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SBK - Standard Bank Group Limited - Chief executive`s comments at the AGM 28 May 2009 and capital adequacy disclosure" Standard Bank Group Limited (Incorporated in the Republic of South Africa) (Registration number 1969/017128/06) South African Share Code: SBK Namibian Share Code: SNB ISIN: ZAE000109815 ("Standard Bank" or "the group") Chief executive`s comments at the AGM 28 May 2009 and capital adequacy disclosure 1. Chief executive`s comments at the Annual General Meeting At the annual general meeting to be held later today, chief executive Jacko Maree will make the following comments regarding the group`s performance for the first four months of 2009 in comparison with the similar period for 2008: At the time of releasing the group`s 2008 results on 5 March 2009, we cautioned that we expected the extremely difficult operating conditions to continue, posing significant challenges for our customers and our industry. Since then, slowing economic growth has resulted in an even tougher operating environment than anticipated and consequently our focus remains on prudent risk management and preservation of liquidity and capital. For the four month period to 30 April 2009, normalised headline earnings contributed by banking activities were down 6%, and, after consolidating a net loss from Liberty Holdings (refer below), group normalised headline earnings amounted to R4,1 billion reflecting a reduction of 14%, and group normalised headline earnings per share were 18% lower. The dilution in normalised headline earnings per share is largely as a result of the shares issued to the Industrial and Commercial Bank of China on 3 March 2008 being included for the full current reporting period. A 72% increase in impairments off the relatively low base for the first four months of 2008 is the principal reason for the 6% reduction in headline earnings from banking activities. The recent reductions in interest rates have not impacted significantly on credit impairments although there was some slowing of the growth rate in non-performing loans in April 2009. Net interest margins remained relatively stable for the first three months of the year, however some net interest margin compression manifested itself in April 2009 as a result of the recent interest rate reductions. Non-interest revenue is performing in line with expectations and reflects an improvement over the comparative period. Operating costs continue to be tightly controlled and the cost-to- income ratio for the first four months remained below 50%. With respect to the major business units, Personal & Business Banking headline earnings to April 2009 were down 18% and Corporate & Investment Banking headline earnings were up 4% - after recognising significant increases in credit impairments in both business units. Shareholders are referred to the Liberty Holdings market update on 15 May 2009 wherein, referring to the first quarter of 2009, it was stated "Although operations continue to deliver earnings in line with expectations, the operational earnings have been exceeded by the impact of balance sheet management activities. The unrealised market risk loss consists of interest rate and equity mark-to-market losses of an estimated R250m and R500m respectively. This unrealised market risk loss was offset by an estimated R350m of operating earnings from subsidiaries, resulting in an overall loss of approximately R400m for the quarter. Although the challenging economic environment experienced in the first quarter of 2009 is expected to continue for the remainder of the year, the group is expected to return to profitability for the full year." Standard Bank effectively consolidates 53.7% of these losses through our shareholding in Liberty Holdings. As disclosed below, at 31 March 2009 the group had a total capital adequacy ratio of 12.7% and a tier 1 capital adequacy ratio of 10.8%, comfortably exceeding minimum regulatory requirements and the group`s target ratios. Jacko Maree will also make the following comments on the outlook for the group in 2009: In light of the deterioration in expectations for economic growth in all markets in which the group operates and the pressure on net interest income caused by the faster than anticipated reduction in interest rates in South Africa, the group remains cautious on its outlook for the 2009 year. In March 2009, the board considered that to produce similar results in 2009 to those achieved in 2008 would be an acceptable outcome. Given the trend established in the first four months, it is unlikely that last year`s normalised headline earnings per share will be achieved. 2. Basel II capital adequacy disclosure as at 31 March 2009 In terms of the Basel II requirements under Regulation 43(1)(e)(ii) of regulations relating to banks, minimum disclosure on the capital adequacy of the group is required on a quarterly basis. This announcement meets the ongoing reporting requirement for quarterly disclosure in terms of Pillar 3 of the Basel II capital accord. March December 2009 2008 Rm Rm Ordinary share capital and premium 17 046 16 997 Ordinary shareholders` reserves 65 412 64 612 Minority interest 5 621 5 616 Regulatory deductions against primary capital (15 292) (14 432) Regulatory exclusions against primary capital: Foreign currency translation (5 242) (6 168) reserves Other (3 539) (4 394) Preference share capital and premium 5 495 5 495 Primary capital 69 501 67 726 Subordinated debt 14 986 16 035 Secondary unimpaired reserve funds 1 134 1 401 Regulatory deductions against secondary (5 687) (5 958) capital Secondary capital 10 433 11 478 Tertiary capital - Subordinated debt 2 305 2 393 Total qualifying capital 82 239 81 597 Total minimum capital requirement 62 987 61 829 % % Total capital adequacy ratio 12.7 12.9 Primary capital adequacy ratio 10.8 10.7 Note: Ordinary shareholders` reserves include unappropriated profits. The information contained in this announcement has not been reviewed by or reported on by the group`s auditors. Johannesburg 28 May 2009 Lead sponsor Standard Bank Independent sponsor Deutsche Securities (SA) (Proprietary) Limited Date: 28/05/2009 08:00:05 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
