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SBK/SBKP/SBPP - Standard Bank Group Limited - Unaudited results and dividend
announcement for the six months ended 30 June 2009
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
NSX share code: SNB ZAE000109815
SBKP ZAE000038881 (First preference shares)
SBPP ZAE000056339 (Second preference shares)
("Standard Bank Group" or "the group")
Unaudited results and dividend announcement
for the six months ended 30 June 2009
Key financial highlights
Normalised IFRS
Headline earnings (Rm) 5 407 5 079
Headline earnings decline (%) (24) (30)
Headline earnings per share (cents) 351,3 352,5
Headline earnings per share decline (%) (27) (33)
Dividend per share (cents) 141 141
Cost-to-income ratio (%) 49,9 50,0
Return on equity (%) 12,6 12,4
Credit loss ratio (%) 1,84 1,84
Capital adequacy ratio (%) 14,4 14,4
Overview of financial results
The group`s operating environment during the first six months of 2009 was
challenging following the turbulence in financial markets experienced in the
second half of 2008. The aftershocks of the credit and liquidity crisis
continued to be felt in financial systems around the world. The impact of
sharply lower demand for goods and services in the real economy dragged the
global economy further into downturn.
Emerging market growth has come under increasing pressures due to the
reduction in global export demand, falling commodity prices and a significant
decline in foreign direct investment. Africa has not been spared from these
pressures.
The South African banking sector has remained stable throughout the global
financial crisis. Robust risk management practices, a relatively low
concentration of exotic products in local banking models and a proactive
regulatory framework have all contributed to the resilience of the banking
system.
Although South Africa has avoided the worst effects of the financial crisis,
the economy is feeling the lagged effect of the cyclically higher inflation
and interest rates experienced in 2008, compounded by output levels in the
first quarter of 2009 contracting by an annualised 6,4%. The contraction was
particularly evident in mining and manufacturing with unemployment rising in
these sectors. Consumers` ability to repay debt remained under strain,
resulting in further growth in defaults, albeit at a slowing rate.
The group produced acceptable results in this tough operating environment.
Normalised headline earnings of R5 407 million were down 24% on the comparable
six month period while normalised headline earnings from banking activities
were 11% lower. Higher lapses of insurance policies, the marking-to-market of
portfolios exposed to market risk and foreign currency fluctuations impacted
negatively on Liberty`s earnings.
The group has been mindful that despite extreme short-term financial
pressures, defensive action taken should wherever possible avoid damaging long-
term relationships with customers, or hampering economic recovery. In the
context of not compromising its risk practices, the group has done everything
possible to proactively assist its customers.
In the past six months, personal customers have been encouraged to contact the
group in advance of financial distress and various measures have been
implemented to assist them.
The financial position of corporate clients has been closely monitored through
rigorous industry-specific analysis and review. Proactive steps have included
participating in recapitalisation, funding, renegotiating lending facilities
and providing bridging finance.
Key performance indicators
On an International Financial Reporting Standards (IFRS) basis, the group
reported a 12,4% return on equity (ROE) (June 2008: 21,4%). Headline earnings
of R5 079 million were 30% lower and headline earnings per share down 33% at
352,5 cents per share (June 2008: 529,2 cents per share). On a normalised
basis, the group`s ROE was 12,6% (June 2008: 19,8%), headline earnings of R5
407 million were down 24% and headline earnings per share fell 27% to 351,3
cents per share (June 2008: 481,8 cents per share).
The dilution in the per share results was largely due to the inclusion of the
shares issued to the Industrial and Commercial Bank of China (ICBC) on 3 March
2008, for the full reporting period.
Normalised results are adjusted to account for two accounting anomalies that
have distorted the group`s results from an economic perspective since 2004,
described fully in the normalised results below. The commentary that follows
is based on the normalised results.
Key factors impacting results
Slowdown in economic activity
The global economic downturn resulted in the continued deleveraging of company
balance sheets, lower worldwide production levels, weaker international trade
and a slump in demand for commodities. These economic conditions had a
significant impact on emerging markets, leading to an increase in specific
impairment levels in respect of the group`s exposures outside South Africa.
In South Africa, declining economic activity and an increase in the levels of
unemployment sharply constrained consumer spending. This contributed to rising
levels of corporate financial stress and an increase in loan impairments in
Corporate & Investment Banking.
A further consequence has been reduced consumer contractual savings through
institutions, negatively impacting Liberty.
Increase in non-performing loans
High consumer indebtedness and the lagged effect of previously high interest
rates, together with high food and fuel prices in South Africa, continued to
impact on customers` ability to service debt. Non-performing loans in Personal
& Business Banking continued to increase, albeit at a slowing rate. Lower
collateral values in weaker housing and vehicle markets exacerbated the credit
losses experienced.
Falling interest rates
Towards the end of 2008, central banks around the world eased monetary policy
aggressively in an attempt to revive weakened economies. Interest rates have
remained at historically low levels in most large economies in the past six
months. In South Africa, the Reserve Bank has cut lending rates by 450 basis
points since December 2008. The positive impact of the interest rate cuts only
became apparent towards the end of the reporting period through a reduction in
early arrears. However the lower interest rates have reduced the endowment
benefit which arises from transactional deposits and shareholders` funds that
margins previously enjoyed in the rising rate cycle.
