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Standard Bank - Audited results and dividend for the year ended 31 December 2005
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
AUDITED RESULTS AND DIVIDEND ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2005
The group"s key financial highlights were:
Normalised IFRS
Return on equity (%) 25,2 27,8
Headline earnings growth (%) 20 12
Headline earnings per share (cents) 666,0 702, 3
Headline earnings per share growth (%) 19 23
Overview of financial results
Standard Bank Group headline earnings per share for the year to December 2005
increased by 23% to 702,3 cents per share and a return on equity of 27,8% was
achieved. These results are based on International Financial Reporting
Standards (IFRS). Certain of the accounting conventions under IFRS, in the
opinion of the board, distort the results from an economic perspective. As
discussed under the normalised headline earnings section in this announcement,
the effect of these distortions has been adjusted for in calculating normalised
results. On a normalised basis headline earnings per share grew 19% and the
return on equity was 25,2% (2004: 24,2%).
Broadly, 2005 was positive for emerging market economies as macroeconomic
fundamentals and demand for exports from these markets improved. Investment
inflows to these markets, aided by global liquidity and increased investor
risk appetite, lifted economic activity but reduced profit margins of our
corporate and investment banking activities.
South Africa"s economic growth, which is high at present, stemmed substantially
from strong local demand. High consumer spending was underpinned by relatively
low inflation and interest rates.
Net job creation, the positive effect of rising equity and house prices,
increased household disposable income and the growing middle class resulted in
improved consumer confidence and provided a strong platform for consumer and
business banking in South Africa.
Key factors impacting the results
Increased consumer activity in South Africa
2005 saw continued strong growth in the residential property market and record
new vehicle sales. A further 50 basis points reduction in the prime interest
rate together with a strengthening economy was conducive to sustained growth in
lending and transaction volumes.
Rehabilitation of previously impaired loans
Corporate & Investment Banking in South Africa and internationally experienced
credit recoveries during the year as improved economic conditions in emerging
markets led to the recovery of previously distressed counterparties. This
helped reduce the group"s credit loss ratio to a historic low, despite an
increase in the credit loss ratio in Personal & Business Banking SA.
Increased funding requirements
Customer deposits continue to grow at a slower pace than consumer lending,
resulting in an increased reliance on more expensive wholesale funding. In
addition, the proportion of term deposits has been increased to lengthen the
structure of the funding book in line with internal prudential guidelines.
Consequently, average long-term funding as a percentage of total funding has
increased from 15% to 18%. During the year, the group successfully concluded
its first asset-backed securitisation transactions: R4,5 billion of mortgage
loans and R3,0 billion of vehicle and asset finance receivables.
Strong equity markets
Investment Management & Life Insurance benefited from a strong run in equity
markets. Higher property prices assisted Corporate & Investment Banking SA to
achieve sizeable gains on its listed property investment portfolio.
Intensified competition in emerging markets
Emerging markets are increasingly popular with global investors as developing
countries" credit ratings continue to improve. In this environment, traditional
emerging market players like ourselves are encountering increased competition
from the large established global banks in our chosen markets. Consequently,
margins have contracted. In addition, these more stable environments have
reduced trading opportunities for the group"s international operations. These
trends have led to the international operations" 2005 results being below
expectation.
Higher compliance costs
Increased regulations are becoming a feature in most of the jurisdictions in
which the group operates. Staff costs in South Africa were significantly
impacted by additional staff requirements to comply with the Financial
Intelligence Centre Act (FICA) and other regulations. FICA requirements were
also the main driver behind increased communication costs.
Normalised headline earnings (unaudited)
As indicated, normalised headline earnings have been adjusted for required
accounting conventions that do not reflect the underlying economic substance
of transactions. With regard to segmental reporting, normalised adjustments
have been made centrally and in Liberty Life and the business unit
results are therefore not affected.
Black Economic Empowerment Ownership Initiative (Tutuwa)
In terms of the accounting treatment of the Tutuwa 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 therefore not
reflected in income. Perpetual preference share capital raised to fund the
transaction is classified as equity and thus dividends are only accounted for
when declared. The ordinary shares delivered to the Tutuwa participants,
although legally effected, are deemed to be 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 included 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 the Tutuwa
participants is added back to the weighted number of shares in issue.
