536
Net interest income 11 6 008 5 395 11 492
Interest income 9 18 135 16 682 35 247
Interest expense 7 12 127 11 287 23 755
Non-interest revenue 11 7 943 7 145 15 044
Income from insurance activities >100 20 023 8 140 31 298
Net insurance premiums and
service fees 48 9 068 6 115 12 115
Investment returns >100 10 955 2 025 19 183
Total income 64 33 974 20 680 57 834
Impairment charges on loans and
advances (23) 638 830 1 050
Benefits due to policyholders >100 15 982 5 475 24 586
Net insurance benefits and claims
Transfer and fair value 6 350 5 006 19 365
adjustment to policyholder
liabilities
Fair value adjustment on third 8 517 137 4 077
party mutual fund liabilities
1 115 332 1 144
Net income after impairment
charges and policyholder benefits
21 17 354 14 375 32 198
Operating expenses in banking
operations 13 7 953 7 050 15 384
Staff costs 15 4 557 3 969 8 610
Other operating expenses 10 3 396 3 081 6 774
Operating expenses in insurance
operations 24 2 500 2 010 4 120
Commissions 16 1 159 997 1 920
Expenses 32 1 341 1 013 2 200
Profit from operations 30 6 901 5 315 12 694
Goodwill impairment (330) (25) (48)
Income from associates and joint
ventures 15 53 46 97
Profit before tax 24 6 624 5 336 12 743
Indirect tax expense 259 159 389
Profit before direct tax 23 6 365 5 177 12 354
Direct income tax expense 38 1 991 1 443 3 277
Profit for the period 17 4 374 3 734 9 077
Attributable to minorities 384 393 1 393
Attributable to preference
shareholders 114 - -
Attributable to ordinary
shareholders 16 3 876 3 341 7 684
Headline earnings
Six Six Year
months months ended
ended ended
June 2005 June 2004 Dec 2004
% R million R million R million
change Unaudited Unaudited Audited
Group profit for the period 17 4 374 3 734 9 077
Attributable to minorities (2) 384 393 1 393
Attributable to preference
shareholders 114 - -
Attributable to ordinary
shareholders 16 3 876 3 341 7 684
Adjustable items added back or
reversed: 284 (43) (562)
Goodwill impairment 330 25 48
Impairment of properties and
equipment - - 15
Other capital losses - - 5
Profit on sale of properties and
equipment (46) (7) (44)
Impairment of intangibles - - 12
Recycled investment gains on
available-for-sale assets - (61) (598)
Tax on headline adjustable items 1 4 7
Minority share of headline
earnings adjustable items (220) 41 409
Headline earnings 18 3 941 3 343 7 538
Unaudited
Normalised headline earnings 23 4 126 3 343 7 511
Standard Bank operations 21 3 898 3 221 7 156
Liberty Life 87 228 122 355
Segmental report
Six Six Year
% months months ended
change ended ended
June 2005 June 2004 Dec 2004
R million R million R million
Unaudited Unaudited Audited
Headline earnings
Domestic Banking 19 3 043 2 550 5 790
Retail Banking 30 1 550 1 196 2 980
Corporate and Investment Banking 10 1 398 1 271 2 796
Other domestic operations 95 83 14
International (8) 319 348 647
International (USD million) (2) 51 52 101
Africa 16 338 292 616
Stanlib >100 48 21 56
Central funding and eliminations (21) 10 78
Standard Bank operations 16 3 727 3 221 7 187
Liberty Life 75 214 122 351
Standard Bank Group 18 3 941 3 343 7 538
Consolidated statement of changes in equity
Ordinary Preference Minority Total
shareholders share interest equity
equity capital
and premium
R million R million R million R million
Audited Audited Audited Audited
Balance at 1 January 2004 28 835 8 6 421 35 264
Change in accounting
policy (91) (5) (96)
Restated balance at
1 January 2004 28 744 8 6 416 35 168
Profit for the year 7 684 1 393 9 077
Dividends paid (2 150) (797) (2 947)
Net translation reversal
and hedging (1 272) (108) (1 380)
Issue of share capital 269 3 000 138 3 407
and premium
Other reserve movements 35 (17) 250 268
Equity impact of
empowerment transactions (4 246) (814) (5 060)
Balance at 31 December
2004 29 064 2 991 6 478 38 533
Change in accounting
policies (901) (2 756) (3 657)
Restated balance at1
January 2005 28 163 2 991 3 722 34 876
Unaudited Unaudited Unaudited Unaudited
Profit for the period 3 876 114 384 4 374
Dividends paid (2 231) (114) (257) (2 602)
Net translation gain and
hedging 1 096 51 1 147
Issue of share capital
and premium 145 145
Share buy-back (281) (281)
Other reserve movements (270) 253 (17)
Balance at 30 June 2005 30 498 2 991 4 153 37 642
Consolidated cash flow information
Six Six months Year
% months ended ended
change ended
June 2005 June 2004 Dec 2004
R million R million R million
Unaudited Unaudited Audited
Net cash from operating 8 516 8 698 15 978
activities
Net cash from operating funds 21 308 3 093 918
(4 237) (3 521) 3 195
Net cash (used in)/from
investing activities
Net cash used in financing (1 548) (1 576) (3 581)
activities
Contingent liabilities and capital commitments
June 2005 June 2004 Dec 2004
R million R million R million
Unaudited Unaudited Audited
Contingent liabilities
Letters of credit 5 107 4 270 4 827
Guarantees 18 309 17 346 17 520
Unutilised facilities 23 698 14 887 18 497
47 114 36 503 40 844
Capital commitments
Capital Alliance Holdings Limited
acquisition - - 3 094
Contracted capital expenditure 384 315 664
Capital expenditure authorised 556 540 438
but not yet contracted
940 855 4 196
Accounting policies
Basis of preparation
These consolidated financial statements are prepared in accordance with,
and comply with IFRS and the South African Companies Act of 1973. The
consolidated financial statements are prepared in accordance with the
going concern principle under the historical cost basis as modified by the
revaluation of financial assets classified as available-for-sale,
financial assets and liabilities held at fair value through profit and
loss and derivative instruments.
