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SBK - Standard Bank Group - Audited results and dividend announcement

Release Date: 05/03/2008 07:55
Code(s): SBK SBPP SBKP
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SBK - Standard Bank Group - Audited results and dividend announcement For the year ended 31 December 2007 Standard Bank Group Limited Registration No. 1969/017128/06 Incorporated in the Republic of South Africa JSE Share code: SBK NSX Share code: SNB ISIN: ZAE000109815 Audited results and dividend announcement For the year ended 31 December 2007 For Standard Bank, 2007 was a momentous year in which we: weathered global financial market stresses not seen in the last decade; finalised acquisitions in the important emerging markets of Argentina, Turkey and Nigeria; negotiated and gained the necessary approvals for the historic transaction between Standard Bank and ICBC which resulted in us gaining a valuable strategic partner and a significant injection of tier one capital in a cost effective manner; and achieved financial results that met our published objectives for growth in headline earnings per share and return on equity. Overview of financial results Operating conditions in local and international markets in the second half of the year contrasted starkly with the more favourable conditions in the six months to June 2007. Despite the worsening environment, Standard Bank Group continued to perform strongly, building on the excellent financial results achieved in the first half of the year. For the full year to 31 December 2007, headline earnings per share grew by 23,4% to 1 033,4 cents per share and the group achieved a return on equity of 26,7% on an IFRS basis. Key financial highlights: Normalised Objectives IFRS Unaudited 2007(1) Audited Return on equity (%) 24,8 24,0 26,7 Headline earnings growth (%) 22 25 Headline earnings per share (cents) 960,6 1 033,4 Headline earnings per share growth (%) 21 16,5(2) 23 Cost-to-income ratio(3) (%) 52,0 =53,5 52,4 Credit loss ratio (%) 0,78 <0,75 0,79 1 Based on normalised results. 2 10% above average South African inflation (CPIX) of 6,5%. 3 Excluding profit on the sale of the remaining shares in MasterCard. On a normalised basis, headline earnings per share grew by 20,6% and a return on equity of 24,8% was achieved. Normalised results, fully explained in a separate section in this announcement, adjust the IFRS results for two accounting anomalies that have distorted the results from an economic perspective with effect from 2004. The commentary that follows is based on the normalised results. The global economy continued to expand rapidly in the first half of 2007, with growth exceeding 5%. In the second half of the year concerns about the US sub- prime market intensified, credit repriced sharply and liquidity contracted. The impact was pervasive, affecting high-yield corporate debt, asset-backed commercial paper, funding and capital markets. South Africa weathered the credit market turmoil relatively well, but high oil and food prices took their toll. CPIX inflation breached the upper limit of the target range early in the second quarter of the year, and has stayed above the target ever since. This prompted the South African Reserve Bank to raise interest rates by a further 200 basis points over the year. Interest rates in South Africa are now 400 basis points higher than in June 2006. Of concern is the ratio of household debt to disposable income which reached 77,4% in the third quarter of 2007. Higher interest rates and household debt levels indicate heightened credit risk in South Africa, reflected in the higher levels of credit provisioning in the bank`s results. Retail sales, vehicle sales and house prices, although buoyant for much of the year, finally succumbed to the impact of higher interest rates and stagnated towards the end of the year. The group`s strategy of building revenue streams in other emerging markets started to show results in 2007. While the growth contribution to headline earnings from the South African operations slowed to 15%, the businesses in the rest of Africa grew their contribution by 58% and operations outside Africa by 98%. South Africa remains the group`s primary operating market, accounting for 82% of the total R13 billion in headline earnings for 2007 (2006: 87% of R11 billion). Analysing the results by global business line, which is more reflective of the way the group`s businesses are managed, Corporate & Investment Banking had an excellent year, growing headline earnings by 34%, while Personal & Business Banking grew by a more subdued 18%. Liberty Life (now incorporating 100% of Stanlib) grew its contribution to headline earnings by 15%. Banking activities income statement analysis Net interest income Growth of 35% was achieved in net interest income 39% in Personal & Business Banking and 33% in Corporate & Investment Banking. The strong increase in net interest income was driven by 26% growth in average assets across the group`s banking