Changes in rand exchange rate
The rand strengthened by 17% against the US dollar from 31 December 2008 to 30
June 2009. This affected assets and liabilities translated at closing exchange
rates, dampening banking asset and loan growth by 6% and 5% respectively. The
adverse foreign currency translation movement accounted for directly in
reserves was R6,2 billion attributable to ordinary shareholders.
Ongoing investment in infrastructure, technology and operations
The group continued to invest in technology and infrastructure mainly in its
African operations. This is in line with the group`s strategy to increase its
footprint in key African countries such as Nigeria, Kenya, Ghana, Zambia and
Uganda. This investment has contributed to substantial cost growth in the
period whereas the benefits will only be realised over time.
Business units
Operations were impacted by the economic conditions which dampened revenue
growth, increased impairment charges and resulted in negative fair value
movements on both trading and investment asset classes.
Personal & Business Banking
Personal & Business Banking reported headline earnings of R2 011 million, 21%
lower than in the prior period, primarily due to higher credit impairments.
Non-performing loans as a percentage of the advances book were 7,7% at 30 June
2009, 5,7% at 31 December 2008 and 4,0% at 30 June 2008, reflecting the strain
facing consumers in South Africa.
Despite the severity and duration of the economic downturn, easing interest
rates have offered some relief to consumers. Early arrears have improved by
13% since June 2008 and 29% since December 2008. There are signs that the rate
of increase in impaired loans is slowing, with these rising 35% from December
2008 to June 2009 compared to 49% between June 2008 and December 2008.
Revenue growth held up well in Personal & Business Banking at 8%. Interest
income benefited from widening lending margins, the unwinding of the IAS 39
discount on expected non-performing loan recoveries and balance growth. The
endowment impact of lower interest rates on transactional balances and capital
dampened margins in the second half of the period. Continued growth in
transactional volumes and the customer base supported higher fee revenue.
Costs were well contained and rose only 9%, with 4% higher staff costs and a
14% increase in other operating expenses. This resulted in a cost-to-income
ratio of 50,2% (June 2008: 49,7%). The business unit achieved a commendable
16,5% ROE in the circumstances.
Corporate & Investment Banking
Corporate & Investment Banking produced a resilient performance in a very
difficult operating environment. Total income grew by 18% and headline
earnings of R3 391 million were down 8% after absorbing a 353% increase in
credit impairment charges. The global markets business achieved a strong
performance in commodities, foreign exchange and equity trading as a result of
improved liquidity-related trading spreads and a favourable exchange rate
impact. Market risk was well controlled within value-at-risk limits.
The harsh macroeconomic conditions in all the countries in which the group
operates resulted in corporate credit deteriorating markedly across all
portfolios, and impairment charges impacted significantly on headline
earnings. Early intervention in anticipation of the deteriorating credit
environments mitigated some risk in the period.
The strategic partnership with ICBC contributed R127 million to headline
earnings in the six months to June 2009 and the partnership won significant
deals across several product areas. A representative office has been
established in Beijing to service Chinese clients interested in Africa and
emerging markets.
Liberty
Economic activity in South Africa has slowed substantially over the past
twelve months and consumers have seen a marked decline in their disposable
income. This has impacted on Liberty`s policyholder persistency and, together
with substantial mark-to-market adjustments to its balance sheet exposures,
has had a negative result on earnings.
Despite the economic challenges, Liberty remains strong operationally. New
business sales and cash flows are satisfactory and management expenses have
been well controlled.
Liberty reported a normalised headline loss of R1 207 million, compared with a
profit of R913 million in the prior period. The loss attributable to the
Standard Bank Group was R647 million compared to a consolidated profit of R279
million, given the group`s increased shareholding in Liberty compared with the
corresponding period in the prior year.
Banking operations
Balance sheet analysis
Banking assets of R1 130 billion were 1% down on June 2008 levels and 13%
lower than December 2008. Excluding the impact of the strengthening rand,
banking assets grew by 1% when compared to June 2008.
Gross loans and advances - down 1%
Gross loans and advances were down 1% across the group against June 2008 and
10% lower than December 2008. The South African book was 3% lower than in
December 2008. The reduction across the rest of the group related mainly to
the translation impact of the stronger rand on non-South African assets and
steps taken to conserve liquidity given the global financial crisis.
Personal & Business Banking gross loans and advances grew by 3% from June
2008. The June 2009 mortgage loan book was 1% higher than December 2008 and
grew 8% since June 2008. A slowdown in the property market, stricter
affordability and loan-to-value lending criteria, and constrained consumer
purchasing power were responsible for the steep decline. The impact of the
slowdown was softened by a decrease in prepayment rates.
The slowdown in consumer spending and lower economic activity affected
instalment sale and finance leases, which were 10% lower than in June 2008 and
7% down from December 2008. This resulted in an 11% decline in the total
number of instalment sale and finance lease accounts. Card debtors were 5%
lower than in June 2008 and 4% down from December 2008.
South African market share in key segments has changed from June 2008 to May
2009 as follows:
mortgage advances up to 26,4% from 26,1%;
instalment finance down to 21,2% from 22,3%;
card debtors down to 34,4% from 35,5%; and
deposit and current accounts up to 24,6% from 23,3%.
Corporate & Investment Banking gross loans and advances across all regions
declined 5% from June 2008 and were 17% lower than at December 2008. Most of
the decline since December 2008 occurred outside South Africa, due to both
currency translation effects and deleveraging. The Corporate & Investment
Banking loan book in South Africa at June 2009 was 9% lower than December
2008.
