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SBK / SBKP / SBPP - Standard Bank Group Limited - Audited results and
distribution announcement for the year ended 31 December 2009
Standard Bank Group Limited (SBG)
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)
Audited results and distribution announcement for the year ended 31 December
2009
"It was an extremely tough year - but one in which our focus on developing
markets stood us in good stead. Our profitability remained sound and our
strong liquidity and capital position allowed us to continue to invest for
growth. We achieved our highest-ever independent customer satisfaction ratings
in South Africa. We invested more than we have ever done in developing,
training and building the competency of our people, and focused on connecting
our customers in Africa to the rest of the world and those in the rest of the
world to Africa." - Jacko Maree, group chief executive
Headline earnings
- normalised R11 718 million, down 17% on 2008
- IFRS R11 253 million, down 20% on 2008
Return on equity (ROE)
- normalised 13,6% (2008: 18,2%)
- IFRS 13,7% (2008: 19,1%)
Headline earnings per share
- normalised 757 cents, down 20% on 2008
- IFRS 771 cents, down 23% on 2008
Tier I capital adequacy ratio
of 11,8% (2008: 11,0%)(unaudited)
Distributions per ordinary share
of 386 cents held at 2008 level
Credit loss ratio
of 1,60% (2008: 1,55%)
The results discussed in the commentary below have been prepared on an
unaudited normalised basis. Results are normalised to reflect the legal and
economic substance of the group`s black ownership initiative; and deemed
treasury shares held for the benefit of Liberty policyholders and to
facilitate client trading activities (described below).
Global operating environment
The global economic recession of 2009 was the most serious since the Great
Depression of the 1930s. Trade declined rapidly in the final quarter of 2008
and into 2009. The real economy also suffered with industrial production,
household consumption expenditure and employment coming under significant
pressure. Many countries, except for some in Asia, slipped into recession. In
developed countries, the downturn was deeper and more broadly felt than in any
period since World War II.
Emerging market countries were hit hard by the global slowdown and proved
vulnerable to falling international trade. Around half of emerging market
exports are destined for developed markets, where there was significant
withdrawal of demand. The resilience and swift return to positive growth in
key emerging nations, such as China, Brazil, and India seemingly confirms that
a structural shift in economic influence remains intact. Emerging markets
accounted for two thirds of global growth in 2009, growing their share of
global GDP to 31% in 2009 from 20% in 1998.
The sharp fall in commodity prices that accompanied the global slowdown was
particularly concerning for African economies, many of which are heavily
dependent on commodity exports as their primary source of export revenue. The
tightening of global credit as a result of the crisis has also led to a
reduction in private investment flows and bank financing, resulting in reduced
capital flows and a curtailing of the availability of trade finance.
Domestic operating environment
While South Africa was able to weather the storm to some degree, the effects
of the global recession could not be avoided. In the fourth quarter of 2008,
the country entered its first recession in 17 years, which lasted through the
next two quarters. No sector evaded the downturn, with mining and
manufacturing the hardest hit. By the third quarter of 2009 the economy had
emerged tentatively from the recession and a contraction in GDP of 1,8% was
recorded for the year. Household consumption expenditure and gross fixed
capital formation remained subdued, declining 2% and 4% respectively.
The inflation outlook during 2009 was more benign than in the previous year,
with lower petrol prices and decreased food inflation being key drivers. The
South African Reserve Bank cut interest rates by 450 basis points in the year,
providing much needed relief, but the full benefit to the economy is only
expected to be realised in 2010.
As the recession took its toll, demand for credit in both corporate and retail
sectors fell. Company borrowing contracted in the last three quarters of the
year. Household debt to disposable income remained elevated in 2009. After
peaking at 83% in the first quarter of 2008, the ratio declined only
marginally to around 80% over the first three quarters of 2009. Households are
generally reducing debt levels after having over-extended themselves in the
period of low interest rates from 2004 to 2006.
Confidence in a sustainable but slow recovery is growing. While credit demand
is expected to improve, a resurgence is only likely to follow a more tangible
revival of economic activity.