operations together with wider net interest margins. The net interest margin improved 19 basis points to 2,97%, due largely to the endowment impact of higher interest rates on shareholders` funds and transactional deposits. This was offset by a continued reliance on more expensive wholesale funding to support strong growth in Personal & Business Banking lending, increased competition for term funding and higher central bank reserving costs. Non-interest revenue Net fee and commission revenue grew by 23%. The largest category, account transaction fees, grew 10% despite sub-inflation price increases in South Africa. A highlight was the 75% growth in knowledge based fee income, driven by advisory fees emanating from strong investment banking deal flow. Card based commissions grew by 16% as transactional turnover increased and customer numbers grew by 2%. Commission revenue in short-term insurance operations grew by 28% on the back of increased policy sales across the branch network. Trading revenue grew by 49%, benefiting from increased client deal flow in volatile foreign exchange and interest rate markets. Foreign exchange trading revenues grew strongly across the group, particularly in the rest of Africa. Debt capital markets showed excellent results in the first half of the year and, given the extreme conditions in global credit markets, the second half presented fewer opportunities to generate revenue as the level of client activity slowed. Commodity trading outside Africa grew strongly off increased deal flow in the energy, base and precious metals sectors. Growth in other revenue of 21% originated mainly from the profit of R459 million (2006: R157 million) realised on the sale of the remaining portion of the group`s shares in MasterCard. The profit is excluded from headline earnings as it relates to realised gains transferred out of equity on a financial asset defined under IFRS as "available-for-sale". Property related revenue decreased due to the non-recurrence of substantial gains on property investments and lower dividends received from investments. Credit impairment charges The 68% increase in the group`s credit impairment charge, to R4,6 billion, comprises an 86% increase in impairment charges for non-performing loans and a 16% increase in portfolio based provisions for performing loans. In Personal & Business Banking the total charge increased by 82% while in Corporate & Investment Banking the charge reduced from last year. The group`s credit loss ratio increased to 0,78% from 0,60%, slightly outside the group`s objective of 0,75% for this indicator. In Personal & Business Banking, the largest increase in impairment charges came in the mortgage business. Higher inflation and interest rates contributed to a 129% increase in non-performing mortgage loans, resulting in a 171% higher income statement charge for this product. The credit loss ratio for mortgages is 0,54% (2006: 0,27%). In instalment sale and finance leases, the weaker economic conditions and growth in higher risk dealer originated business increased non-performing loans by 116%. Recovery values in the used passenger market have also deteriorated and indications of increased defaults in the business portfolio are being monitored. Credit impairment charges have increased by 90% and the credit loss ratio in this product is 1,49% (2006: 1,09%). Credit card customers felt the pinch of rising inflation on disposable income and non-performing loans increased by 46%. Credit impairment charges increased by 48% and the credit loss ratio in this product is 7,20% (2006: 7,03%), well within the group`s previous guidance of 7% to 9% through an economic cycle. The credit loss ratio in Corporate & Investment Banking improved to 0,09% (2006: 0,15%), mainly as a result of doubtful debt rehabilitations in the property finance portfolio. Operating expenses Operating expenses increased by 29%, comprising 32% growth in staff costs and 26% in other operating expenses. Excluding recent acquisitions, cost growth amounted to 23% in total, and 26% and 18% in staff costs and other operating expenses respectively. The cost-to-income ratio improved from 52,7% to 52,0% (excluding the capital gain realised on the disposal of MasterCard shares) and the "jaws gap" (income growth less cost growth) remained positive at 2,4% (2006: 6,1%). The increase in staff costs was driven by a 17% larger staff complement as the group built scale and upskilled management in key markets. Incentive pay provisions increased in line with business performance. The incentive-based remuneration component of total staff costs increased from 31% to 34%, reflecting improved flexibility in staff costs. The increase in other operating expenses was largely attributable to higher levels of business activity and continued expansion. The group`s largest cost component besides staff costs was information technology, which grew by 24% largely as a result of investments in systems development for compliance and risk related projects, increased maintenance