The accounting policies comply in all material respects with IFRS as well
as with the South African Companies Act of 1973.
Changes in accounting policies
The accounting policies are consistent with those applied in 2004 except
for the adoption of IFRS. The impact of adopting IFRS is described in more
detail below.
Standard Bank Group IFRS impact
Introduction
In line with the listing requirements of the JSE Securities Exchange of
South Africa the Standard Bank Group (SBG) is adopting International
Financial Reporting Standards (IFRS) with effect from 1 January 2005. As
the group publishes comparative information for one year in its financial
statements, the date for transition to IFRS is effectively 1 January 2004,
which represents the start of the earliest period of comparative
information presented. South African accounting standards have seen a
number of significant changes over the past couple of years as they were
being aligned with IFRS. The most notable change was the adoption of the
South African version of IAS 39 (AC 133 - Financial instruments:
Recognition and Measurement) in the group"s 2003 results. The final move
to full IFRS compliance is therefore less significant than what is
currently being experienced in Europe and the United Kingdom.
The most significant IFRS changes for the group originate from the
implementation of IFRS 4 - Insurance Contracts which results in Standard
Bank Group and Liberty Holdings shares held by Liberty Life for the
benefit of policyholders being deemed treasury shares for accounting
purposes and eliminated on consolidation. It is however important to note
that although this treasury share adjustment potentially results in
greater volatility in reported earnings, there is no impact on the
underlying business fundamentals, cash flows, risks, growth strategies or
the group"s capital management policies.
In the light of the potential for increased earnings volatility, the group
will ensure that comparable underlying business performance and trends are
clearly identified on an ongoing basis. With the exception of the
abovementioned changes, the implementation of IFRS has a relatively
immaterial impact on the group"s financial position and earnings.
Basis of presentation
The financial information has been prepared in accordance with IFRS
statements that are currently effective together with expected amendments.
This may differ from IFRS finally in effect at 31 December 2005 as a
result of ongoing review and possible amendment by interpretive guidance
from the International Accounting Standards Board (IASB) and the
International Financial Reporting Interpretations Committee (IFRIC) and
may therefore be subject to change.
Apart from the reclassification of cash and cash equivalents held by
Liberty Life policyholders, there have been no material adjustments to the
cash flow statements in respect of cash utilized by operating activities
before tax, cash flows from investment activities and cash flows from
financing activities as a result of the adoption of IFRS.
Transitional arrangements
The key principle of IFRS 1 - First-time adoption of International
Financial Reporting Standards is full retrospective application of IFRS.
This statement however provides exemptions from retrospective application
in certain instances due to cost and practical considerations. The group"s
transitional elections are set out below:
Elections applicable 1 January 2004
-Business combinations: The group is electing not to retrospectively apply
the requirements of IFRS 3 for business combinations that occurred prior
to 1 January 2004. As a result, the carrying amount of goodwill is the
depreciated amount on 31 December 2003 and previously amortised goodwill
and goodwill eliminated against reserves are not re-instated.
-Property and equipment: A first time adopter may elect to use the fair
value of individual property and equipment at transition date as the
deemed cost. The group is not making use of this transitional exemption
and elects to measure individual items of property and equipment at
original cost.
-Employee benefits: The group is electing not to apply the exemption to
account for all deferred actuarial gains or losses, including a 10%
tolerance limit for differences in actuarial assumptions, in opening
equity as at 1 January 2004. This exemption is not elected as the group"s
accounting for employee benefits under previous SA GAAP was already
substantially in compliance with IAS 19 - Employee Benefits.