Group companies" shares held for the benefit of policyholders
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, with effect from January 2005,
Standard Bank and Liberty Holdings shares held by Liberty Life on behalf of
policyholders are deemed to be 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. Fair value
movements are eliminated from the income statement and dividends received are
eliminated against divdends paid without a corresponding elimination in
policyholders" liabilities resulting in a mismatch in the group"s income
statement. The elimination is attributable to Standard Bank ordinary share-
holders 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. This treatment exaggerates the reduction in the
weighted number of shares used for per share calculations.
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 result of these adjustments is as
follows:
Normalised headline earnings
Weighted
average Growth on
number of Headline 31 December
shares earnings 2004
"000 Rm %
Disclosed in terms of IFRS 1 205 169 8 464 12
Tutuwa initiative
Dividend receivable on 8,5%
preference shares 99 190 367
Dividend payable on perpetual
preference shares
adjusted to an accrual basis 3
Group shares held for the benefit of
policyholders
Fair value movements on group shares
held on behalf
of policyholders 49 023 127
Dividends received on group shares
held for the benefit
of policyholders 52
Normalised for Tutuwa initiative
and group shares held for
the benefit of policyholders 1 353 382 9 013 20
Headline earnings per share as
disclosed (cents) 702,3 23
Normalised headline earnings per
share (cents) 666,0 19
Normalised headline earnings comprise
% 2005 2004
change Rm Rm
Standard Bank Group 20 9 013 7 511
Standard Bank operations 19 8 490 7 156
Liberty Life 47 523 355
Business units
In 2005, re-alignments of executive focus areas and reporting lines have been
implemented to support the group"s growth objectives and to provide more
flexibility for the deployment of capital, particularly against the background
of the recent dispensation announced by the Minister of Finance. The
dispensation allows a portion of a bank"s assets to comprise exposures in
the rest of Africa and, to a lesser extent, internationally without Exchange
Control approval. This involves de-emphasis of geographical segmentation of
businesses in favour of focusing on the three key business segments of the
group: Personal & Business Banking, Corporate & Investment Banking and
Investment Management & Life Insurance. This refocusing aims at the leveraging
of skills, economies of scale and synergies, regardless of geography, and
particularly at enhanced customer focus. It is anticipated that the financial
results of the group will be presented on this basis from 2006 onwards. For
2005, however, the geographic information has been maintained.
On this new basis, Personal & Business Banking comprises 44% of the group"s
headline earnings, and grew these earnings in 2005 by 22%. Corporate &
Investment Banking comprises 45% and grew by 7%, and Investment Management &
Life Insurance comprises 7% and grew by 51%.
On a geographical basis, South African banking increased headline earnings by
21% with growth of 23% in Personal & Business Banking SA. The favourable
economic conditions benefited the consumer market and underpinned transactional
and lending growth. The division maintained a strong focus on service levels
and operational efficiencies notwithstanding increased business volumes and
compliance requirements. The home loans business concluded another successful
year with a 25% growth in new loans registered and low credit losses. Specific
focus on the card business resulted in substantial growth in both balances and
turnover.
Corporate & Investment Banking SA increased headline earnings by 15%. The
benefits of strong loan growth in commercial property lending was partly offset
by lower interest margins resulting from more expensive and longer dated
funding. Fees and commissions benefited from increased corporate transaction
volumes and new electronic banking products. South African trading income
increased by 8%, dampened by low volatility in foreign exchange markets. Other
income increased following the revaluation and realisation of listed property
investments. A net reversal of credit losses occurred for the third
consecutive year supported by an exceptionally favourable credit environment.
Operating cost growth was contained to 3% largely through lower IT costs,
savings on depreciation and premises costs.
Corporate & Investment Banking International"s headline earnings were 28% lower
following increased competition and tightening spreads against a background of
increased global liquidity across most of its markets. Trading income was also
adversely impacted by a continued shift from a reliance on proprietary trading,
with lower value-at-risk utilisation, to becoming more client focused. A net
reversal of credit losses resulted from previously impaired accounts now
performing. Strategies to improve performance in this operation are being
implemented including an increase in the talent pool, particularly in client
facing areas, improved systems and a change in emphasis from product to client
focus. In addition, the appointment of Ben Kruger as chief executive of
Corporate & Investment Banking across the group should quicken the pace of
implementing these strategies.