costs, higher ATM network and data line expenses. Balance sheet analysis Loans and advances grew by 28% in the year, 3% of which related to acquisitions. Organic growth of 25% was achieved in Personal & Business Banking and 26% in Corporate & Investment Banking. Activity in the Personal & Business Banking market segment remained buoyant for most of the year but towards the end of the year the impact of higher interest rates started to dampen the strong growth momentum built up in recent years. Mortgage loans grew by 29% with growth of 9% in the average value of new registrations, a decline in cancellations and prepayments and increased use of access bond facilities. Further advances on existing mortgages represented 17% (2006: 18%) of total new business. Instalment sale and finance leases grew by 22% excluding loans acquired with the acquisition of BankBoston in Argentina, due to a strong increase in dealer originated new vehicle business. The motor to non-motor ratio of this book is 58:42 (2006: 61:39). Card debtors increased by 31%, demonstrating slower growth than in previous years as credit granting criteria were tightened. Overdrafts and other demand loans grew by 22% due to the growth in the number of personal and business current accounts as well as increased utilisation of existing facilities. Corporate & Investment Banking grew loans and advances by 26%, excluding loans consolidated through acquisitions. Loans granted to customers grew by 40%, driven by new product offerings, a general increase in customer demand and a number of specialised finance and energy finance transactions outside Africa. Structured finance transactions in the rest of Africa and other corporate lending transactions in South Africa also contributed to this growth. Infrastructure financing is gaining momentum, with progress made during the year on several toll road, port and airport mandates across Africa. The group`s liquidity position remains healthy and short-term marketable assets exceeded the minimum prudential requirements by R60 billion at year end. The structural liquidity mismatch position continues to be closely monitored and the group`s long-term funding ratio was increased to 17,8% from 15,5% in the prior year. Capital and Basel II The implementation of Basel II on 1 January 2008 has provided the group with an internationally recognised framework incorporating best practice in capital and risk management. The capability that this implementation has developed in the way the group manages its business is recognised and welcomed. The group has invested significant resources over the past seven years in developing the systems and processes to support Basel II and related risk management processes. Over the last year, the group significantly enhanced its internal economic capital and stress testing methodologies. The South African regulator`s approval of the group`s target approaches of AIRB (advanced internal rating based approach) for credit risk, TSA (the standardised approach) for operational risk and internal models for market risk, was an important milestone in validating these efforts. The conversion from Basel I to Basel II has led to increased risk-weighted exposures and lower qualifying capital, resulting in lower capital adequacy ratios. As expected, lower exposures in Personal & Business Banking were offset by higher risk-weighted exposures in Corporate & Investment Banking portfolios and the addition of operational risk which was not measured under Basel I. The pro-forma impact of conversion to Basel II is illustrated below. 2007 2007 Pro-forma
Basel I Basel II Rbn Rbn Risk-weighted exposures Credit risk 461 465 Trading/market risk 63 54 Operational risk 56 Total 524 575 Qualifying capital 76 65 Group capital adequacy ratios Tier I (%) 10,4 8,5 Total (%) 14,4 11,3 The group issued USD85 million, Euro100 million and R300 million in Tier III capital, and USD355 million in Tier II capital. The group also refinanced part of its Tutuwa BEE structure, releasing R1 billion in regulatory Tier I capital. Subordinated debt to the value of R882 million was redeemed during the year. Distributions to shareholders The group`s policy to declare both interim and year-end distributions at a cover ratio of 2,5 times normalised headline earnings remains unchanged. A final dividend of 205 cents per share (2006: 176 cents) has been declared, an increase of 16% on last year`s final dividend. The total amount distributed to shareholders in respect of the 2007 financial year was 21% higher than in the prior year. Financial Sector Charter Standard Bank remains committed to the principles of the Financial Sector Charter (charter). The bank concurs with the need to harmonise the charter and the Broad-based Black Economic Empowerment Codes of Good Practice legislated in 2007, and is working hard to achieve this without losing certain sector specific targets agreed to in the charter which are of significant national importance. The harmonisation process continues. The bank`s