-Cumulative foreign currency translation adjustment: The cumulative
foreign currency translation reserve existing on transition to IFRS has
been retained and the option to reset the reserve to zero is not elected
as the group"s accounting for translation adjustments under previous SA
GAAP was already substantially in compliance with IAS 21 - The effects of
changes in foreign exchange rates.
-Share-based payments: The group is electing not to apply the provisions
of IFRS 2 - Share-based payments to equity-settled awards granted on or
before 7 November 2002, or to awards granted after that date but which had
vested prior to 1 January 2005.
Elections applicable 1 January 2005
-Comparative numbers restated for financial instruments and insurance
contracts: The group is electing the exemption not to restate its
comparatives for IAS 32 - Financial Instruments: Disclosure and
Presentation, IAS 39 - Financial instruments: Recognition and Measurement
and IFRS 4 - Insurance Contracts. SBG has therefore applied SA GAAP
applicable as at 31 December 2004 to financial instruments and insurance
contracts in its 2004 numbers disclosed as comparatives for the 2005 IFRS
results. It is considered impractical to retrospectively adjust for
changes resulting from revised impairment and insurance contract
requirements.
-Designation of financial assets and financial liabilities in terms of IAS
39: In terms of the transitional arrangements SBG is electing the option
to reclassify certain financial assets and liabilities on 1 January 2005.
The reclassifications are not material.
There are no changes to estimates made under previous SA GAAP for
transition to IFRS (for example expected default or actuarial
assumptions). Where estimates have previously been made under SA GAAP,
consistent estimates (after adjustments to reflect any difference in
accounting policies) have been made for the same date.
Adjustments as a result of the adoption of IFRS
The impact of changing from SA GAAP to IFRS is summarised below. The
quantification of the adjustments is shown in the tables for
reconciliation of assets, liabilities and equity, IFRS income statement
impact and IFRS equity impact.
Adjustments implemented with effect from 1 January 2004
Note 1: IAS 18 - Revenue recognition and deferred acquisition costs
(excluding insurance contracts accounted for in terms of IFRS 4)
The previous South African version of IAS 39 (AC 133 - Financial
instruments: Recognition and Measurement) required that fees which form an
integral part of the effective interest rate, including transaction costs,
be taken into account in calculating the original effective yield. Initial
fees that relate to the origination of loans are therefore deferred and
amortised as an adjustment to the effective interest rate. The same
accounting principle was carried forward in the revised IAS 18 with fees
relating to the future provision of services, deferred and amortised over
the anticipated period in which the services will be provided. This
adjustment effectively results in the reversal of fees and commission and
a corresponding increase in interest income during these periods. A small
adjustment was required to align the previous deferral methodologies with
the revised IAS 18, primarily for instalment finance on moveable assets.
Note 2: IAS 36/IFRS 3 - Goodwill
Previously, the group recognised acquired goodwill at cost and amortised
it on a straight-line basis over its expected useful life. Goodwill was
subject to regular review for indications of impairment and any impairment
charges were recognised in the income statement. In terms of IFRS 3 -
Business combinations goodwill is not amortised but is subject to
impairment reviews, both annually and where there are indications that the
carrying value may not be recoverable. The 2004 goodwill amortisation
previously recognised in the income statement has been reversed, resulting
in a corresponding increase in equity. All goodwill has accordingly been
tested for impairment at 1 January 2004, 30 June 2004, and 31 December
2004. One instance of goodwill impairment for 2004 arose out of the new
accounting rules and this relates to the group"s international operations.
Note 3: IFRS 2 - Share-based payments
The group grants share options to employees under employee share incentive
schemes. Other than costs incurred in administering the schemes, which
were expensed as incurred, the schemes did not result in any expense in
the income statement, but rather a dilution in earnings per share when the
shares were issued. In accordance with the requirements of IFRS 2, the
group now recognises an expense in the income statement, with a
corresponding credit to equity, representing the fair value of employee
share options granted, recognised on a straight-line basis over the
vesting period of the options.
In anticipation of a final international interpretation (D16) on IFRS 2,
the group is extending the scope of IFRS 2 to include the group"s Black
Ownership Initiative. The statement is applicable to share appreciation
rights that have not vested by 31 December 2004 and, as a result, the
ownership of shares allocated to black managers that vests over a period
ending on 31 December 2010 is accounted for in terms of this statement.
The shares owned by community participants and strategic partners have
vested and no expense is therefore required. The treatment in the group"s
annual results of 2005 will however be based on the final interpretation
as issued by IFRIC.