Following strong earnings growth in Rest of Africa over a number of years,
headline earnings growth, of 17% was slightly below expectation. Lower lending
margins restricted income growth, off a higher cost base. Management"s attention
in 2005 was mostly inwardly focused with concentration on the alignment of
products, policies, procedures and systems across all African countries, and
integrating these with the South African operations. The focus for 2006 will be
to increase transaction flows through the stronger base that has now been
established.
Liberty Life had a very good year and increased normalised headline earnings by
47%, notwithstanding a once-off R321 million after tax provision for the
Statement of Intent relating to the Pension Funds Adjudicator (PFA) rulings.
Significant gains on investments held in the shareholders portfolio more than
offset this provision. Highlights of Liberty Life"s results were improved
investment returns and strong growth in new business. The Capital Alliance
Holdings Limited (CAL) integration is on track and benefits are beginning to be
extracted.
The group will continue to invest in expanding its activities in emerging
markets outside of South Africa. In December 2005, a consortium led by Standard
Bank entered into an agreement with Bank of America to buy BankBoston Argentina.
This transaction remains subject to fulfilment of provisions of the agreement
and obtaining the necessary regulatory approvals in both South Africa and
Argentina. The acquisition is only expected to be concluded in the third
quarter and is not anticipated to materially affect the 2006 results. Given our
interest in Nigeria, we have invested approxmately USD 185 million in our
existing banking operation to meet the new minimum capital requirement set by
the Central Bank of Nigeria. This enables us to comprehensively evaluate
suitable acquisition opportunities.
Income statement analysis
Net interest income - up 13%
Despite lower margins, strong South African asset growth resulted in increased
group net interest income.
Pressure on funding costs resulted in a decline in South African banking
margins which affected the group"s margin.
The lower interest earned on shareholders" funds and transactional deposits
such as current accounts continued to squeeze margins as the average prime rate
reduced by 66 basis points to 10,65% in 2005 following a further 50 basis points
reduction in the domestic prime rate.
On the funding side, increased utilisation of more expensive wholesale funding
to fund asset growth and the lengthening of the average long-term funding ratio
from 15% to 18%, impacted margins.
Lending growth was the main contributor to higher net interest income in Rest
of Africa and internationally but falling interest rates in key African markets
and high levels of global liquidity resulted in tighter margins, partly
reducing this benefit.
Non-interest revenue - up 11%
Growth in non-interest revenue resulted from a 14% increase in fee and
commission revenue and growth of 25% in other sources of non-interest revenue.
Net trading revenue was marginally lower.
In South Africa, fees and commission benefited from a growing customer base and
higher transaction volumes resulting in growth of 16% despite below inflation
price increases. These increased volumes were particularly evident in
card-based commissions, point of representation fees and electronic banking
where income growth rates of 29%, 13% and 19%, respectively, were achieved.
Migration to electronic banking is continuing as the number of Internet
transactions increased by 85% and the number of new Internet users increased by
27%. Increased deal flow benefited the corporate finance advisory business and
contributed significantly to growth in knowledge-based fees. Rest of Africa
recorded fees and commissions growth of 15%, resulting mainly from increased
volumes and repricing of electronic banking and point of representation fees.
Stanlib benefited from increased assets under management and grew fees by 14%.
Internationally, competitive pressures and lower fund management fees led to
a reduction of 9% in fee revenue.
Trading revenue grew by 8% in South Africa with improved deal flow in
client-based derivative trading. Foreign exchange trading recorded a marginal
increase, off a high base, with volumes and market conditions to a large extent
the same as in 2004. Buoyant precious metal prices resulted in reduced hedging
activity and a consequent reduction in commodity trading revenue. In Rest of
Africa, strong growth occurred in foreign exchange trading with favourable
spreads and increased volumes from higher volatility being the main drivers.