Net asset value
The group`s net asset value reduced by 1% from December 2008. This was mainly
as a result of the adverse foreign currency translation movement of R6,2
billion caused by the strong rand. Net asset value per share of 5 452 cents
was 3% lower than December 2008.
Income statement analysis
Net interest income - up 15%
Net interest income was up 9% in Personal & Business Banking and 29% in
Corporate & Investment Banking. The group`s interest margin improved by 29
basis points to 3,45% (June 2008: 3,16%) despite a reduction of 162 basis
points in the average prime interest rate. The margin improvement came from a
significant reduction in non-interest earning trading assets. Excluding this
impact the net interest margin contracted by 14 basis points. The reduction in
the prime lending rate has had a negative endowment impact of 36 basis points
as less interest was earned on shareholders` funds and transactional deposits.
This was partially offset by an increase in the unwind of the discount on
recoveries of impaired advances in terms of IAS 39 and improved lending
margins due to better pricing for both liquidity and credit risk.
Personal & Business Banking continued to grow its loan book, at a slower rate,
and the interest margin improved to 5,10% (June 2008: 4,87%). This was as a
result of the abovementioned increase in the IAS 39 discount unwind, tighter
control of pricing concessions on new business and lower loan origination
costs.
Corporate & Investment Banking`s interest margin improved by 37 basis points
to 2,06% (June 2008: 1,69%). Lending margins were supported by increased term
margins and from gains on the early settlement of a syndicated loan. These
benefits were partly offset by a negative endowment impact and significantly
higher term funding costs.
Non-interest revenue - up 6%
Growth in non-interest revenue was constrained by recessionary pressures. The
overall growth rate in non-interest revenue was reduced due to the high 2008
base which included currency hedging profits of R394 million and the gain on
the sale of Visa shares of R123 million recorded in Central and other. Both
Personal & Business Banking and Corporate & Investment Banking performed well,
posting growth rates of 7% and 12% respectively.
Net fee and commission revenue was up 5%. Personal & Business Banking achieved
a 15% growth in account transaction fees due to an increased customer base,
higher transaction volumes and the standardisation of pricing policies across
all regions. Documentation and administration fees grew 43% due to volume
growth in the rest of Africa and outside Africa. Card-based commissions were
flat as annual fee escalations and revenue growth outside South Africa were
offset by slower growth in customer accounts and transactional volumes in
South Africa.
Net fee and commission revenue in Corporate & Investment Banking contracted
3%. Knowledge-based fees and commissions were down 1%, largely as a result of
lower brokerage and custody revenues in Nigeria as transaction volumes and
client asset values declined in a weaker equity market. Lower investment
banking deal flow across the group was a further factor, while higher revenue
from asset management activities outside Africa provided some relief.
Trading revenue rose 11% off a relatively high base with a 37% growth in the
rest of Africa supported by strong gains in securities and foreign exchange
trading in Nigeria. Trading revenue outside Africa grew 23% with foreign
exchange and commodity trading benefiting from higher trading volumes, market
volatility and an overall increase in client business. This was partly offset
by a decline in trading revenues in debt securities due to reduced liquidity.
Improved trading volumes, market volatility and favourable yield curve
movements resulted in 31% growth in commodities trading and 15% in foreign
exchange trading revenue, while equities trading revenues were higher off a
very low base.
Other non-interest revenue declined 11% largely resulting from the non-
recurrence of profits on the sale of Visa shares (June 2008: R123 million) and
favourable fair value adjustments (June 2008: R190 million) on the group`s
unlisted equity portfolio. The decline was partly offset by lower fair value
mark-downs on the group`s listed property investments and short-term insurance
investment portfolios, and a 4% increase in bancassurance profit.
Credit impairments - up 58%
Credit impairments were up 58% to R7 115 million, resulting in the group`s
credit loss ratio deteriorating to 1,84% from 1,31%. Compared to the second
half of 2008, credit impairments were 4% higher.
Impairment losses in Personal & Business Banking rose 35% and the credit loss
ratio increased to 2,80% (June 2008: 2,18%). The lagged effects from 2008 of
high household debt ratios accompanied by high interest rates, food and fuel
inflation are still evident in constraining the ability of many consumers to
repay debt. Some slowing of growth in non-performing loans and a reduction in
early arrears may be early signs that the reduction in interest rates, 2009
wage settlements and reducing inflation are improving customers` ability to
service their debt.
In Personal & Business Banking, the mortgage loan credit loss ratio
deteriorated to 1,55% (June 2008: 1,30% and December 2008: 1,49%). Expected
recovery values remained under pressure following further contractions in
house prices and the increased time required to realise security. Impairment
losses in instalment sale and finance leases grew 70% and the credit loss
ratio worsened to 3,60% (June 2008: 2,00% and December 2008: 2,48%). Vehicle
loan delinquencies rose further and motor vehicle sale recovery values
remained low. Card debtors reflected an improvement of 27% in credit losses
and the credit loss ratio eased to 7,24% (June 2008: 9,44%) as collections
improved. Impairment losses on other loans rose 113% with the credit loss
ratio worsening to 6,04% from 3,18% in June 2008 and 3,92% in December 2008 as
acute economic stress across all sectors of the economy impacted loan
performance in business banking.