Note 4: IAS 16 - Revaluation of residual values in property and equipment
In calculating the depreciation charge an entity reduces the depreciable
amount of an asset by its residual value. Previously under SA GAAP, the
estimated residual value was fixed on recognition of the asset and was not
subject to reassessment. IAS 16 revised requires that the residual value
of the assets should be reassessed at each balance sheet date. Annual
increases in asset values result in annual upward adjustments of residual
values. The continuous reassessment of residual values typically leads to
a reduction in depreciation charges and depreciation charges cease when
the carrying value of an asset equals the residual value.
With respect to the buildings" carrying values that were previously fully
depreciated, they are now re-instated to reflect the applicable residual
value. Where buildings are not fully depreciated, there has generally been
a reduction in depreciation as residual values are reassessed. The
depreciation previously recognised in the income statement has accordingly
been reversed or reduced, resulting in a corresponding increase in equity.
Note 5: IAS 16 - Reclassification of property revaluations
This adjustment is to account for property revaluation surpluses directly
in reserves. This has no impact on total equity.
Note 6: IAS 27 - Consolidation of mutual funds
IFRS requires the consolidation of certain mutual funds where Liberty Life
and International are considered to have control of such funds through the
size of their investment, voting control and related management contracts.
The consolidation of these mutual funds has an immaterial effect on total
equity.
The consolidation of such funds is still subject to international industry
debate and progress in this regard will be monitored.
Note 7: IAS 17 - Leases
IAS 17 requires operating lease costs and income to be accounted for on a
straight-line basis. Future lease increases in terms of the lease contract
is estimated and the average lease expense is then recognised in equal
amounts over the lease period. In general, this leads to earlier
recognition of lease income and lease expense, compared with the pattern
of recognition under SA GAAP where income and expenses were recognised at
a constant real rate of return on the net cash investment in the lease.
This generally results in higher lease costs for previously reported
periods with a reduction in the 2004 opening equity and an increase in the
2004 lease costs.
IAS 40 - Investment Property states that the fair value of investment
property should exclude prepaid or accrued operating lease income if this
would otherwise result in double counting. Therefore Liberty Life will
offset any resulting adjustment against the fair value of investment
properties. The impact of accounting on the basis of straight-line
compared to the economic benefit basis currently employed at Liberty Life
will require some time to determine accurately. Any adjustment will, in
all probability, be netted off the respective investment property"s fair
value adjustments resulting in little or no change to reported earnings.
Further analysis of any interpretations issued by standard setters will
take place in order to process any required adjustments for the full year
results ending 31 December 2005.
As this treatment potentially departs from economic reality, it will be
monitored and representations may be made to accounting standard setters.
Note 8: IAS12/IAS 40 - Deferred tax applicable to fair value adjustments
on investment properties
IAS 12 - Income Taxes defines the difference between the carrying amount
of a revalued depreciable asset and its tax base as a temporary difference
and therefore gives rise to a deferred tax liability or asset. The
carrying amount of a portion of investment property portfolios is
considered to be recovered through future net rental income with the
remaining portion recovered through disposals. In terms of IAS 12,
deferred tax is provided on fair value adjustments on the future net
rental portion at the use tax rate (income tax rate). Liberty Life already
provides for deferred tax on fair value adjustments in investment
properties at the applicable capital tax rate (CGT). It is believed that
the fair (open market) value already discounts the average tax
consequences of market participants in respect of rental income. A process
is underway to engage the IASB to revise IAS 12 to result in the
recognition of deferred tax assets and liabilities that are more
reflective of economic reality.
The resulting additional deferred tax charge has been debited to
policyholder liabilities to the extent that the applicable investment
property return impacts the determination of the policyholder liability.
Adjustments implemented with effect from 1 January 2005
Note 9: IAS 39 - Credit impairments
Previously the group raised an impairment for credit losses on performing
loans as the shortfall between the carrying value of a loan and the
present value of expected future cash flows discounted at the original
effective interest rate of loans, taking changes in expected cash flows
and the average maturity of loans into account. Under IFRS an impairment
loss can only be accounted for if there is objective evidence that a loss
event has occurred after the initial recognition of the financial asset
but before the balance sheet date. IFRS also allows for the creation of a
credit impairment for incurred but not reported losses in order to provide
for latent losses in a portfolio of loans that have not yet been
individually identified as impaired. This change results in a net release
of credit impairments and a consequent increase in the opening 2005
equity.
For certain African entities, already reporting under IFRS, the impairment
for credit losses is lower than the level required by their respective
regulatory authorities. As a result, a portion of their impairment for
credit losses is released to equity on a retrospective basis. It has been
agreed with these regulatory authorities that any shortfall on impairment
for credit losses will be set aside in a statutory credit risk reserve,
within total equity.