most pleasing achievement in relation to charter targets has been in the area of employment equity. Black managers comprised 49% of Standard Bank management in South Africa at the end of 2007. Major acquisitions concluded in 2007 BankBoston in Argentina The group obtained approval from both South African and Argentine regulators for its acquisition of the assets and liabilities of BankBoston Argentina, with effect from 1 April 2007. The transaction resulted in negative goodwill of R382 million which was accounted for as a gain in the income statement, but excluded from headline earnings. The incorporation of this entity into the group has progressed well with minimal disruption and it contributed R129 million to the group`s headline earnings and R511 million to earnings. IBTC Chartered Bank Plc (IBTC) in Nigeria Regulatory approval was granted to the group on 24 September 2007 to obtain a controlling interest in IBTC through the sale of its Nigerian operations, Stanbic Bank (Nigeria) Limited, to IBTC in exchange for a 33,3% share in the combined entity, and Standard Bank`s acquisition of a further 16,8% of the enlarged entity for R2,8 billion. IBTC has been consolidated with effect from 1 October 2007 and added R67 million to the group`s earnings in the three months to 31 December 2007. The transaction resulted in goodwill and intangible assets, based on preliminary purchase price allocation, of R3,0 billion being recognised, and a gain of R534 million on the partial disposal of Stanbic Bank (Nigeria) Limited which has been accounted for directly in equity. The valuation of the intangible assets as part of the purchase price allocation is in progress. The integration of IBTC is well underway. Acquisition of CFC Bank in Kenya The group has concluded an agreement with CFC Bank to dispose of its shareholding in Stanbic Bank Kenya to CFC Bank in exchange for a 41,4% share in the merged bank, and to simultaneously acquire further shares worth approximately USD90 million to ensure a controlling interest of 60% therein. This transaction is still subject to regulatory approvals and is unlikely to have a significant impact on group results. If approved, It will expand the group`s African network and create a stronger presence in East Africa. Strategic partnership with Industrial and Commercial Bank of China (ICBC) The strategic partnership between Standard Bank Group and ICBC, pursuant to which ICBC became a supportive, non-controlling 20% minority shareholder in Standard Bank Group, was announced on 25 October 2007. The key features of the deal are the issue of 152,5 million new ordinary shares to ICBC at R104,58 per share and the acquisition by ICBC of 152,5 million ordinary shares from existing shareholders at R136,00 per share, for a total consideration of R36,7 billion. The two transactions were approved by the shareholders of both Standard Bank and ICBC at general meetings held on 3 December 2007 and 13 December 2007 respectively, with 97% of Standard Bank shareholders voting in favour of the transaction. The last of the conditions precedent to the transaction was fulfilled on 14 February 2008. The operative date of the scheme was 3 March 2008, on which date the scheme consideration was paid into shareholders` accounts, share balances updated and new shares issued. The first strategic co- operation committee meeting, jointly chaired by Jacko Maree and President of ICBC, Yang Kaisheng, is scheduled to take place during March in Beijing. In addition to the co-operation benefits that the transaction provides, Standard Bank has raised new capital required to continue growing its franchise in its chosen markets at a time when bank capital has become a very scarce resource. This transaction is expected to affect the group`s results as follows: revenue benefits of approximately USD50 million are expected to arise from the business co-operation agreements in the first year of co-operation, and by the third year of co-operation, the annual revenue benefits are expected to amount to approximately USD180 million. For 2008, return on equity is expected to be diluted, given that the new equity capital will take time to employ and growth in headline earnings per share is expected to be slower as a result of the dilutive impact of the new shares in issue and the relatively low initial return on ungeared capital. The group`s longer-term growth prospects are however substantially enhanced. Prospects The outlook for global economic growth has deteriorated significantly in the past six months. Dislocations in developed financial markets have inevitably had a knock-on effect in developing markets and South Africa has not been immune. Growth rates in the markets in which we operate are expected to slow in 2008. Operating conditions will however create both risks and opportunities across the group`s diverse financial services operations. The board is confident that with our skilled and passionate people, and highly disciplined approach to risk management, the group is well