The credit loss ratio in Corporate & Investment Banking deteriorated to 1,15%
off a low base in June 2008 of 0,31% (December 2008: 0,46%). The worsening
trend was seen across all geographies. Financial stress caused by, amongst
other things, reduced commodity prices and weak demand for exports, as well as
the significant slowdown in consumer spending in South Africa, heightened
corporate default risk. Credit impairment charges on corporate lending
increased by 353% from June 2008 and non-performing loans by 465% to R9,0
billion off a low base.
Targeted strategies remain in place to contain credit losses and manage risk.
Specific measures include ongoing prudent credit extension criteria, close
monitoring of arrears, active management of early delinquencies, ongoing
improvement in collection capabilities and targeted programmes designed to
assist customers.
Operating expenses - up 13%
Growth in operating expenses was 13%, reflecting ongoing investment in
infrastructure in the rest of Africa, moderated by a continued focus on cost
containment and efficiency management in South Africa. The cost-to-income
ratio for the period was weaker at 49,9%, off a low base of 48,7% in June
2008. The translation of foreign expenses at weaker average rand exchange
rates added 6% to cost growth.
Total staff costs were up 9%. Staff costs in the rest of Africa increased
significantly due to continued expansion. A net 3% increase in staff costs was
recorded in South Africa, resulting from annual salary increases of around 10%
offset by reduced headcount through a recruitment freeze and natural
attrition. The impact on staff costs of currency translation and a marginal
increase in headcount outside Africa was partially offset by a reduction in
incentive provisioning, resulting in an overall increase of 7%.
Other operating expenses grew 18%, of which 5% was due to the weaker average
exchange rate. South Africa accounted for 9% while the rest of Africa added 4%
and outside Africa some 5% to overall expenses growth of 18%. Information
technology costs were 29% higher as a result of increased systems development
costs, maintenance costs and software licensing fees. Depreciation and
amortisation increased due to investments in processing centres, ATMs and
software development. The growth in other cost categories related mainly to
the expansion in the rest of Africa and outside Africa.
Liquidity
In the first six months of 2009, the ability to price for credit and related
liquidity risk improved moderately. However, the availability of term
liquidity remained tight compared to the period before the financial crisis.
The group has therefore continued to manage its liquidity prudently in
accordance with the strategy initiated in 2008. Unencumbered surplus liquidity
holdings were R136 billion at 30 June 2009, while any structural liquidity
mismatches and the diversification of the funding base were managed and
maintained within best banking practice guidelines.
Capital
The group remains well capitalised with the total capital adequacy ratio
rising to 14,4% from 13,3% at December 2008 and Tier I capital up to 12,0%
from 11,0%. Tier I capital of R2,0 billion was retained through a scrip
dividend offer in March 2009 when 68% of shareholders elected to receive scrip
instead of a cash dividend. Tier II capital was enhanced by a R1,9 billion
subordinated bond issue. The capital adequacy ratio improved significantly
from December 2008 due to risk-weighted assets in respect of foreign
operations being consolidated at a stronger closing rand exchange rate.
Liberty`s capital adequacy level at June 2009 was strong at 2,5 times the
required cover.
Dividends
The group`s policy is for both interim and final dividends to be covered 2,5
times by normalised headline earnings per share. An interim dividend of 141
cents per share has accordingly been declared, 27% lower than in June 2008.
Black Economic Empowerment
The group continues to support the process undertaken in South Africa by the
financial sector and other stakeholders to align the Financial Sector Charter
(FSC) to the Codes of Good Practice for Broad-based Black Economic Empowerment
legislated in 2007. Negotiations are ongoing and future targets have not been
agreed. As a result the bank has reported performance for the six month period
to 30 June 2009 in terms of the targets set by both the Department: Trade and
Industry (DTI) and the FSC. The bank achieved a level 3 rating (above 75%
compliant) in terms of the DTI scorecard. In terms of the bank`s employment
equity profile at June 2009, black managers comprise more than 50% of
management in South Africa, of which 54% are women.
Pending transaction in Russia
On 6 March 2009, the group announced that it had entered into a strategic
partnership with Troika Dialog Group, the largest independent investment bank
in Russia. The group intends, subject to regulatory approvals, to become a 33%
shareholder in Troika Dialog Group. As part of the purchase consideration,
Standard Bank`s existing operation in Russia, ZAO Standard Bank, will be sold
to Troika Dialog Group. Both the detailed planning for the implementation of
this transaction and the regulatory process are on track.
Prospects
In South Africa, the government`s infrastructure development programme will
continue to provide some counter to depressed consumer demand and spending.
Interest rate reductions and lower inflation should alleviate financial strain
among households over the medium term as debt affordability starts to improve.
As consumer demand recovers, transactional volumes across all sectors should
show some improvement with a positive effect on credit performance and lending
growth.
The US economy is expected gradually to stabilise in the coming months. The
Organisation of Economic Co-operation and Development has revised its growth
forecasts upward, predicting that the global recession is close to bottoming
out. The timing and strength of the recovery remain unclear, and financial
markets are likely to remain unsettled for the remainder of the year.
In the current environment, the group is intensifying its focus on building
revenue pipelines and strengthening customer relationships. We are committed
to continue lending to our personal and corporate customers, while remaining
firmly focused on risk, capital and liquidity management. Whilst we will
remain vigilant and disciplined in our origination and risk management
practices, we believe the group is well positioned both domestically and
internationally to take advantage of opportunities as they arise.