Note 10: IAS 32 - Elimination of treasury shares
Shares in group companies held on behalf of policyholders in the insurance
operation were previously not classified as treasury shares. The risks and
rewards of these shares are for the benefit of the policyholders. As a
result of the issue of IFRS 4, the statement on insurance contracts, the
SA GAAP statement specifically dealing with accounting for assets and
liabilities in the insurance industry (AC 121: Disclosure in the financial
statements of long-term insurers) was revoked. Assets are now subject to
IAS 39 - Financial instruments: Recognition and Measurement and IAS 32 -
Financial Instruments: Disclosure and Presentation. As a result, shares
held by policyholders in group companies are accounted for as equity
instruments. In terms of IAS 32 the cost price of any SBG and Liberty
Holdings shares held by policyholders within Liberty Group is now
eliminated against equity and any changes in fair value are eliminated
from the income statement. In terms of actuarial principles, the insurance
operation maintains a matching position to ensure the risk profile of
liabilities to policyholders is matched by the underlying shares. The
classification of policyholders" investments in group company shares as
treasury shares for accounting purposes, does not consider the
relationship between the policyholder liabilities and shares held to meet
these liabilities and consequently the corresponding policyholder
liability is not similarly adjusted. This introduces a mismatch between
assets and liabilities which is charged against equity.
Application of IAS 32 to these shares reduces equity and investments by R3
703 million in the opening 2005 balance sheet. As the effective interest
held by the group in Liberty Life is 30%, R951 million of the equity
reduction is allocated to ordinary shareholders, with the remaining 70%
allocated against minority interests.
The statement on earnings per share, IAS 33, requires that the weighted
number of shares should be calculated after deducting the total number of
deemed treasury shares. The result of the above is that 30% of the value
of these treasury shares is eliminated against ordinary shareholders
equity, 30% of the fair value adjustments are eliminated against earnings
attributable to ordinary shareholders with the remaining 70% eliminated
against earnings attributable to minorities. In contrast 100% of the
weighted number of treasury shares are eliminated for purposes of per
share calculation.
The group started to publish normalised headline earnings at 31 December
2004 to allow for instances where the accounting treatment of transactions
departs from their legal and economic substance. At 31 December 2004, the
only adjustments falling within this category related to the group"s Black
Ownership Initiative. As the above accounting treatment departs from the
legal and economic substance of returns on these assets accruing to
policyholders, a further adjustment is now made. The headline earnings per
share and earnings per share number has consequently been normalised to
reflect the earnings and equity after re-instating the shares as
investments and adding back the reversal of fair value movements on these
shares accounted for in the income statement. Normalised earnings and
headline earnings per share are calculated based on the total number of
shares in issue per the JSE securities exchange.
Note 11: IAS 39 - Financial instrument reclassifications
The group has elected the exemption not to restate its comparatives for
IAS 32 - Financial Instruments: Disclosure and Presentation and IAS 39 -
Financial instruments: Recognition and Measurement. SBG has therefore
applied SA GAAP applicable at 31 December 2004 to financial instruments in
its 2004 numbers disclosed as comparatives for the 2005 results.
For entities that were already complying with International Accounting
Standards, the transitional provisions in IFRS 1 do not apply. Therefore,
as a result of the IAS 39 transitional provisions, certain African
entities retrospectively reclassified financial assets and liabilities
from 1 January 2004.
As at 1 January 2005 Liberty Life has reclassified certain shareholder-
designated financial instruments from available-for-sale to fair value
through profit and loss. This resulted in a reclassification from an
available-for-sale reserve to retained surplus at 1 January 2005. There is
no impact on total equity. In the future, all unrealised fair value
adjustments on these assets will be included directly in the income
statement.
Note 12: IAS 39 - Fair value adjustments for day one profits
Unquoted financial instruments acquired were previously recognised at cost
and any profit or loss on remeasurement to fair value based on valuation
models was accounted for on the date of such remeasurement (day two).
The IAS 39 revision for Financial Instruments: Recognition and
Measurement, issued in February 2005, provided further criteria on the
recognition of gains or losses on initial recognition of financial
instruments. Where pricing models are used, inputs are based on observable
market indicators at the balance sheet date and profits or losses are only
recognised to the extent that it relates to changes in factors that market
participants will consider in setting a price. Any gain or loss on the
first remeasurement after initial recognition is deferred and recognised
over the life of the instrument on a straight-line basis.
As a result of the IAS 39 revision a net decrease to trading assets is
reflected in the 2005 opening balance sheet with a corresponding decrease
in equity.
Note 13: IFRS 4 - Insurance classifications
Liberty Life has re-examined the classification of all their contracts
between investment and insurance under the IFRS 4 definition criteria.
This resulted in a net reclassification from investment policyholder
liabilities to insurance policyholder liabilities at 1 January 2005.