Overview of results
Headline earnings by business unit
% change 2009 2008
Rm Rm
Personal & Business Banking (19) 3 835 4 739
Corporate & Investment Banking (6) 7 507 7 948
Liberty (89) 72 641
Central and other (63) 304 822
Total (17) 11 718 14 150
Personal & Business Banking`s headline earnings reflect margin pressure due to
declining interest rates and high credit impairments. Domestic cost
containment initiatives helped offset some of these effects. Corporate &
Investment Banking experienced good growth in revenues but absorbed
significantly higher credit losses. Liberty returned to profitability for the
full year after reporting a loss in the first six months. Lower interest
income on surplus capital impacted central earnings.
Headline earnings by geography
% change 2009 2008
Rm Rm
South Africa banking (9) 8 657 9 467
Liberty (89) 72 641
Central and other (63) 304 822
South Africa & Central and other (17) 9 033 10 930
Rest of Africa (35) 1 206 1 842
Outside Africa 7 1 479 1 378
Total (17) 11 718 14 150
Banking operations in South Africa showed resilience, with headline earnings
down only 9% on the prior year. Headline earnings from operations in the rest
of Africa were impacted by the translation effect of a stronger rand and a
very difficult operating environment in Nigeria. Operations outside of Africa
grew headline earnings 5% in US dollar terms, despite absorbing a 45% increase
in credit impairments. Strong client driven global market revenues were a
feature of the year.
Balance sheet analysis
Year end banking assets of R1 125 billion were 13% lower than the prior year.
Lower derivative assets (and liabilities) resulting from a decrease in both
the volume and value of client trading positions held at year end across all
key desks, contributed 8% to the decline. A smaller loan book contributed a
further reduction of 5%, of which 3% was exchange rate related.
The mortgage book, comprising 35% of the bank`s gross loans and advances, grew
2%. The net growth experienced in mortgage balances was the result of a
combination of slowing new business, with registration values down 61%, offset
by declining prepayment rates and reduced cancellations, and the purchase of a
R3,7 billion high quality book from SA Home Loans in the year. Instalment
sales and finance leases decreased dramatically by 17%, mainly in South
Africa, as new car sales declined 24% and consumers shied away from taking on
new credit, with the number of applications down 27%. Term lending which
accounts for 21% of bank lending and is mainly to corporates, was 16% lower.
This was as a result of a slowdown in the deal pipelines given the tough
operating environment. The translation effect of the strong rand particularly
impacted this line item, further decreasing the balance year-on-year.
Deposit and current accounts were down 9%. Personal & Business Banking held
deposits from customers at the same level as the prior year, reflecting
increased focus on transactional banking relationships. Call and term deposits
in Corporate & Investment Banking both reduced on the back of a slowdown in
client activity and less surplus cash at corporate clients.
Net asset value grew by 2% for the period, with earnings contributing strongly
to the increase, offset by an adverse movement of R7,5 billion on the foreign
currency translation reserve caused by the strong rand at year end. The group
ROE of 13,6% was slightly below the average cost of equity for the year.
Income statement analysis
Total revenue from banking activities held up well under the difficult
operating environment, growing 2%. After absorbing credit losses, income was
up 1%. Operating expenditure increased by 8% to support our continued drive to
invest in infrastructure and grow our franchise, particularly in the rest of
Africa. As a result net income before tax was 12% lower. Reduced income from
associates further reduced headline earnings from banking activities, which
resulted in an overall decline of 14%. When the result from Liberty is
included, group headline earnings declined 17% from the prior year.
Net interest income was down 2%, as a result of lower net interest margins
(3,21% in 2009 versus 3,32% in 2008) and declining loan balances during 2009.
The negative endowment impact of a lower average prime rate in South Africa
(11,9% in 2009 versus 15,1% in 2008) on capital and transactional balances
took the greatest toll on margins. This was somewhat offset by slowly
improving client yields as new lending transactions were priced according to
the higher cost of term funding.
Non-interest revenue grew a healthy 6% during 2009 with net fee and commission
income up 3%, trading revenue up 12% and other revenue up 5%. Advisory fee and
commission income was affected by a marked slowdown in client activity in
structured transactions. However, customer activity in basic transactional
banking increased and, helped by an annual inflationary price increase, this
revenue line was up 13%. Our trading businesses benefited from volatile market
conditions and increased client activity. Other revenue growth was positively
impacted by higher valuations of listed property investments and a solid
performance from insurance-related products sold to bank customers in co-
operation with Liberty.