positioned to manage these risks and capitalise on the opportunities. Over the next few years the group will focus on identifying suitable capital deployment opportunities for the capital inflow arising from the transaction with ICBC to ensure appropriate shareholder returns. The group`s medium-term financial objectives remain unchanged: a normalised return on equity of 22,5%, and normalised headline earnings per share growth of average South African inflation (CPIX) plus 10 percentage points. In 2008, returns are anticipated to be slightly reduced by the prevailing economic conditions but more significantly impacted by the short-term financial effects of the ICBC transaction. Consequently, the group`s financial objectives for the year ahead have been revised downwards to 21% for normalised return on equity and to average South African inflation (CPIX) plus 5 percentage points for growth in normalised headline earnings per share. Jacko Maree Derek Cooper Chief executive Chairman Johannesburg 4 March 2008 Normalised results (Unaudited) With effect from 2004, the group has adjusted its results reported under International Financial Reporting Standards (IFRS) for two required accounting conventions that do not reflect the underlying economic substance of the transactions. Consistent with prior years, the IFRS results have been adjusted for the following items to arrive at the normalised results: preference share funding for the group`s Black Economic Empowerment Ownership initiative (Tutuwa) transaction that is deducted from equity and reduces the shares in terms of IFRS; and group company shares held for the benefit of Liberty Life policyholders that result in a reduction in the number of shares and the exclusion of fair value adjustments and distributions on these shares. The IFRS treatment causes an accounting mismatch between income from investments and changes in policyholders` liabilities. On 20 December 2007 the group entered into a financing arrangement that effectively externalised R1 billion of the preference share financing provided in terms of the group`s Tutuwa initiative. This transaction resulted in the release of 24,7 million shares previously deemed by IFRS to be "treasury shares". As the transaction took place close to the end of the financial period the impact on the weighted average number of shares was insignificant. The result of these adjustments is as follows: Normalised headline earnings for the year ended 31 December 2007 Weighted average number Headline Growth on
of shares earnings 2006 `000 Rm % Disclosed on an IFRS basis 1 230 961 12 721 25 Tutuwa initiative 98 378 358 Group shares held for the benefit of Liberty Life policyholders 39 884 74 Normalised 1 369 223 13 153 22 Normalised financial statistics for the year ended 31 December % change 2007 2006
Standard Bank Group Number of ordinary shares in issue (000`s) end of period 1 372 597 1 362 633 weighted average 1 369 223 1 358 415 diluted weighted average 1 388 217 1 380 416 Cents per ordinary share Headline earnings 21 960,6 796,4 Diluted headline earnings 21 947,5 783,7 Total distributions 21 386,0 320,0 Earnings 25 1 028,5 820,7 Diluted earnings 26 1 014,5 807,6 Net asset value 20 4 255 3 548 Financial performance (%) ROE 24,8 25,4 Net interest margin 2,97 2,78 Credit loss ratio 0,78 0,60 Cost-to-income ratio 51,6 52,5 Cost-to-income ratio excluding capital profit on MasterCard 52,0 52,7 Normalised headline earnings contribution by business unit for the year ended 31 December % Rm change 2007 2006 Personal & Business Banking 18 5 661 4 816 Corporate & Investment Banking 34 6 765 5 033 Central and other (>100) (246) 126 Central and other IFRS (572) (208) Tutuwa adjustments (2) 326 334 Banking activities 22 12 180 9 975 Liberty Life 15 973 843 Liberty Life IFRS 59 867 547 Policyholders` deemed treasury shares and Tutuwa adjustment (64) 106 296 Standard Bank Group 22 13 153 10 818 Standard Bank Group results for the year ended 31 December 2007 Abridged audited results prepared in accordance with IFRS Consolidated income statement for the year ended 31 December % Rm change 2007 2006 Income from banking activities 32 47 296 35 819 Net interest income 35 22 549 16 654 Non-interest revenue 29 24 747 19 165 Income from investment management and life insurance activities (16) 49 834 59 344 Total income 2 97 130 95 163 Credit impairment charges 68 4 590 2 733 Benefits due to policyholders (22) 37 153 47 896 Income after credit impairment charges and policyholders` benefits 24 55 387 44 534 Operating expenses in banking activities 29 24 706 19 105 Operating expenses in investment management and life insurance activities 14 7 423 6 486 Net income before goodwill 23 23 258 18 943 Goodwill (gain)/impairment (>100) (376) 15 Net income before associates and joint ventures 25 23 634 18 928 Share of profit from associates and joint ventures 29 355 275 Net income before indirect taxation 25 23 989 19 203 Indirect taxation 41 1 185 841 Profit before direct taxation 24 22 804 18 362 Direct