Corporate & Investment Banking International showed a 9% reduction in trading
revenue. Favourable economic conditions in emerging markets resulted in
increased competition and tighter spreads, reducing foreign exchange and debt
securities trading profits. In commodity markets, revenue was lower, off a high
base, as the re-establishment of the energy business team following some key
departures is only expected to take effect in 2006.
In South Africa, growth in the other income category resulted mainly from gains
in listed property investments. This was coupled with increased profits from
the private equity business and an improved underwriting performance in the
short-term insurance operation.
Credit impairment charges - up 15%
The credit impairment charge increased by 15% off a low base. This growth is
made up of a decrease in the charge for non-performing loans and a significant
increase in the portfolio charge for performing loans. The benign South African
credit conditions of the past two years played a significant role in the low
credit losses on non-performing loans.
The charge for non-performing loans was also assisted by the corporate and
investment banking businesses in South Africa and internationally ending the
year with net recoveries following the rehabilitation of previously
non-performing exposures. In Personal & Business Banking SA strong growth in
all categories of consumer lending, especially in card, resulted in a
substantially increased charge in rand terms.
This translated into a net credit loss ratio of 0,41% compared to a ratio of
0,43% the prior year. All businesses reflected lower credit loss ratios for the
year, except for Personal & Business Banking SA where the ratio increased from
0,59% in 2004 to 0,73% in 2005. This was mainly as a result of a planned
increase in risk appetite on credit card lending and the impact of prudent risk
quantifications on a relatively young consumer loan book.
Operating expenses - up 9%
Banking operations contained its overall growth in operating expenses to 9%
with staff costs increasing by 12% and other operating expenses growing by 6%.
Staff cost growth resulted mainly from a 2% increase in headcount necessitated
by additional volume and compliance requirements and new IT initiatives. A
focus on efficiencies at branch level and productivity at head office resulted
in containment of staff numbers despite increased business volumes. In line
with the group"s remuneration policy, increased profitability resulted in higher
incentive payments. Staff costs were further increased by the phase-in of
share-based payments relating to the group"s share incentive schemes as well as
a full year"s expense relating to rights to shares acquired by black managers
in terms of the Tutuwa empowerment initiative, both now required in terms of
IFRS.
Growth in other operating expenses resulted mainly from an increase in IT
contractor fees as a number of system-based projects in response to operational
and regulatory requirements are in progress, including compliance with Basel
II. Increased business volumes, higher communication costs and additional
client interaction to meet the Financial Intelligence Centre Act (FICA)
requirements resulted in increased costs in South Africa. Other
operating expenses in Rest of Africa grew by 17% due to continued
investment in improved IT systems and processes across the continent.
Internationally, increasing investment in IT infrastructure and network
capabilities coupled with the expansion of regional offices resulted in 6% cost
growth.
Across the group, additional compliance related costs amounted to approximately
R200 million in 2005.
Balance sheet analysis
Strong growth in banking assets excluding derivatives occurred across the group
with growth of 28% in Personal & Business Banking SA, 35% in Corporate &
Investment Banking SA, 18% in Rest of Africa and 14% in Corporate &
Investment Banking International.
Most consumer lending categories in South Africa benefited from lower interest
rates:
Mortgage loans increased by 32% following an increase in the volume and value
of new registrations;
Instalment finance was up 15%, mainly as a result of volume growth as average
lending values remained largely unchanged. Results reflected a performance
above expectation in motor vehicle business for consumers and a disappointing
growth rate in the non-motor book; and
A strong focus was placed on growth in card debtors with a resulting 55%
growth in card balances. Growth resulted mainly from new card openings through
targeted campaigns and joint ventures, higher levels of revolving credit
facilities and increased consumer spending.
The group"s market share in South Africa increased in credit card debtors to
35,1% (2004: 32,8%) and decreased in both mortgage lending, down marginally to
25,6% (2004: 25,8%) and in instalment finance down to 20,3% (2004: 22,1%). Both
mortgage lending and instalment finance market share statistics were impacted
by securitisations, which reduced the ratios by 0,6% and 1,1% respectively.
Corporate & Investment Banking SA recorded growth in external loans and
advances of 24%, mainly from increased commercial property lending, new term
deals to corporate customers and increased structured trade finance
transactions. Internationally, external loan growth of 45% resulted mainly from
increased structured and trade finance deals.