Credit impairment charges, after more than doubling in 2008 to R11 342
million, were up a further 7% in 2009 to R12 097 million. As expected,
impairments on non-performing loans (NPLs) rose 26% while portfolio
impairments on performing loans fell 84%. NPLs continued to rise during the
year and at year end comprised 6,2% of the book (2008: 3,4%). The credit loss
ratio for the year was 1,60% compared with 1,55% in the prior year. The ratio
of 1,60% comprises a charge of 1,84% in the first half of the year and 1,31%
in the second half of the year, indicating the improvements in credit
experience which started to be felt towards the end of 2009, especially in
Personal & Business Banking.
Cost discipline was well maintained during the year, restricting overall
banking activities cost growth to 8%. Proactive cost containment initiatives
kept total operating cost growth in line with inflation in South Africa,
despite substantially higher depreciation and information technology expenses.
However, we continued to invest in strategic projects for the longer term
benefit of our businesses and our customers, especially in the rest of Africa.
Staff costs rose 5% mainly as a result of annual inflationary increases and
headcount growth in the rest of Africa compensated by restrained growth in
short-term performance related remuneration. Other operating expenses grew
11%, with IT-related expenditure up 18%. The group`s cost-to-income ratio
deteriorated to 52,4%, given slower revenue growth.
Income from associates and joint ventures decreased during the year. This was
largely due to the write down of the carrying value of our 45% investment in
RCS Investment Holdings (RCS) by R366 million. RCS provides short-term credit
to consumers in South Africa and the impairment was necessitated by the
adverse credit experience it faced over the year and was accounted for outside
of headline earnings. We remain positive about the long-term future of RCS.
Standard Bank`s strategic investment in Troika Dialog Group (Troika) in Russia
was completed in September 2009 and the investment has been recognised as an
interest in an associate company. Due to Troika`s September year end, Standard
Bank Group will recognise earnings from this associate a quarter in arrears,
therefore no earnings have been recognised for the fourth quarter of 2009.
Standard Bank`s share of profits earned in this period were not material at a
group level.
Overview of business unit performance
Personal & Business Banking
Personal & Business Banking produced headline earnings of R3 835 million, down
19% on 2008, in an exceptionally tough environment. Margins were impacted by
lower interest rates while the lag effect of high interest rates in the prior
period continued to put upward pressure on NPLs. ROE was 15,8%, down from
19,7% the year before.
In mortgage lending, new business registrations declined as a result of
subdued demand from customers with new applications down 50% year-on-year and
the tightening of certain credit criteria during 2008. This was necessary at
the time given the uncertainty in the economic outlook for South Africa and
the unknown risks implied by rising unemployment and asset prices. Certain
credit criteria were relaxed in line with the easing of these risks during
2009. However, customer demand is not expected to recover significantly in the
medium term as households remain focused on repaying existing debt.
Of new business written, concessions were reduced by 55 basis points and only
33% of loans were originated through the more expensive mortgage originator
channel, compared with 52% in the prior year. These management actions helped
mitigate the impact on margins of the unavoidable increase in the cost of term
funding. NPLs continued to climb, to 10,1% of the book from 6,5% in the prior
year. This resulted in the credit loss ratio for mortgages increasing to 1,59%
(2008: 1,49%). Although the rate of growth in NPLs started to slow in the
second half of the year, we believe the peak in NPLs will only be reached in
the second quarter of 2010. Balances in the early arrears category almost
halved, mainly due to the active restructuring of this portfolio - a
deliberate strategy undertaken to assist good customers to keep their homes in
this difficult time. Reduced values received at auction and the debt review
process, referred to under the heading "helping customers through the cycle"
below, remain key risks in the mortgage business.
Instalment sale and finance leases suffered continued high credit losses
(credit loss ratio 3,49% from 2,48% in 2008) as pressure on the recovery
values of used passenger vehicles continued and the business segment felt the
impact of the slowdown in the economy. The level of NPLs remained stubbornly
high for most of 2009, although the rate of growth in NPLs began to slow in
the fourth quarter.
Card products recorded a commendable increase in earnings as a result of the
non-recurrence of high credit losses in the prior year. The credit loss ratio
in this business improved to 5,53% in 2009 from 9,53% in the prior year. This
was as a result of a continued focus on recoveries and due to post write-off
recoveries now being recognised in impairment calculations. The rest of Africa
made a meaningful contribution to these results following the rollout of new
products and successful marketing campaigns.