With regard to Liberty, the Standard Bank board is confident that its board
and management are focused on the main issues facing Liberty, being
policyholder persistence and capital management.
We remain cautious in our outlook for the rest of 2009 and are not providing
specific guidance on projected results for this year. Interim results together
with current trends indicate that normalised earnings for the year will be
lower than those of 2008.
Looking past the current challenges towards the longer term, we remain
convinced of the group`s strategic focus. Our strong presence across Africa
and our growing businesses and strengthening associations in other key
developing markets, coupled with the group`s broad-based suite of financial
services, provide a strong platform for future growth.
The above information has not been reviewed or audited by the group`s
auditors.
Jacko Maree Derek Cooper
Chief executive Chairman
Johannesburg
12 August 2009
Normalised results
With effect from 2004, we have adjusted the group`s results reported under
IFRS for two required accounting conventions that do not reflect the
underlying economic substance of transactions. Consistent with prior years, to
arrive at the normalised results, the IFRS results have been adjusted for the
following two items:
preference share funding for the group`s Black Economic Empowerment Ownership
initiative (Tutuwa) transaction that is deducted from equity and reduces the
shares in issue in terms of IFRS; and
group companies` shares held for the benefit of Liberty policyholders that
result in a reduction of the number of shares in issue and the exclusion of
fair value adjustments and dividends on these shares. The IFRS requirement
causes an accounting mismatch between income from investments and changes in
policyholders` liabilities.
Two transactions reduced the extent of the normalised adjustments relating to
Tutuwa:
in December 2007, the group externalised R1 billion of preference share
financing provided in terms of the Tutuwa initiative, resulting in the release
of 24,7 million ordinary shares, previously deemed by IFRS to be treasury
shares; and
in March 2008, Tutuwa participants sold 11,1% of their shares to ICBC, partly
using the proceeds for the repayment of their preference share liability,
thereby releasing a further 11,0 million ordinary shares previously deemed by
IFRS to be treasury shares.
The result of these adjustments is shown in the table below:
Reconciliation of normalised headline earnings
for the six months ended 30 June 2009
Weighted average Decline on
number of Headline 30 June
shares earnings 2008
`000 Rm %
Disclosed on an IFRS 1 440 769 5 079 (30)
basis
Tutuwa initiative 63 479 143
- Initial transaction 99 190
- External financing (24 691)
- Disposal of shares to (11 020)
ICBC
Group shares held for the 34 981 185
benefit of Liberty
policyholders
Normalised 1 539 229 5 407 (24)
Normalised financial statistics
for the six months ended 30 June 2009
% June June December
change 2009 2008 2008
Standard Bank Group
Cents per ordinary share
Headline earnings (27) 351,3 481,8 942,6
Diluted headline earnings (27) 348,7 477,7 935,6
Dividends (27) 141,0 193,0 386,0
Basic earnings (28) 353,4 492,3 937,0
Diluted earnings (28) 350,8 488,2 930,0
Net asset value 0 5 452 5 451 5 633
Financial performance (%)
ROE 12,6 19,8 18,2
Net interest margin 3,45 3,16 3,32
Credit loss ratio 1,84 1,31 1,55
Cost-to-income ratio 49,9 48,7 49,2
Number of ordinary shares
in issue (000`s)
- end of period 2 1 555 568 1 527 810 1 525 008
- weighted average 4 1 539 229 1 474 519 1 501 126
- diluted weighted 4 1 550 674 1 486 991 1 512 402
average
Normalised headline earnings contribution by business unit
for the six months ended 30 June 2009
% June June December
Rm change 2009 2008 2008
Personal & Business (21) 2 011 2 549 4 797
Banking
Corporate & Investment (8) 3 391 3 668 7 889
Banking
Central and other 7 652 608 823
Central and other - IFRS 537 513 643
Tutuwa adjustments 115 95 180
Banking activities (11) 6 054 6 825 13 509
Liberty (>100) (647) 279 641
Liberty - IFRS (860) 511 688
Policyholders` deemed 213 (232) (47)
treasury shares and
Tutuwa adjustment
Standard Bank Group (24) 5 407 7 104 14 150
Unaudited results prepared in accordance with IFRS
Consolidated income statement
for the six months ended 30 June 2009
June June December
% 2009 2008 2008
Rm change Unaudited Unaudited Audited
Income from banking 10 31 804 28 816 61 366
activities
Net interest income 15 16 522 14 390 31 918
Non-interest revenue 6 15 282 14 426 29 448
Income from investment (31) 9 287 13 486 23 359
management and life
insurance activities
Total income (3) 41 091 42 302 84 725
Credit impairment charges 58 7 115 4 497 11 342
Benefits due to (9) 6 634 7 273 11 997
policyholders
Income after credit (10) 27 342 30 532 61 386
impairment charges and
policyholders` benefits
Operating expenses in 13 15 962 14 167 30 390
banking activities
Operating expenses in 6 4 170 3 916 8 423
investment management and
life insurance activities
Net income before goodwill (42) 7 210 12 449 22 573
Goodwill impairment 2 2 5
Net income before (42) 7 208 12 447 22 568
associates and joint
ventures
Share of profit from (27) 137 187 268
associates and joint
ventures
Net income before indirect (42) 7 345 12 634 22 836
taxation
Indirect taxation 5 679 647 1 382
Profit before direct (44) 6 666 11 987 21 454
taxation
Direct taxation (42) 1 627 2 804 4 705
Profit for the period (45) 5 039 9 183 16 749
Attributable to minorities (>100) (361) 1 531 2 288
Attributable to preference 13 289 256 529
shareholders
Attributable to ordinary (31) 5 111 7 396 13 932
shareholders
Basic earnings per share (34) 354,7 540,5 995,9
(cents)
Diluted earnings per share (34) 343,5 521,2 962,2
(cents)
Headline earnings
for the six months ended 30 June 2009
June June December
% 2009 2008 2008
Rm change Unaudited Unaudited Audited
Group profit attributable (31) 5 111 7 396 13 932
to ordinary shareholders
Headline earnings (44) (184) 126
adjustable items
(deducted)/added (1)
Goodwill impairment - IFRS 2 2 5
3
Profit on sale of (18) (6) (16)
properties and equipment -
IAS 16
Impairment of properties - 28 84
and equipment - IAS 16
Gains on disposal of - (17) (24)
businesses and divisions -
IAS 27
Impairment of associates - - - 139
IAS 28
Impairment of intangible 11 - 132
assets - IAS 38
Gains on disposal of (39) (191) (194)
available-for-sale assets
- IAS 39
Taxation on headline 10 29 (13)
earnings adjustable items
Minority share of headline 2 - (28)
earnings adjustable items
Headline earnings (30) 5 079 7 241 14 017
1 These headline earnings adjustable items have been included in the
calculation of normalised headline earnings.