Net asset value as defined by ordinary shareholders" equity grew by 13% to R33
billion. In 2004, the group reported a R4,2 billion elimination against equity
attributable to ordinary shareholders for shares issued in terms of the Tutuwa
initiative deemed to be treasury shares. Following the adoption of IFRS a
further elimination was required for group shares held for the benefit
of policyholders amounting to R1,1 billion, net of minority interest. On a nor-
malised basis (adding these eliminations back) net asset value increased by 15%
to R38 billion, representing mainly the retention of earnings and a R0,4 billion
increase in the translation reserve.
Liberty Life
It has been a good year for Liberty Life. Indexed new business premiums
increased by 12%. Net cash inflows from insurance operations amounted to R5,7
billion - the highest level to date. In addition, Stanlib and Liberty Ermitage
net cash inflows amounted to R13,3 billion and R0,4 billion respectively.
Normalised embedded value per share was 15% higher than last year. During the
course of 2005 Liberty Life initiated the disposal of its offshore asset
manager, Liberty-Ermitage, and the Australian life assurance business,
Prefsure, which was included in the acquisition of CAL.
Liberty Life"s published earnings are adjusted to exclude all earnings related
to Stanlib, this entity"s results being consolidated into those of Standard
Bank operations.
Capital
The group"s capital adequacy ratio reduced to 14,2% from 15,0% at
December 2004, still well above the weighted average regulatory requirement of
10,3% for the 25 banks across the group. Tier I capital adequacy reduced from
11,0% to 10,5% due to strong growth in risk-weighted assets marginally exceeding
retention of capital following the reduction in dividend cover. In addition, the
group utilised R677 million to buy back 10,2 million shares thus counteracting
the impact on earnings per share of shares issued in relation to the group"s
share option scheme.
Dividends
In March 2005 the group announced a revised dividend policy using a dividend
cover ratio for both interim and year-end dividends. This has resulted in a
more even spread between interim and final dividends. Due to the much higher
number of shares eliminated in terms of IFRS from 2005, dividend cover has now
been applied to normalised headline earnings per share for the purpose of
arriving at dividend declarations, slightly reducing the reported dividend
growth.
At December 2004 the cover ratio was 2,5 times, down from 3,1 times in 2003.
The dividend cover for 2005 has remained unchanged, resulting in total dividends
declared of 267,0 cents, 15% higher than the total dividend declared in 2004.
The total dividend of 267,0 cents is made up of a final dividend of 145,0 cents
(20% lower than 2004) and an interim dividend of 122,0 cents (142% higher than
2004).
The dividend policy is subject to annual review and may be adjusted for
business growth, acquisition activity, the impact of Basel II or changes in
reported earnings resulting from applying fair value accounting principles.
Prospects
The group"s Personal & Business Banking operation is set to continue to benefit
from sustained positive economic fundamentals in South Africa, together with
increased economic development and organic business growth anticipated across
the African continent.
Corporate & Investment Banking should benefit from potential growth in South
African infrastructural and empowerment financing together with an expected
increase in corporate credit demand. As we improve the infrastructure and
trading teams in our regional operations in emerging economies, the group should
be well placed to take advantage of opportunities across most of our chosen
markets.
Investment Management & Life Insurance earnings may be lower in 2006 due to the
potential impact of a lower assumed equity and bond market performance although
real growth in embedded value and dividends should be achieved.
Taking the above factors into account, we believe that the group"s diversified
business spread will enable the group to produce returns to shareholders in
2006 in line with our principal financial objectives of a normalised return on
equity of 24,0% (revised upwards) and normalised headline earnings per share
growth of South African inflation (CPIX) plus 10 percentage points.