Transactional and lending product deposit margins came under pressure due to
the negative endowment impact of lower interest rates on transactional
accounts. Our strategy to grow our deposit base proved effective with the
number of current accounts in South Africa growing 11%. Branch expansion in
Mozambique, Ghana and Kenya assisted in attracting clients. Lower average
balances however resulted in a marginal decline in deposit and current account
year-end balances. Credit losses rose to 5,07% of the lending book (2008:
3,92%) as a result of increased NPLs in both the personal and business
segments.
Bancassurance revenues were affected by a reduction in complex product
business and an increase in lapse rates. Simple embedded insurance products
sales were also lower given slower asset growth in the bank. The short-term
insurance business benefited from a better underwriting performance despite
pressure on new business volumes. Bancassurance revenues from the rest of
Africa provided some uplift following the Kenyan acquisition.
Corporate & Investment Banking
Corporate & Investment Banking delivered a robust performance in the tough
economic conditions, with headline earnings down 6% to R7 507 million and ROE
of 18,3% (2008: 22,1%).
The global markets business had an excellent year, generating revenues of
almost R13 billion, up 11% on the prior year. Throughout the year, we were an
active market maker for our clients, particularly during the most volatile
conditions. The increase in revenues was most notable in our business outside
of Africa where we were well positioned to capitalise on market volatility and
offer innovative hedging and risk management solutions to our emerging market
clients. Credit trading performed particularly well across all regions by
taking advantage of higher deal flow, lower interest rates and the
introduction of new products. Commodities and foreign exchange reported
stronger performances in the first half, partially offset by a slowdown in
client activity and a decrease in volatility in the second half.
Investment banking had a tough start to the year following the active
curtailment of business towards the end of 2008 due to market uncertainty. The
second half of 2009 showed some promise of increased activity as corporates
tentatively became more active and we felt more confident in making our
balance sheet available to clients. The year has ended with a healthy pipeline
of new business.
Credit impairments in investment banking rose substantially during the year
due to higher impairments for NPLs across all regions as the impact of the
turmoil in credit markets spread into emerging markets. In the South African
and international operations, impairment charges were up on the prior year
with large charges booked in the first half of the year, slowing in the second
half. The full impact of the global slowdown manifested in credit impairments
in the rest of Africa rising towards the end of 2009. The highly
collateralised nature of many of our more recent corporate NPLs results in a
relatively lower gross coverage ratio.
Transactional products and services had a subdued year but continued to invest
in infrastructure, particularly in the rest of Africa. Income was down
primarily as a result of lower current account deposit balances in South
Africa partially offset by an increase in transactional volumes in the rest of
Africa.
Wealth
The financial results reported for the wealth business unit are the
consolidated results of our 53,7% investment in Liberty Holdings Limited
(Liberty). Bancassurance results are included in Personal & Business Banking.
Liberty reported normalised headline earnings of R135 million (2008: R1 573
million) for the year ended 31 December 2009. Of these headline earnings R72
million was attributable to Standard Bank (2008: R641 million). The year`s
performance can be best explained in two halves. Liberty reported a half year
normalised headline loss of R1 207 million which included three significant
and unrelated loss events, namely the estimated R519 million impact of actions
to reduce equity market risk, the required strengthening of assumptions in
policyholder withdrawals, paid ups and lapses of R685 million and an
unrealised loss of R531 million due to the rand`s strength at 30 June 2009.
The impact of improved investment markets combined with limited additional
policyholder persistency assumption changes resulted in Liberty achieving
second half normalised headline earnings of R1 342 million.
The prevailing recessionary environment impacted to some extent the ability of
the insurance operations to attract investment flows and total indexed new
business at R4 412 million was 7,7% lower than 2008. Retail risk product sales
held up relatively well, increasing by 8% on an indexed basis. The net cash
flows of the asset management operations benefited from strong money market
and dividend income fund flows. One of Stanlib`s largest clients, the Public
Investment Corporation (PIC), is strategically moving a large component of its
portfolio in-house. Excluding the PIC withdrawal, asset management net cash
inflows totalled R11,1 billion (2008: R13,4 billion). Earnings from South
African asset management operations are 3,7% lower than last year reflecting
the lower average values of assets under management and reduced fee income.
Cost discipline partially offset the lower fees.
Shareholders are referred to the full Liberty Holdings announcement dated 25
February 2010.