Segment report
for the six months ended 30 June 2009
June June December
% 2009 2008(2) 2008(2)
Rm change Unaudited Unaudited Audited
Revenue contribution by
business unit
Personal & Business 8 17 152 15 882 33 511
Banking
Corporate & Investment 18 14 238 12 043 26 198
Banking
Central and other (50) 502 998 1 856
Banking activities 10 31 892 28 923 61 565
Liberty (25) 9 684 12 869 23 136
Standard Bank Group - (1) 41 576 41 792 84 701
Normalised
Adjustments for IFRS (>100) (485) 510 24
Standard Bank Group - IFRS (3) 41 091 42 302 84 725
Profit and loss
attributable to ordinary
shareholders
Personal & Business (21) 2 041 2 582 4 624
Banking
Corporate & Investment (8) 3 395 3 681 7 859
Banking
Central and other (9) 650 717 941
Banking activities (13) 6 086 6 980 13 424
Liberty (>100) (647) 279 641
Standard Bank Group - (25) 5 439 7 259 14 065
Normalised
Adjustments for IFRS (>100) (328) 137 (133)
Standard Bank Group - IFRS (31) 5 111 7 396 13 932
2 Where reporting responsibility for individual cost centres and divisions
within business units changes, the segmental comparatives are reclassified
accordingly.
Consolidated statement of financial position
as at 30 June 2009
June June December
% 2009 2008 2008
Rm change Unaudited Unaudited Audited
Assets
Cash and balances with (2) 22 731 23 296 25 697
central banks
Financial investments, (12) 337 536 381 544 346 859
trading and pledged
assets
Loans and advances (2) 707 675 722 183 787 934
Loans and advances to (1) 98 606 100 082 129 890
banks
Loans and advances to (2) 609 069 622 101 658 044
customers
Investment property 15 17 695 15 405 16 771
Derivative and other 16 212 023 182 806 299 476
assets
Non-current assets held 3 363 - -
for sale
Interest in associates (45) 6 800 12 435 6 990
and joint ventures
Goodwill and other 3 9 356 9 100 10 180
intangible assets
Property and equipment 24 9 467 7 618 9 746
Total assets (2) 1 326 646 1 354 387 1 503 653
Equity and liabilities
Equity (2) 95 445 96 999 99 501
Equity attributable to 1 80 632 79 921 81 953
ordinary shareholders
Preference share 5 503 5 503 5 503
capital and premium
Minority interest (20) 9 310 11 575 12 045
Liabilities (2) 1 231 201 1 257 388 1 404 152
Deposit and current 2 769 052 750 643 843 815
accounts
Deposits from banks (16) 90 906 107 790 129 055
Deposits from customers 5 678 146 642 853 714 760
Derivative, trading and (11) 269 655 303 766 366 737
other liabilities
Non-current liabilities 2 054 - -
held for sale
Policyholders` (7) 168 733 180 493 172 069
liabilities
Subordinated debt (3) 21 707 22 486 21 531
Total equity and (2) 1 326 646 1 354 387 1 503 653
liabilities
Consolidated cash flow information
for the six months ended 30 June 2009
June June December
2009 2008 2008
Rm Unaudited Unaudited Audited
Net cash from operations 15 888 12 560 28 559
Net cash used in operating (15 676) (21 145) (21 901)
funds
Net cash used in investing (1 182) (2 212) (10 885)
activities
Net cash from financing 557 12 791 7 550
activities
Consolidated statement of comprehensive income
for the six months ended 30 June 2009
June 2009
Minorities
Ordinary and June December
share- preference 2008 2008
Rm holders shareholders Total Total Total
Profit for the 5 111 (72) 5 039 9 183 16 749
period
Other (5 821) (1 894) (7 715) 4 942 6 277
comprehensive
income for the
period after tax
Exchange rate (6 254) (1 856) (8 110) 3 503 5 131
differences on
translating
foreign
operations
Foreign currency 96 - 96 57 447
hedge of net
investment
Cash flow hedges 218 - 218 1 410 932
Available-for- 96 6 102 (17) (212)
sale financial
assets
Revaluation and 23 (44) (21) (11) (21)
other
gains/(losses)
Total (710) (1 966) (2 676) 14 125 23 026
comprehensive
income for the
period
Attributable to - (2 255) (2 255) 2 032 3 568
minorities
Attributable to (710) 289 (421) 12 093 19 458
equity holders
of the parent
Attributable to - 289 289 256 529
preference
shareholders
Attributable to (710) - (710) 11 837 18 929
ordinary
shareholders
Consolidated statement of changes in equity
for the six months ended 30 June 2009
Preference
Ordinary share
shareholders` capital and Minority Total
Rm equity premium interest equity