For the majority of the reclassifications, where investment contracts are
reclassified as insurance contracts, this reclassification has no effect
as contracts were previously valued on a fair value basis consistent with
IAS 39 and South African Financial Soundness Valuation (FSV) methodology.
Where an insurance contract is reclassified to an investment contract,
negative rand reserves that were previously allowed under FSV techniques
in terms of SA GAAP are now reversed, leading to a decrease in equity.
Further developments in IFRS reporting
The information has been prepared on the basis of the group"s expectation
of the standards that will be applicable as at 31 December 2005. IFRS
information at year-end may differ from the information contained herein
for the following reasons:
-Further standards and interpretations may be issued that are applicable
for 2005 reporting or which are applicable to later accounting periods
but with an option to adopt for earlier periods; and
-different practice may develop with regard to interpretation and
application of the standards.
Audit opinion
The 30 June 2004 restatements are unaudited.
The restatements of financial information for the opening IFRS balance
sheet as at 1 January 2004, the IFRS balance sheet and income statement as
at and for the year ended 31 December 2004 and the opening IFRS balance
sheet at 1 January 2005 have been audited by the group"s auditors, KPMG
Inc and PricewaterhouseCoopers Inc and their audit opinion is available
for inspection at the group"s registered office. Their report includes an
emphasis of matter that amendments to the interpretive guidance issued by
the IASB, between the date of this announcement and the finalisation of
the financial statements for the year ending 31 December 2005, may result
in changes to the restatements published. They further note that the scope
of the audit engagement did not include the presentation and disclosure of
the IFRS financial information in a set of consolidated annual financial
statements and was limited to the recognition and measurement requirements
of IFRS and the disclosures of the conversion information as required by
IFRS 1.
IFRS reconciliation of assets, liabilities and equity
Assets
Note Audited (1) Audited (1) Unaudited
R million 1 Jan "05 31 Dec "04 30 Jun "04
31 December 2004 and 30 June 619 370 615 596 533 119
2004-as previously
reported/restated1
IFRS adjustments (3 045) 3 774 3 138
IFRS 2 - Share-based payments 3 4 4
IFRS 4-Insurance
classifications 13 471
IAS 12/IAS 40 - Investment
properties 8 - - -
IAS 16 - Revaluation of
residual values in property and
equipment 4 45 43
IAS 17 - Leases 7 5 5
IAS 18/IFRS 4 - Revenue
recognition 1 99 - -
IAS 27 - Consolidation of
mutual funds 6 3 648 3 040
IAS 32 - Elimination of
treasury shares 10 (3 703)
IAS 36/IFRS 3 - Goodwill
amortisation 2 112 57
IAS 36/IFRS 3 - Goodwill
impairment 2 (48) (25)
IAS 39 - Financial instrument
reclassifications 11 (6) 10 3
IAS 39 - Fair value adjustments 12 (21)
IAS 39 - Credit impairments 9 115 (2) 11
Restated under IFRS 616 325 619 370 536 257
Liabilities
Note Audited (1) Audited (1) Unaudited
R million 1 Jan "05 31 Dec "04 30 Jun "04
31 December 2004 and 30 June
2004-as previously
reported/restated1 580 837 577 032 496 550
IFRS adjustments 612 3 805 3 186
IFRS 2 - Share-based payments 3 136 130
IFRS 4-Insurance
classifications 13 504
IAS 12/IAS 40 - Investment
properties 8
IAS 16 - Revaluation of
residual values in property and
equipment 4
IAS 17 - Leases 7 20 17
IAS 18/IFRS 4 - Revenue
recognition 1 70 3 (1)
IAS 27 - Consolidation of
mutual funds 6 3 648 3 040
IAS 32 - Elimination of
treasury shares 10
IAS 36/IFRS 3 - Goodwill
amortisation 2
IAS 36/IFRS 3 - Goodwill
impairment 2
IAS 39 - Financial instrument
reclassifications 11 (2) -
IAS 39 - Fair value adjustments 12 - - -
IAS 39 - Credit impairments 9 38 - -
Restated under IFRS 581 449 580 837 499 736
Equity
Note Audited (1) Audited (1) Unaudited
R million 1 Jan "05 31 Dec "04 30 Jun "04
31 December 2004 and 30 June
2004-as previously 38 533 38 564 36 569
reported/restated1
IFRS adjustments (3 657) (31) (48)
IFRS 2 - Share-based payments 3 (132) (126)
IFRS 4-Insurance
classifications 13 (33)
IAS 12/IAS 40 - Investment
properties 8 - - -
IAS 16 - Revaluation of
residual values in property and
equipment 4 45 43
IAS 17 - Leases 7 (15) (12)
IAS 18/IFRS 4 - Revenue 17
recognition 1 29 (3) 1
IAS 27 - Consolidation of
mutual funds 6 - - -
IAS 32 - Elimination of
treasury shares 10 (3 703)
IAS 36/IFRS 3 - Goodwill
amortisation 2 112 57
IAS 36/IFRS 3 - Goodwill
impairment 2 (48) (25)
IAS 39 - Financial instrument
reclassifications 11 (6) 12 3
IAS 39 - Fair value adjustments 12 (21) - -
IAS 39 - Credit impairments 9 77 (2) 11
Restated under IFRS 34 876 38 533 36 521
(1) This represents the adjustments relating to prospective application of
statements and uses the 31 December 2004 restated IFRS balance sheet as
the base.