Jacko Maree Chief Executive
Derek Cooper Chairman
Johannesburg
8 March 2006
Declaration of dividends
Notice is hereby given that the following final dividends have been declared:
Ordinary dividend No. 73 of 145 cents per ordinary share (share codes: SBK
and SNB, ISIN: ZAE000057378), payable on Tuesday, 18 April 2006, to ordinary
shareholders recorded in the books of the company at the close of business on
the record date, Thursday, 13 April 2006. The last day to trade to participate
in the dividend is Thursday, 6 April 2006. Ordinary shares will commence
trading ex-dividend from Friday, 7 April 2006;
6,5% first cumulative preference shares (first preference shares) dividend
No. 73 of 3,25 cents per first preference share (share code: SBKP, ISIN:
ZAE000038881), payable on Monday, 10 April 2006, to holders of first preference
shares recorded in the books of the company at the close of business on the
record date, Friday, 7 April 2006. The last day to trade to participate in the
dividend is Friday, 31 March 2006. First preference shares will commence
trading ex-dividend from Monday, 3 April 2006; and
Non-redeemable, non-cumulative, non-participating preference shares (second
preference shares) dividend No. 3 of 370,52 cents per second preference share
(share code: SBPP, ISIN: ZAE000056339), payable on Monday, 10 April 2006, to
holders of second preference shares recorded in the books of the company at the
close of business on the record date, Friday, 7 April 2006. The last day to
trade to participate in the dividend is Friday, 31 March 2006. Second
preference shares will commence trading ex-dividend from Monday, 3 April 2006.
The relevant dates for the payment of the dividends are as follows:
Non-
redeemable,
non-cumulative,
6,5% non-participating
cumulative preference
preference shares
shares (First (Second
preference preference
Ordinary shares shares) shares)
JSE Limited
(JSE)
Share code SBK SBKP SBPP
ISIN ZAE000057378 ZAE000038881 ZAE000056339
Namibian Stock
Exchange (NSX)
Share code SNB
ISIN ZAE000057378
Dividend
number 73 73 3
Dividend per
share(cents) 145 3,25 370,52
Dividend
payment dates
Last day to
trade Thursday, 6 April Friday, 31 March Friday, 31 March
"CUM" dividend 2006 2006 2006
Shares trade Friday, 7 April Monday, 3 April Monday, 3 April
"EX" dividend 2006 2006 2006
Record date Thursday, 13 April Friday, 7 April Friday, 7 April
2006 2006 2006
Payment date Tuesday, 18 April Monday, 10 April Monday, 10 April
2006 2006 2006
Ordinary share certificates may not be dematerialised or rematerialised between
Friday, 7 April 2006 and Thursday, 13 April 2006, both days inclusive.
Preference share certificates (first and second) may not be dematerialised or
rematerialised between Monday, 3 April 2006 and Friday, 7 April 2006, 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, 10 April 2006. Ordinary shareholders who have dematerialised their
share certificates will have their accounts at their CSDP or broker credited on
Tuesday, 18 April 2006.
On behalf of the board
Loren Wulfsohn
Group Secretary
Consolidated income statement
for the year ended 31 December 2005
% 2005 2004
Rm change Audited Audited
Income from banking operations 12 29 705 26 536
Net interest income 13 12 987 11 492
Interest income 10 38 697 35 247
Interest expense 8 25 710 23 755
Non-interest revenue 11 16 718 15 044
Income from life insurance operations 58 51 127 32 311
Total income 37 80 832 58 847
Credit impairment charges 15 1 207 1 050
Benefits due to policyholders 65 41 004 24 809
Income after credit impairment charges
and policyholders" benefits 17 38 621 32 988
Operating expenses in banking operations 9 16 817 15 384
Operating expenses in insurance operations 54 7 222 4 684
Net income before goodwill 13 14 582 12 920
Goodwill impairment 421 48
Net income from banking and insurance 10 14 161 12 872
Income from associates and joint ventures 78 226 127
Net income before indirect taxation 11 14 387 12 999
Indirect taxation 20 778 651
Profit before direct taxation 10 13 609 12 348
Direct taxation 32 4 312 3 276
Profit for the year 2 9 297 9 072