Balance at 1 53 671 5 503 9 332 68 506
January 2008
Total 18 929 529 3 568 23 026
comprehensive
income for the
year
Equity-settled 217 - 35 252
share-based
payment
transactions
Transactions with (2 198) - (982) (3 180)
minority
shareholders
Issue of share 16 132 - - 16 132
capital and
premium
Share buy-backs (503) - - (503)
Net decrease in 1 483 - 906 2 389
treasury shares
Dividends paid (5 778) (529) (814) (7 121)
Balance at 31 81 953 5 503 12 045 99 501
December 2008
Balance at 1 81 953 5 503 12 045 99 501
January 2009
Total (710) 289 (2 255) (2 676)
comprehensive
income for the
period
Equity-settled 133 - 17 150
share-based
payment
transactions
Issue of share 103 - (2) 101
capital and
premium
Net increase in (73) - (63) (136)
treasury shares
Dividends paid (774) (289) (432) (1 495)
Balance at 30 June 80 632 5 503 9 310 95 445
2009
Financial statistics
for the six months ended 30 June 2009
June June December
% 2009 2008 2008
Rm change Unaudited Unaudited Audited
Standard Bank Group
Number of ordinary
shares in issue (000`s)
- end of period 2 1 457 831 1 425 474 1 430 618
- weighted average 5 1 440 769 1 368 386 1 398 866
- diluted weighted 5 1 487 924 1 419 137 1 447 886
average
Cents per ordinary
share
Headline earnings (33) 352,5 529,2 1 002,0
Diluted headline (33) 341,3 510,2 968,1
earnings
Dividends (27) 141,0 193,0 386,0
Basic earnings (34) 354,7 540,5 995,9
Diluted earnings (34) 343,5 521,2 962,2
Net asset value (1) 5 531 5 607 5 729
Financial performance
(%)
ROE 12,4 21,4 19,1
Net interest margin 3,44 3,15 3,31
Credit loss ratio 1,84 1,31 1,55
Cost-to-income ratio 50,0 48,9 49,3
Capital adequacy (%)
Capital ratio
- tier I capital 12,0 11,4 11,0
- total capital 14,4 14,2 13,3
Private equity associates and joint ventures(3)
June June December
2009 2008 2008
Rm Unaudited Unaudited Audited
Cost 303 236 308
Carrying value 418 389 411
Fair value 418 397 516
Loans to associates and joint 515 818 719
ventures
Equity accounted income 12 34 119
3 These associates and joint ventures are accounted for using the equity
method and are subject to the headline earnings exemption for listed banks.
Contingent liabilities and capital commitments
as at 30 June 2009
June June December
2009 2008 2008
Rm Unaudited Unaudited Audited
Contingent liabilities
Letters of credit 11 285 16 219 16 521
Guarantees 28 955 28 122 34 680
40 240 44 341 51 201
Capital commitments
Contracted capital expenditure 3 164 847 2 059
Capital expenditure authorised 7 862 4 861 9 117
but not yet contracted
11 026 5 708 11 176
Declaration of dividends
Notice is hereby given that the following interim dividends have been
declared:
Ordinary dividend No. 80 of 141,0 cents per ordinary share (share codes: SBK
and SNB, ISIN: ZAE000109815), payable on Monday, 21 September 2009, to
ordinary shareholders recorded in the books of the company at the close of
business on the record date, Friday, 18 September 2009. The last day to trade
to participate in the dividend is Friday, 11 September 2009. Ordinary shares
will commence trading ex-dividend from Monday, 14 September 2009;
6,5% first cumulative preference shares (first preference shares) dividend
No. 80 of 3,25 cents per first preference share (share code: SBKP, ISIN:
ZAE000038881), payable on Monday, 14 September 2009, to holders of first
preference shares recorded in the books of the company at the close of
business on the record date, Friday, 11 September 2009. The last day to trade
to participate in the dividend is Friday, 4 September 2009. First preference
shares will commence trading ex-dividend from Monday, 7 September 2009; and
Non-redeemable, non-cumulative, non-participating preference shares (second
preference shares) dividend No. 10 of 456,62 cents per second preference share
(share code: SBPP, ISIN: ZAE000056339), payable on Monday, 14 September 2009,
to holders of second preference shares recorded in the books of the company at
the close of business on the record date, Friday, 11 September 2009. The last
day to trade to participate in the dividend is Friday, 4 September 2009.
Second preference shares will commence trading ex-dividend from Monday, 7
September 2009.