taxation 6 6 232 5 852 Profit for the year 32 16 572 12 510 Attributable to minorities 43 2 471 1 723 Attributable to preference shareholders 67 450 269 Attributable to ordinary shareholders 30 13 651 10 518 Basic earnings per share (cents) 28 1 109,0 864,5 Diluted earnings per share (cents) 27 1 044,1 820,1 Headline earnings for the year ended 31 December Rm % change 2007 2006 Group profit attributable to ordinary shareholders 30 13 651 10 518 Headline earnings adjustable items added back or reversed(1) (966) (601) Goodwill (gain)/impairment IFRS 3 (376) 15 Profit on sale of property and equipment IAS 16 (61) (53) Impairment of property and equipment IAS 16 10 9 Gains on disposal of businesses and divisions IAS 27 (6) (374) Impairment of intangibles IAS 38 26 - Investment gains on available-for-sale assets IAS 39 (559) (198) Taxation on headline earnings adjustable items 32 14 Minority share of headline earnings adjustable items 4 257 Headline earnings 25 12 721 10 188 1 These headline earnings adjustable items have been included in the calculation of normalised headline earnings disclosed above. Segment report for the year ended 31 December Revenue contribution by business unit % Rm change 2007 2006 Personal & Business Banking 29 27 075 20 911 Corporate & Investment Banking 37 19 756 14 452 Central and other 1 812 803 Banking activities 32 47 643 36 166 Liberty Life (17) 50 320 60 410 Standard Bank Group Normalised 1 97 963 96 576 Adjustments for IFRS (41) (833) (1 413) Standard Bank Group IFRS 2 97 130 95 163 Profit and loss attributable to ordinary shareholders Personal & Business Banking 18 5 710 4 844 Corporate & Investment Banking 35 6 805 5 029 Central and other 88 593 315 Banking activities 29 13 108 10 188 Liberty Life 2 975 960 Standard Bank Group Normalised 26 14 083 11 148 Adjustments for IFRS (31) (432) (630) Standard Bank Group IFRS 30 13 651 10 518 Statement of changes in equity for the year ended 31 December Preference Ordinary share share capital holders` and Minority Total
funds premium interest equity Rm Balance at 1 January 2006 32 931 2 991 5 770 41 692 Change in accounting policy (276) (126) (402) Restated balance at 1 January 2006 32 655 2 991 5 644 41 290 Total recognised income and expenses 13 619 269 1 968 15 856 Profit for the year 10 518 269 1 723 12 510 Items accounted for directly in reserves 3 101 245 3 346 Currency translation movement and hedging 2 173 10 2 183 Cash flow hedging and available-for-sale revaluations 965 965 Change in shareholding of subsidiaries (133) (315) (448) Other reserve movements 96 550 646 Issue of share capital and premium 299 2 512 57 2 868 Share buy-backs (102) (102) Net dividends paid (3 555) (269) (1 380) (5 204) Balance at 31 December 2006 42 916 5 503 6 289 54 708 Balance at 1 January 2007 42 916 5 503 6 289 54 708 Total recognised income and expenses 14 293 450 3 896 18 639 Profit for the year 13 651 450 2 471 16 572 Items accounted for directly in reserves 642 1 425 2 067 Currency translation movement and hedging 155 (52) 103 Cash flow hedging and available-for-sale revaluations 194 194 Change in shareholding of subsidiaries 665 1 384 2 049 Other reserve movements (372) 93 (279) Issue of share capital and premium 300 73 373 Share buy-backs 626 (455) 171 Net distributions paid (4 464) (450) (541) (5 455) Balance at 31 December 2007 53 671 5 503 9 262 68 436 Consolidated balance sheet as at 31 December % Rm change 2007 2006 Assets Cash and balances with central banks 44 20 618 14 343 Financial investments, trading and pledged assets 9 331 596 303 343 Loans and advances 29 646 781 502 519 Loans and advances to banks 10 98 631 89 785 Loans and advances to customers 33 548 150 412 734 Investment property 13 14 937 13 200 Derivative and other assets 19 141 968 118 850 Interest in associates and joint ventures 43 12 293 8 584 Goodwill and other intangible assets >100 6 666 2 374 Property and equipment 38 7 216 5 242 Total assets 22 1 182 075 968 455 Equity and liabilities Equity 25 68 436 54 708 Equity attributable to ordinary shareholders 25 53 671 42 916 Ordinary share capital 1 137 136 Ordinary share premium (47) 1 231 2 303 Reserves 29 52 303 40 477 Preference share capital and premium 5 503 5 503 Minority interest 47 9 262 6 289 Liabilities 22 1 113 639 913 747 Deposit and current accounts 29 705 843 545 164 Deposits from banks 42 72 372 51 093 Deposits from customers 28 633 471 494 071 Derivative, trading and other liabilities 10 200 691 182 115 Policyholders` liabilities 10 186 137 168 898 Subordinated debt 19 20 968 17 570 Total equity and liabilities 22 1 182 075 968 455 Contingent liabilities and capital commitments as at 31 December Rm 2007 2006 Letters of credit 14 299 9 133 Guarantees 31 916 23 367 Irrevocable unutilised facilities 47 172 51 436 93 387 83 936
Capital commitments Contracted capital expenditure 161 309 Capital expenditure authorised but not yet contracted 4 156 1 682 4 317 1 991