IFRS equity impact
30 Jun "04 31 Dec "04
Unaudited Audited
Note R million R million
(1)
Opening equity previously reported at 1 28 843 28 843
January 2004
Minority interest at 1 January 2004 6 421 6 421
Opening adjustments at 1 January 2004
on statements applied retrospectively (96) (96)
Standard Bank operations (96) (96)
Retained earnings: (115) (115)
IFRS 2: Share based payments 3 (139) (139)
IAS 16: Revaluation of residual values
in property and equipment 4 40 40
IAS 17: Leases 7 7 (7) (7)
IAS 18: Revenue recognition 1 (11) (11)
IAS 39: Financial instrument
reclassifications 11 (3) (3)
IAS 39: Credit impairments 9 5 5
IAS 39: Transfer to statutory credit 9 (2) (2)
risk reserves
Tax impact 2 2
Share-based payment reserve: IFRS 2:
Share-based payments 3 22 22
Statutory credit risk reserve: IAS 39:
Transfer to statutory credit risk
reserves 9 2 2
Minority interest (5) (5)
Liberty Life - -
Retained earnings: (133) (133)
IFRS 2: Share based payments 3 (1) (1)
IFRS 16: Reclassification of property
revaluations 5 (132) (132)
Tax impact - -
Share-based payment reserve: IFRS 2:
Share-based payments 3 1 1
Other reserves: IAS 16:
Reclassification of property
revaluations 5 132 132
Restated opening equity at 1 January 35 168 35 168
2004
Income statement adjustments (19) (57)
Standard Bank operations (13) (61)
Minority interest (6) 4
Equity adjustments 82 113
Standard Bank operations 55 115
Share-based payment reserve:
IFRS 2: Share-based payments 3 22 66
Statutory credit risk reserve: IAS 39:
Transfer to statutory credit risk
reserves 9 - 1
Retained earnings:
IAS 39: Financial instrument 11 21 24
classifications
IAS 39: Transfer to statutory credit 9 - (1)
risk reserve
Impact of IFRS restatements on 13 36
translation reserve (1) (11)
Minority interest
Liberty Life 27 (2)
Share-based payment reserve:IFRS 2:
Share-based payments 3 1 4
Revaluation reserve: IAS 16:
Reclassification of property
revaluations 5 6 (5)
Minority interest 20 (1)
Changes in shareholders" funds as 1 165 3 235
previously reported
Minority interest reclassification 140 65
Closing equity at 30 June/31 December 36 521 38 533
2004
Opening adjustments at 1 January 2005
on statements applied prospectively (3 657)
Standard Bank operations
Retained earnings: 50
IAS 39: Credit impairments 9 109
IAS 39: Financial instrument
reclassifications 11 (9)
IAS 39: Fair value adjustments 12 (29)
Tax impact (21)
Liberty Life
Retained earnings: (198)
IFRS 4: Insurance classifications 13 (13)
IAS 39: Financial instrument
reclassifications 11 399
IAS 32: Treasury shares (fair value
adjustments) 10 (597)
IAS 18/IFRS 4: Revenue recognition 1 11
Tax impact 2
Available-for-sale reserve: IAS 39: 11 (399)
Financial instrument reclassifications
Treasury shares reserve: IAS 32: 10 (354)
Treasury shares (original costs)
Minority interest (2 756)
Restated opening equity balance at 1
January 2005 34 876
IFRS income statement impact
June 2004 Unaudited Unaudited Unaudited
30 Jun "04 IFRS Jun "04
as previously adjust- Restated
reported ments
R million R million R million
Standard Bank operations
Interest income 16 664 18 16 682
Interest expense 11 287 - 11 287
Net interest income
before impairment charges
on loans and advances 5 377 18 5 395
Impairment charges on
loans and advances 829 1 830
Net interest income after
impairment charges on
loans and advances 4 548 17 4 565
Non-interest revenue 7 139 6 7 145
Income from operations 11 687 23 11 710
Operating expenses 6 996 54 7 050
Staff costs 3 924 45 3 969
Fees and commission paid - 40 40
Other operating expenses 3 072 (31) 3 041
Profit from operations 4 691 (31) 4 660
Goodwill and exceptional
items (44) 44 -
Goodwill impairment - (25) (25)
Income from associates
and joint ventures 46 - 46
Profit before tax 4 693 (12) 4 681
Indirect tax expense 159 - 159
Profit before direct tax
expense 4 534 (12) 4 522
Direct income tax expense
1 259 2 1 261
Standard Bank operations