Minorities (54) 639 1 388
Preference shareholders 226 -
Ordinary shareholders 10 8 432 7 684
Headline earnings for the year ended 31 December 2005
% 2005 2004
Rm change Audited Audited
Group profit attributable to ordinary
shareholders 10 8 432 7 684
Adjustable items added back or reversed 293 (563)
Goodwill impairment 421 48
Profit on sale of properties and
equipment (64) (44)
Impairment on capital assets - 27
Recycled investment gains on available-
for-sale assets (64) (599)
Other capital losses - 5
Taxation on headline earnings adjustable
items 20 8
Minority share of headline earnings
adjustable items (281) 409
Headline earnings 12 8 464 7 538
Unaudited Unaudited
Normalised headline earnings 20 9 013 7 511
Financial statistics
at/for the year ended 31 December 2005
% 2005 2004
change Audited Audited
Standard Bank Group
Cents per ordinary share
Headline earnings 23 702,3 570,3
Dividends 15 267,0 231,5
Earnings 20 699,7 581,4
Fully diluted earnings 17 668,4 571,3
Standard Bank operations
Financial performance (%)
Net interest margin 2,93 3,07
Credit loss ratio 0,41 0,43
Cost-to-income ratio 56,6 58,0
Effective tax rate (including indirect taxes) 27,4 28,3
Capital adequacy (%)
Capital ratio
- primary capital 10,5 11,0
- total capital 14,2 15,0
Normalised financial statistics
at/for the year ended 31 December 2005
% 2005 2004
change Unaudited Unaudited
Standard Bank Group
Cents per ordinary share
Headline earnings 19 666,0 558,1
Earnings 17 663,6 569,0
Fully diluted earnings 16 652,2 561,6
Net asset value per ordinary share 15 2 830 2 464
Financial performance (%)
Return on equity 25,2 24,2
Return on equity (Standard Bank
operations) 25,8 25,1
Consolidated cash flow information
for the year ended 31 December 2005
2005 2004
Rm Audited Audited
Net cash from operating activities 19 020 16 550
Net cash from operating funds 27 895 623
Net cash (used in)/from investing activities (5 377) 451
Net cash used in financing activities (1 907) (3 497)
Consolidated balance sheet at 31 December 2005
% 2005 2004
Rm change Audited Audited
Assets
Cash and balances with banks 87 70 852 37 842
Short-term negotiable securities 41 30 313 21 461
Derivative assets (19) 100 188 124 236
Trading assets 19 38 446 32 438
Investments 29 153 404 118 677
Loans and advances 29 334 128 258 873
Current and deferred taxation (10) 990 1 094
Other assets (25) 13 003 17 223
Disposal groups held for sale 2 380 -
Interest in associates and joint ventures 53 4 985 3 250
Goodwill and other intangible assets >100 2 453 965
Property and equipment 10 4 536 4 114
Total assets 22 755 678 620 173
Equity and liabilities
Equity 4 39 964 38 533
Equity attributable to ordinary shareholders 13 32 931 29 064
Preference share capital and premium 2 991 2 991
Minority interest (38) 4 042 6 478
Liabilities 23 715 714 581 640
Derivative liabilities (15) 98 826 116 214
Trading liabilities 49 21 462 14 410
Deposit and current accounts 28 412 462 322 477
Current and deferred taxation 44 6 926 4 812
Other liabilities 32 21 292 16 074
Disposal groups held for sale 1 267 -
Policyholders" liabilities 44 140 835 97 993
Subordinated bonds 31 12 644 9 660
Total equity and liabilities 22 755 678 620 173
Contingent liabilities and capital commitments
at 31 December 2005
2005 2004
Rm Audited Audited
Contingent liabilities
Letters of credit 5 398 4 827
Guarantees 16 309 17 520
Unutilised facilities 26 417 18 497
48 124 40 844
Capital commitments
Capital Alliance Holdings Limited acquisition - 3 094
Contracted capital expenditure 552 664
Capital expenditure authorised but not yet
contracted 876 768
1 428 4 526
Statement of changes in shareholders" funds
for the year ended 31 December 2005
Ordinary Preference
shareholders" share capital Minority Total
equity and premium interest equity
Rm Audited Audited Audited Audited
Balance at
1 January 2004 28 835 8 6 421 35 264
Adjustment on
adoption
of IFRS (91) (5) (96)
Restated balance at
1 January 2004 28 744 8 6 416 35 168
Profit for the year 7 684 1 388 9 072
Net dividends paid (2 150) (797) (2 947)
Net translation
reversal
and hedging (1 272) (103) (1 375)