Overview of strategic progress
Group strategy
Our vision to be a leading emerging markets financial services organisation
remains unchanged. Our resilience in the face of the severe challenges of the
past two years confirms that the group is strategically well positioned. In an
environment where global growth rates are expected to depend heavily on
emerging markets, our strategic focus, strong capital position, risk
management capability and growing customer base gives us confidence in the
future.
Helping customers through the cycle
During the year we worked actively to find solutions for individual, business
and corporate customers unable to repay loans according to the original terms.
Standard Bank has assisted some 30 000 South African customers to keep their
homes in the past year without fear of legal action or repossession. We
support the debt review initiative recently implemented under the auspices of
the National Credit Act and our debt review department, created to address the
needs of our customers availing themselves of debt counselling, has seen
volumes increase substantially since June 2007. The way in which this process
has been implemented - with many interpretations of the act yet to be
clarified - has created bottlenecks in the system, resulting in lengthy
delays. During the debt counselling process, banks are unable to engage with
customers to reschedule payment terms or, where deemed necessary, foreclose on
assets to redeem unpaid debts. We continue to work closely with the
authorities to improve the efficacy of the process for the good of our
customers, the bank and the hitherto strong South African culture of debt
repayment.
The financial position of corporate clients has been closely monitored through
rigorous industry-specific analysis and review. Proactive steps have included
providing recapitalisation, funding, renegotiating lending facilities and
bridging finance to clients in financial distress.
Risk appetite
Tightening of risk appetite in 2008 manifested in lower asset growth in 2009.
Risk appetites across the group have been reviewed extensively throughout 2009
and have been amended as appropriate to ensure that we remain committed to
writing good quality business. We are encouraging relationship managers to
remain close to their customers and their prospects to understand their future
borrowing needs, so we are able to lend responsibly as their need for credit
arises.
Capital management
The group continued to demonstrate its ability to generate capital internally,
ending 2009 with a capital adequacy ratio of 14,9% and a tier I capital
adequacy ratio of 11,8%. These strong ratios were achieved despite the
deployment of capital in respect of the investment in Troika, and dividends of
R3,1 billion paid to shareholders. Liberty`s capital adequacy level at
December 2009 was strong at 2,8 times the required cover.
Liquidity
The availability of term funding improved gradually during the second half of
2009. Over this period the group continued to manage its liquidity risk
exposures proactively within prudent risk parameters. A sound structural
liquidity mismatch profile, an adequately diversified funding base and
unencumbered surplus liquidity totalling R118,6 billion at 31 December 2009,
were maintained.
External pressures
We recognise the need for politicians and regulators to take the necessary
action to avoid the spectacular failures in banking that have marked the
global financial crisis. However, we are concerned that the unintended
consequence of some of the proposed changes to banking regulations may hinder
our ability to service our customers and increase the cost of funding for
developing countries. While the crisis appears to be ending, the regulatory
consequences for structure, capital, leverage and liquidity are just beginning
and increasingly stringent developments in the regulatory universe will
therefore remain a key challenge for us.
We are currently evaluating the capital and liquidity requirements proposed by
the Basel Committee on Banking Supervision.
Distributions to shareholders
The group`s tier I capital ratio is steadily strengthening, our outlook for
profitability is improving and economic stress in our chosen markets is
easing. Against this background, the board has decided that for the year under
review it will divert from the group`s existing distribution cover policy of
2,5 times and will maintain the same total level of distribution as in 2008.
This results in a final distribution being declared of 245 cents per share,
bringing the total distribution for the year to 386 cents. The board believes
it is prudent to offer the final distribution as a scrip distribution with a
cash alternative. A circular relating to the scrip distribution will be
posted to shareholders in due course.
Black economic empowerment
Despite the persisting challenges to harmonising the financial sector charter
(charter) with the Department of Trade and Industry`s Codes of Good Practice
for Broad Based Black Economic Empowerment (codes), and converting the former
into a sector code, our commitment to measurable progress in the
transformation of the sector and of the group remains steadfast. The Standard
Bank of South Africa Limited (SBSA) will continue to meet the requirements of
the codes while also working toward internally set targets for those aspects
of the charter that are not reflected in the codes.
During 2009, accredited black economic empowerment (BEE) verification agencies
conducted independent assessments of SBSA`s BEE performance in terms of the
generic codes. SBSA`s verified overall score was above 75, qualifying as a
level three BEE contributor.