The relevant dates for the payment of dividends are as follows:
Non-redeemable,
non-cumulative,
6,5% non-
Cumulative participating
preference preference
shares shares
(First (Second
Ordinary preference preference
shares shares) shares)
JSE Limited (JSE)
Share code SBK SBKP SBPP
ISIN ZAE000109815 ZAE000038881 ZAE000056339
Namibian Stock
Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Dividend per share 141 3,25 456,62
(cents)
Last day to trade Friday Friday Friday
"CUM" dividend 11 September 4 September 4 September
2009 2009 2009
Shares trade Monday Monday Monday
"EX" dividend 14 September 7 September 7 September
2009 2009 2009
Record date Friday Friday Friday
18 September 11 September 11 September
2009 2009 2009
Payment date Monday Monday Monday
21 September 14 September 14 September
2009 2009 2009
Ordinary share certificates may not be dematerialised or rematerialised
between Monday, 14 September 2009 and Friday, 18 September 2009, both days
inclusive.
Preference share certificates (first and second) may not be dematerialised or
rematerialised between Monday, 7 September 2009 and Friday, 11 September 2009,
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 (first and second) who hold
dematerialised shares will have their accounts at their CSDP or broker
credited on Monday, 14 September 2009. Ordinary shareholders who hold
dematerialised shares will have their accounts at their CSDP or broker
credited on Monday, 21 September 2009.
On behalf of the board
Loren Wulfsohn
Group secretary
Accounting policies
Basis of preparation
The consolidated financial results are prepared in accordance with, and comply
with, IFRS and the South African Companies Act (61 of 1973). The consolidated
financial statements are prepared in accordance with the going concern
principle under the historical cost basis as modified by the fair value
accounting of assets and liabilities where required in terms of IFRS. The
interim results are prepared in accordance with IAS 34 Interim Financial
Reporting and have not been audited.
Changes in accounting policies
The accounting policies are consistent with those adopted in the previous year
except for the standards and interpretations noted below. The following
standards became effective on 1 January 2009:
IFRS 2 Share-based Payment - Vesting Conditions and Cancellations;
IFRS 7 Financial Instruments: Disclosures - Improving Disclosures about
Financial Instruments;
IAS 1 Presentation of Financial Statements (revised);
IAS 28 Investments in Associates (2008 Improvements to IFRS); and
IAS 40 Investment Property (2008 Improvements to IFRS).
The following new interpretations became effective on 1 January 2009:
IFRIC 13 Customer Loyalty Programmes;
IFRIC 15 Agreements for the Construction of Real Estate;
IFRIC 16 Hedges of a Net Investment in a Foreign Operation; and
AC 503 Accounting for Black Economic Empowerment (BEE) Transactions.
The adoption of these standards and interpretations has had no material effect
on the results, nor has it required any restatements of the results.
Reclassifications and restatements
No reclassifications or restatements were made to results disclosed in respect
of December 2008.
The June 2008 statement of financial position has been restated for
reclassifications and restatements made in the second half of 2008. These
reclassifications include:
all items which are of a trading nature were moved into the trading assets or
liabilities classification. These included collateral and repurchase
agreements held for trading purposes;
financial instruments previously classified as other assets were moved to
appropriate financial instrument classifications; and
the analysis of balances between banks and non-banks was reviewed and
refined.
The allocation of goodwill and intangible assets on the acquisition of IBTC
Chartered Bank Plc, previously determined provisionally, was finalised in the
second half of 2008. The June 2008 comparatives have been restated as if the
initial accounting had been completed at the acquisition date as required by
IFRS 3 Business Combinations. The finalisation of the purchase price
allocation resulted in a decrease in intangible assets for the 2008 interim
results, of R185 million and a resulting increase in goodwill of R65 million,
after accounting for minority interest and taxation.
Comparative numbers relating to segmental results have been reclassified for
restructuring of divisional responsibilities between business units.
The reclassifications and restatements did not impact equity attributable to
ordinary shareholders or profit for the period attributable to ordinary
shareholders.
Directors:
DE Cooper (Chairman), Kaisheng Yang** (Deputy chairman),
SJ Macozoma (Deputy chairman), JH Maree* (Chief executive),
DDB Band, TS Gcabashe, SE Jonah KBE##, Sir Paul Judge#,
KP Kalyan, Yagan Liu**, RP Menell, Adv KD Moroka, AC Nissen,
MC Ramaphosa, SP Ridley*, MJD Ruck, MJ Shaw,
Lord Smith of Kelvin, Kt#, EM Woods
*Executive director
**Chinese
#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 Namibia
Computershare Investor Services Transfer Secretaries
(Proprietary) Limited (Proprietary) Limited
70 Marshall Street, Shop 8, Kaiserkrone Centre,
Johannesburg 2001 Post Street Mall,
Windhoek
PO Box 61051, Marshalltown 2107 PO Box 2401, Windhoek
Investors are referred to www.standardbank.co.za where a detailed analysis of
the group financial results, including an income statement and a statement of
financial position for The Standard Bank of South Africa Limited (SBSA) can be
found.
www.standardbank.co.za
Johannesburg
13 August 2009
Independent sponsor
Deutsche Securities (SA) (Proprietary) Limited
Joint Sponsor
Standard Bank
Date: 13/08/2009 08:00:01 Supplied by www.sharenet.co.za
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