profit for the period 3 275 (14) 3 261
Attributable to
minorities 59 (1) 58
Attributable to ordinary
shareholders 3 216 (13) 3 203
Liberty Life
Net insurance premiums 6 115 - 6 115
and service fees
Investment returns 1 716 309 2 025
Total revenue 7 831 309 8 140
Net insurance benefits
and claims 5 006 - 5 006
Transfer and fair value
adjustment to
policyholder liabilities 84 53 137
Fair value adjustment on
third party mutual funds
liabilites - 332 332
Expenses 2 006 4 2010
Profit from operations 735 (80) 655
Goodwill impairment 6 6 -
Profit before tax 729 (74) 655
Direct income tax expense 236 (54) 182
Liberty Life profit for
the period 493 (20) 473
Attributable to
minorities 349 (14) 335
Attributable to ordinary
shareholders 144 (6) 138
Group profit for the
period 3 768 (34) 3 734
Attributable to
minorities 408 (15) 393
Attributable to ordinary
shareholders 3 360 (19) 3 341
IFRS income statement impact
December 2004 Audited Audited Audited
31 Dec "04 IFRS 31 Dec "04
as previously adjust- Restated
reported ment
R million R million R million
Standard Bank operations
Interest income 35 206 41 35 247
Interest expense 23 755 - 23 755
Net interest income
before impairment charges
on loans and advances 11 451 41 11 492
Impairment charges on
loans and advances 1 048 2 1 050
Net interest income after 10 403 39 10 442
impairment charges on
loans and advances
Non-interest revenue 15 048 (4) 15 044
Income from operations 25 451 35 25 486
Operating expenses 15 242 142 15 384
Staff costs 8 449 111 8 610
Fees and commission paid - 114 114
Other operating expenses 6 743 (83) 6 660
Profit from operations 10 209 (107) 10 102
Goodwill and exceptional
items (86) 86 -
Goodwill impairment - (48) (48)
Income from associates
and joint venture 97 - 97
Profit before tax 10 220 (69) 10 151
Indirect tax expense 389 - 389
Profit before direct tax
expense 9 831 (69) 9 762
Direct income tax expense
2 489 (5) 2 484
Standard Bank operations
profit for the period 7 342 (64) 7 278
Attributable to 127 (3) 124
minorities
Attributable to ordinary
shareholders 7 215 (61) 7 154
Liberty Life
Net insurance premiums
and service fees 12 115 - 12 115
Investment returns 18 021 1 162 19 183
Total revenue 30 136 1 162 31 298
Net insurance benefits
and claims 19 280 85 19 365
Transfer and fair value
adjustment to
policyholder liabilities 4 056 21 4 077
Fair value adjustment on
third party mutual fund
liabilities - 1 144 1 144
Expenses 4 105 15 4 120
Profit from operations 2 695 (103) 2 592
Goodwill impairment 12 (12) -
Profit before tax 2 683 (91) 2 592
Direct income tax expense
900 (107) 793
Liberty Life profit for
the period 1 783 16 1 799
Attributable to
minorities 1 257 12 1 269
Attributable to ordinary
shareholders 526 4 530
Group profit for the
period 9 125 (48) 9 077
Attributable to
minorities 1 384 9 1 393
Attributable to ordinary
shareholders 7 741 (57) 7 684
More details of IFRS changes will be available on the Standard Bank
website on 22 August 2005.
Board of Directors
DE Cooper (Chairman), JH Maree* (Chief Executive),
DDB Band, E Bradley, T Evans, TS Gcabashe,
DA Hawton, Sir Paul Judge#, SJ Macozoma,
RP Menell, Adv KD Moroka, AC Nissen,
MC Ramaphosa, Dr MA Ramphele, MJD Ruck*,
MJ Shaw, Sir Robert Smith#, Dr CB Strauss
* Executive directors # British
Group Secretary
L Wulfsohn
Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Reg No 1969/017128/06)
Share code: SBK
ISIN: ZAE000057378
Registered office
9th Floor, Standard Bank Centre
5 Simmonds Street, Johannesburg, 2001
PO Box 7725, Johannesburg, 2000
Share transfer secretaries in:
South Africa
Computershare Investor Services 2004
(Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown,
Johannesburg, 2107
Namibia
Transfer Secretaries (Proprietary) Limited
Shop 12, Kaiserkrone Centre,
Post Street Mall, Windhoek
PO Box 2401, Windhoek
Date: 17/08/2005 08:01:36 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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