Prospects
There appears to be consensus that the global economy is emerging from the
harsh conditions experienced in 2008 and 2009. The recovery in 2010 is likely
to be hesitant and employment and credit conditions are expected to remain
under pressure. It is also likely that most of the growth in the global
economy will originate from emerging markets, especially Asia. Africa`s trade
ties to other developing economies should boost its growth rate.
In South Africa, inflation is expected to breach the upper limit of the target
band in the second half of the year but it should average lower than 2009. We
also expect interest rates to be, on average, lower in 2010 than in 2009.
These factors will support an economic recovery but South Africa`s return to
trend growth is likely to lag its emerging market peers. The country`s
internal growth dynamic has been weakened by high levels of debt accumulated
by households, which will limit a stronger recovery in spending. The outlook
for smaller businesses and the corporate sector in South Africa remains
uncertain. Corporates are expected to continue to conserve cash and defer non-
essential capital expenditure in 2010. Targeted strategies to contain credit
losses remain in place across all lending portfolios.
In this environment, the group continues to intensify its focus on building
revenues and strengthening customer relationships. Investments in staff,
systems and infrastructure will continue to ensure sustainability of earnings.
Our elevated focus on risk, capital and liquidity remains an important part of
our day-to-day management of the group.
We anticipate that the group`s normalised headline earnings will recover from
the 2009 base and management`s immediate focus will be to restore earnings to
2008 levels. The financial impact of possible regulatory interventions is
currently being assessed and may impact results and returns over the longer
term. We believe that our strong capital base and client franchise in key
emerging markets position us well.
Jacko Maree Derek Cooper
Chief executive Chairman
3 March 2010
Normalised results (unaudited)
With effect from 2004, we have adjusted the group`s results reported under
IFRS for required accounting conventions that do not reflect the underlying
economic substance of transactions. To arrive at the normalised results the
IFRS results have been adjusted for the following 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.
During the year the group entered into transactions on its own shares to
facilitate client trading activities. As part of the normal trading
operations, a group subsidiary offers to its clients trading positions of
listed shares, including its own shares. In order to hedge the risk on these
shares the subsidiary buys or sells short group shares in the market. Although
the share exposure on the group`s own shares is deducted from equity and the
related fair value movements are reversed in the income statement on
consolidation, the client trading position and fair value movements are not
eliminated, resulting in an accounting mismatch. In addition to the two
anomalies described above, the group has corrected this accounting mismatch
resulting from the application of IFRS in preparing the normalised results.
The result of these adjustments is shown in the table below:
Normalised headline earnings
Weighted average Headline Growth
number of shares earnings on 2008
`000 Rm %
Disclosed on an IFRS basis 1 459 337 11 253 (20)
Tutuwa initiative 63 479 278
Group shares held for the 32 035 399
benefit of Liberty
policyholders
Share exposures held to (6 615) (212)
facilitate client trading
activities
Normalised 1 548 236 11 718 (17)
Summarised audited results in accordance with IFRS
Consolidated income statement
for the year ended 31 December
% 2009 2008
change Rm Rm
Income from banking activities 2 62 828 61 366
Net interest income (2) 31 316 31 918
Non-interest revenue 7 31 512 29 448
Income from investment management and 86 43 458 23 359
life insurance activities
Total income 25 106 286 84 725
Credit impairment charges 7 12 097 11 342
Benefits due to policyholders >100 33 915 11 997
Income after credit impairment charges (2) 60 274 61 386
and policyholders` benefits
Operating expenses in banking 8 32 827 30 390
activities
Operating expenses in investment 7 9 052 8 423