Consolidated cash flow information for the year ended 31 December Rm 2007 2006 Net cash from operating activities 32 694 23 763 Net cash used in operating funds (14 956) (14 048) Net cash used in investing activities (14 001) (13 511) Net cash (used in)/from financing activities (1 115) 2 187 Private equity associates and joint ventures(1) Rm 2007 2006 Cost 198 99 Carrying value 317 254 Fair value 383 274 Loans to associates and joint ventures 442 204 Equity accounted income 144 72 Other income from associates and joint ventures Profit or loss on disposal of associates and joint ventures 1 These associates and joint ventures are accounted for using the equity method and are subject to the headline earnings exemption for listed banks. Major business acquisitions BankBoston Rm Argentina IBTC Nigeria Date of acquisition 1 April 24 September 2007 2007 Percentage of voting equity instruments acquired(%) 76,68 50,10 Contribution to revenue if acquisition occurred on 1 January 2007 1 378 1 099 Contribution to net profit if acquisition occurred on 1 January 2007(1) 177 227 The details of the fair value of the assets and liabilities acquired and goodwill arising are as follows(2): Cash and balances with central banks 1 796 1 514 Trading assets and financial investments 1 839 3 255 Loans and advances 9 865 3 922 Property, equipment, intangibles and other assets 690 1 263 Deposit and current accounts (12 589) (4 171) Derivatives and other liabilities (835) (3 388) Net asset value 766 2 395 Less: minority interest (355) (1 195) Goodwill/(excess)(3) (382) 2 998 Cost of acquisition 29 4 198 Less: fair value of 49,9% of subsidiary effectively disposed to minorities(4) (1 377) Cash consideration paid 29 2 821 1 Excludes excess recognised as a goodwill gain. 2 Carrying amounts approximate fair values. 3 Goodwill represents the premium paid for control and excess represents negative goodwill on acquisition. 4 Fair value of the equity instruments of the subsidiary was determined with reference to the listed share price of IBTC Nigeria. Financial statistics for the year ended 31 December % change 2007 2006
Standard Bank Group Number of ordinary shares in issue (000`s) end of period 1 256 916 1 224 856 weighted average 1 230 961 1 216 687 diluted weighted average 1 307 414 1 282 478 Cents per ordinary share Headline earnings 23 1 033,4 837,4 Diluted headline earnings 22 973,0 794,4 Total distributions 21 386,0 320,0 Basic earnings 28 1 109,0 864,5 Diluted earnings 27 1 044,1 820,1 Net asset value 22 4 270 3 504 Financial performance (%) ROE 26,7 27,4 Net interest margin 2,94 2,74 Credit loss ratio 0,79 0,60 Cost-to-income ratio 51,9 53,0 Cost-to-income ratio excluding capital profit on MasterCard 52,4 53,2 Capital adequacy (%) Capital ratio Tier I capital 10,4 10,8 total capital 14,4 14,8 Declaration of dividends Notice is hereby given that the following final dividends have been declared: Ordinary dividend No. 77 of 205 cents per ordinary share (share codes: SBK and SNB, ISIN: ZAE000109815), payable on Monday, 14 April 2008, to ordinary shareholders recorded in the books of the company at the close of business on the record date, Friday, 11 April 2008. The last day to trade to participate in the dividend is Friday, 4 April 2008. Ordinary shares will commence trading ex-dividend from Monday, 7 April 2008. 6,5% first cumulative preference shares (first preference shares) dividend No. 77 of 3,25 cents per first preference share (share code: SBKP, ISIN: ZAE000038881), payable on Monday, 7 April 2008, to holders of first preference shares recorded in the books of the company at the close of business on the record date, Friday, 4 April 2008. The last day to trade to participate in the dividend is Friday, 28 March 2008. First preference shares will commence trading ex-dividend from Monday, 31 March 2008. Non-redeemable, non-cumulative, non-participating preference shares (second preference shares) dividend No. 7 of 482,03 cents per second preference share (share code: SBPP, ISIN: ZAE000056339), payable on Monday, 7 April 2008, to holders of second preference shares recorded in the books of the company at the close of business on the record date, Friday, 4 April 2008. The last day to trade to participate in the dividend is Friday, 28 March 2008. Second preference shares will commence trading ex-dividend from Monday, 31 March 2008. The relevant dates for the payment of the dividends are as follows: 6,5% cumulative preference shares
(First Ordinary shares preference shares) JSE Limited (JSE) Share code SBK SBKP ISIN ZAE000109815 ZAE000038881 Namibian Stock Exchange (NSX) Share code SNB ISIN ZAE000109815 Dividend number 77 77 Dividend per share (cents) 205 3,25 Dividend payment dates Last day to trade Friday Friday "CUM" dividend 4 April 2008 28 March 2008 Shares trade Monday Monday "EX" dividend 7 April 2008 31 March 2008 Record date Friday Friday 11 April 2008 4 April 2008 Payment date Monday Monday 14 April 2008 7 April 2008 Non-redeemable,
non-cumulative, non-participating preference shares (Second