Issue of share
capital and
share premium 269 3 000 138 3 407
Equity impact of
empowerment (4 360) (908) (5 268)
Other reserve
movements 149 (17) 344 476
Balance at
31 December 2004 29 064 2 991 6 478 38 533
Adjustment on
adoption of IFRS (901) (2 756) (3 657)
Restated balance at
1 January 2005 28 163 2 991 3 722 34 876
Profit for the year 8 432 226 639 9 297
Net dividends paid (3 747) (226) (488) (4 461)
Net translation
gain and hedging 397 (21) 376
Issue of share
capital and
share premium 246 71 317
Share buy-backs (677) - (677)
Other reserve
movements 117 119 236
Balance at
31 December 2005 32 931 2 991 4 042 39 964
Segment report
for the year ended 31 December 2005
Headline earnings contribution by business unit
% 2005 2004
change Audited Audited
Rm
Domestic Banking 21 6 991 5 790
Personal & Business Banking SA 23 3 664 2 985
Corporate & Investment Banking SA 15 3 213 2 805
Other domestic operations 114 -
Rest of Africa 17 721 616
Corporate & Investment Banking
International (28) 465 647
Stanlib 73 97 56
Central funding and eliminations (129) 78
Standard Bank operations 13 8 145 7 187
Liberty Life (9) 319 351
Standard Bank Group 12 8 464 7 538
Normalised headline earnings contribution by business unit
% 2005 2004
Rm change Unaudited Unaudited
Domestic Banking 21 6 991 5 790
Personal & Business Banking SA 23 3 664 2 985
Corporate & Investment Banking SA 15 3 213 2 805
Other domestic operations 114 -
Rest of Africa 17 721 616
Corporate & Investment Banking
International (28) 465 647
Corporate & Investment Banking
International USD (28) 73 101
Stanlib 73 97 56
Central funding and eliminations >100 216 47
Central funding and eliminations - IFRS (129) 78
Tutuwa adjustments 345 (31)
Standard Bank operations 19 8 490 7 156
Liberty Life normalised 47 523 355
Liberty Life - IFRS (9) 319 351
Policyholder deemed treasury shares
added back and Tutuwa adjustment >100 204 4
Standard Bank Group 20 9 013 7 511
Accounting policies
Basis of preparation
The consolidated financial statements are prepared in accordance with, and
comply with International Financial Reporting Standards (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 instruments classified
as available-for-sale, financial assets and liabilities held at fair value
through profit and loss, investment properties and derivative instruments.
Changes in accounting policies
The accounting policies are consistent with those adopted in the previous year,
except for changes made as a result of the adoption of IFRS. The revised IFRS
policies have been consistently applied to both years presented with the
exception of IAS 32 - Financial Instruments: Disclosure and Presentation, IAS
39 - Financial Instruments: Recognition and Measurement and IFRS 4 - Insurance
Contracts, where the group elected to apply IFRS with effect from 1 January
2005 as permitted by IFRS.
A detailed report summarising the impact of IFRS conversion was published with
the 2005 interim results announcement and is available on
www.standardbank.co.za. With the exception of reallocation in the income
statement and balance sheet line items since that publication, no further
adjustments have been made impacting profit and equity attributable to ordinary
shareholders.
Audit opinion
These abridged financial statements have been extracted from the audited
financial statements on which KPMG Inc and PricewaterhouseCoopers Inc have
issued an unqualified audit report. This report is available for inspection at
the company"s registered office.
Board of directors
DE Cooper (Chairman), JH Maree* (Chief Executive), DDB Band, E Bradley,
T Evans, TS Gcabashe, DA Hawton, Sir Sam Jonah KBE
, Sir Paul Judge#,
SJ Macozoma, RP Menell, Adv KD Moroka, AC Nissen, MC Ramaphosa,
Mr MA Ramphele, MJD Ruck*, MJ Shaw, Sir Robert Smith#, Dr CB Strauss
*Executive directors #British
Ghanaian
Group Secretary
L Wulfsohn
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
www.standardbank.co.za
Date: 09/03/2006 08:00:45 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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