management and life insurance
activities
Net income before goodwill (19) 18 395 22 573
Goodwill impairment >100 42 5
Net income before associates and joint (19) 18 353 22 568
ventures
Share of profits from associates and (88) 33 268
joint ventures
Net income before indirect taxation (19) 18 386 22 836
Indirect taxation 24 1 710 1 382
Profit before direct taxation (22) 16 676 21 454
Direct taxation (1) 4 680 4 705
Profit for the year (28) 11 996 16 749
Attributable to minorities (82) 411 2 288
Attributable to preference 0 531 529
shareholders
Attributable to ordinary shareholders (21) 11 054 13 932
Basic earnings per share (cents) (24) 757,5 995,9
Diluted earnings per share (cents) (24) 731,6 962,2
Headline earnings
for the year ended 31 December
% 2009 2008
change Rm Rm
Group profit attributable to ordinary (21) 11 054 13 932
shareholders
Headline earnings adjustable items 205 126
added back/(reversed)
Goodwill impairments - IFRS 3 42 5
Profit on sale of property and (38) (16)
equipment - IAS 16
Impairment of property and equipment - 46 84
IAS 16
Realised foreign currency translation
reserve on foreign operations - IAS 21 (18)
Realised foreign currency translation 7 (24)
reserve on foreign divisions - IAS 27
Impairment of associates - IAS 28 379 139
Impairment of intangible assets - IAS 96 132
38
Realised gains on available-for-sale (309) (194)
assets - IAS 39
Taxation on headline earnings 16 (13)
adjustable items
Minority share of headline earnings (22) (28)
adjustable items
Headline earnings (20) 11 253 14 017
Consolidated statement of financial position
as at 31 December
% 2009 2008
chang Rm Rm
e
Assets
Cash and balances with central banks (3) 24 983 25 697
Financial investments, trading and 3 356 518 346 859
pledged assets
Loans and advances (8) 721 389 787 934
Loans and advances to banks (5) 122 923 129 890
Loans and advances to customers (9) 598 466 658 044
Investment property 14 19 058 16 771
Derivative and other assets (38) 186 664 299 476
Interest in associates and joint 36 9 529 6 990
ventures
Goodwill and other intangible assets (8) 9 409 10 180
Property and equipment 26 12 250 9 746
Total assets (11) 1 339 1 503
800 653
Equity and liabilities
Equity (0) 99 369 99 501
Equity attributable to ordinary 3 84 022 81 953
shareholders
Ordinary share capital 2 156 153
Ordinary share premium 1 17 041 16 844
Reserves 3 66 825 64 956
Preference share capital and premium 5 503 5 503
Minority interest (18) 9 844 12 045
Liabilities (12) 1 240 1 404
431 152
Deposit and current accounts (9) 768 548 843 815
Deposits from banks (18) 106 018 129 055
Deposits from customers (7) 662 530 714 760
Derivative, trading and other (29) 261 683 366 737
liabilities
Policyholders` liabilities 7 183 544 172 069
Subordinated debts 24 26 656 21 531
Total equity and liabilities (11) 1 339 1 503
800 653
Contingent liabilities and capital commitments
as at 31 December
2009 2008
Rm Rm
Letters of credit 10 784 16 521
Guarantees 29 078 34 680
39 862 51 201
Contracted capital expenditure 1 689 2 059
Capital expenditure authorised but not yet
contracted 10 075 9 117
11 764 11 176
Consolidated cash flow information
for the year ended 31 December
2009 2008
Rm Rm
Net cash flows from operating activities 6 295 6 658
Net cash flows used in investing activities (7 372) (10 885)
Net cash flows from financing activities 2 887 7 550
Effects of exchange rate changes on cash and
cash equivalents (2 524) 1 756
Net (decrease)/increase in cash and cash
equivalents (714) 5 079
Cash and cash equivalents at beginning of the
year 25 697 20 618
Cash and cash equivalents at end of the year 24 983 25 697
Statement of comprehensive income
for the year ended 31 December
2009
Minorities
Ordinary and
shareholder preference 2008
s`
equity shareholders` Total Total
Rm Rm Rm Rm
Profit for the year 11 054 942 11 996 16 749
Other comprehensive (7 395) (2 069) (9 464) 6 277
income after tax for
the year:
Exchange rate (7 403) (2 164) (9 567) 5 131
differences on
translating foreign
operations
Foreign currency hedge (106) (106) 447
of net investments
Cash flow hedges 85 85 932
Available-for-sale 7 33 40 (212)
financial assets
Revaluation and other 22 62 84 (21)
gains/(losses)
Total comprehensive 3 659 (1 127) 2 532 23 026
income for the year
Attributable to (1 658) (1 658) 3 568
minorities
Attributable to equity
holders of the parent 3 659 531 4 190 19 458