preference shares) JSE Limited (JSE) Share code SBPP ISIN ZAE000056339 Dividend number 7 Dividend per share (cents) 482,03 Dividend payment dates Last day to trade Friday "CUM" dividend 28 March 2008 Shares trade Monday "EX" dividend 31 March 2008 Record date Friday 4 April 2008 Payment date Monday 7 April 2008 Ordinary share certificates may not be dematerialised or rematerialised between Monday, 7 April 2008 and Friday, 11 April 2008, both days inclusive. Preference share certificates (first and second) may not be dematerialised or rematerialised between Monday, 31 March 2008 and Friday, 4 April 2008, both days inclusive. Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders` bank accounts on the 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, 7 April 2008. Ordinary shareholders who have dematerialised their share certificates will have their accounts at their CSDP or broker credited on Monday, 14 April 2008. On behalf of the board Loren Wulfsohn Group secretary Accounting policies Basis of preparation The abridged consolidated financial statements are prepared in accordance with, and comply with International Financial Reporting Standards (IFRS) and the South African Companies Act. The consolidated financial statements are prepared in accordance with the going concern principle under the historical cost basis as modified by the revaluation of certain assets and liabilities where required or elected in terms of IFRS. Changes in accounting policies The accounting policies are consistent with those adopted in the previous year except for: The adoption of IFRS 7 Financial Instruments: Disclosures. This new standard has not changed the recognition of financial instruments but has resulted in the reclassification of certain financial assets and fee expenses. The adoption of other accounting standards and interpretations issued with an effective date of 1 January 2007. The adoption of these standards and interpretations has not had a material effect on the results, nor has it required any restatements of the results. The early adoption of IFRS 8 Operating Segments. The standard has no impact on the group`s results but has impacted the format of disclosure and measurement of the results of reportable segments. The early adoption of IFRIC 11 IFRS 2 Group and Treasury Share Transactions. The group`s accounting treatment already complies with this interpretation and it has therefore not impacted the group`s results or position. The group changing its accounting policies relating to: transactions with minority shareholders where the group purchases an additional interest from minority shareholders or sells a portion of its interest to minority shareholders, while the group controls the entities both before and after the transaction. Any excess of the purchase consideration over the group`s proportionate share of the additional net asset value of a subsidiary acquired is now accounted for directly in equity. Previously, the group accounted for the excess as goodwill. Any profit or loss on the partial disposal of the group`s interest in a subsidiary is also accounted for directly in equity. Previously, the group accounted for the profit or loss on partial disposal in the income statement; the measurement of investment guarantees, in terms of actuarial Practice Guidance Note 110, on certain insurance contracts. The new model will more accurately reflect fair value. The cumulative impact is not material to the group`s results; and certain modelling (valuation) changes in respect of insurance contracts. These changes have influenced expected cash flows and ultimately liability determined values as well as timing of profit recognition on the individual insurance policies. The cumulative financial impact is not material. Other reclassifications Following a review of interest rate swap transactions, interest income has now been set-off against corresponding interest expense amounts. Audit opinion on the annual financial statements These abridged financial statements have been extracted from the audited financial statements on which KPMG Inc. and PricewaterhouseCoopers Inc. have issued an unmodified audit report. This report is available for inspection at the company`s registered office. Standard Bank Group Limited Registration No. 1969/017128/06 Incorporated in the Republic of South Africa Directors: DE Cooper (Chairman), SJ Macozoma (Deputy chairman), JH Maree* (Chief executive), DDB Band, E Bradley, TS Gcabashe, DA Hawton, SE Jonah KBE##, Sir Paul Judge#, KP Kalyan, RP Menell, Adv KD Moroka, AC Nissen, MC Ramaphosa, MJD Ruck, MJ Shaw, Sir Robert Smith#, EM Woods *Executive director #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 (Proprietary) Limited 70 Marshall Street, Johannesburg 2001 PO Box 61051, Marshalltown 2107 Namibia Transfer Secretaries (Proprietary) Limited Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek PO Box 2401, Windhoek Sponsor: Standard Bank www.standardbank.co.za Date: 05/03/2008 07:55:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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