Attributable to 531 531 529
preference
shareholders
Attributable to 3 659 3 659 18 929
ordinary shareholders
Statement of changes in equity
for the year ended 31 December
Preferenc
e
Ordinary share
share- capital
holders` and Minority Total
equity premium interest equity
Rm Rm Rm Rm
Balance at 1 January 2008 53 671 5 503 9 332 68 506
Total comprehensive 18 929 529 3 568 23 026
income for the year
Equity-settled share- 217 35 252
based payment
transactions
Transactions with (2 198) (982) (3
minority shareholders 180)
Issue of share capital 16 132 16 132
and share premium
Share buy-backs (503) (503)
Net decrease in treasury 1 483 906 2 389
shares
Net dividends paid (5 778) (529) (814) (7
121)
Balance at 31 December 81 953 5 503 12 045 99 501
2008
Balance at 1 January 2009 81 953 5 503 12 045 99 501
Total comprehensive 3 659 531 (1 658) 2 532
income for the year
Equity-settled share- 307 37 344
based payment
transactions
Issue of share capital 200 (10) 190
and share premium
Tax on share-based 58 58
payments
Net decrease in treasury 691 316 1 007
shares
Net dividends paid (2 846) (531) (886) (4
263)
Balance at 31 December 84 022 5 503 9 844 99 369
2009
Financial statistics
for the year ended 31 December
%
chang 2009 2008
e
Number of ordinary shares in issue
(000`s)
- end of year 3 1 474 1 430
344 618
- weighted average 4 1 459 337 1 398
866
- diluted weighted average 4 1 511 038 1 447
886
Cents per ordinary share
Headline earnings (23) 771,1 1 002,0
Diluted headline earnings (23) 744,7 968,1
Total distributions 386,0 386,0
Basic earnings (24) 757,5 995,9
Diluted earnings (24) 731,6 962,2
Net asset value (1) 5 699 5 729
Financial performance (%)
ROE 13,7 19,1
Net interest margin 3,19 3,31
Credit loss ratio 1,60 1,55
Cost-to-income ratio 52,3 49,3
Capital adequacy (%)
Capital ratios (unaudited)
- tier I capital 11,8 11,0
- total capital 14,9 13,3
Segment report
for the year ended 31 December
% 2009 2008
change Rm Rm
Revenue contribution by business unit
Personal & Business Banking 2 34 102 33 516
Corporate & Investment Banking 6 27 701 26 217
Central and other (50) 907 1 832
Banking activities 2 62 710 61 565
Liberty 92 44 338 23 136
Standard Bank Group - Normalised 26 107 84 701
048
Adjustment for IFRS (762) 24
Standard Bank Group - IFRS 25 106 84 725
286
Profit and loss attributable to
ordinary shareholders
Personal & Business Banking (25) 3 445 4 566
Corporate & Investment Banking (3) 7 649 7 918
Central and other (62) 353 940
Banking activities (15) 11 447 13 424
Liberty (89) 72 641
Standard Bank Group - Normalised (18) 11 519 14 065
Adjustment for IFRS (465) (133)
Standard Bank Group - IFRS (21) 11 054 13 932
Private equity associates and joint ventures
for the year ended 31 December
2009 2008
Rm Rm
Cost 409 308
Carrying value 658 411
Fair value 818 516
Loans to associates and joint ventures 432 719
Equity accounted income 128 119
Accounting policies
Statement of compliance and basis of preparation
These audited results are a summary of the consolidated financial statements
and are prepared in accordance with the recognition and measurement criteria
of IFRS, its interpretations adopted by the International Accounting Standards
Board (IASB), the presentation and the disclosure requirements of IAS 34 -
Interim Financial Reporting, the Listings Requirements of the JSE and the
requirements of the South African Companies Act 61 of 1973, as amended. The
consolidated financial statements are prepared in accordance with the going
concern principle under the historical basis as modified by the fair value
accounting of certain assets and liabilities where required or permitted by
IFRS.
Changes in accounting policies
The accounting policies are consistent with those adopted in the previous
year, except as noted below.
The group has adopted the following new and amended IFRS requirements as of 1
January 2009, which have had an effect on the group`s financial statements:
Revised IAS 1 Presentation of Financial Statements
As a result of adopting this revised standard, the group presents all owner
changes in equity in the statement of changes in equity. All non-owner changes
in equity are presented in the income statement and the statement of
comprehensive income. Comparative information has been re-presented
accordingly.
Amendments to IFRS 7 Improving Disclosures about Financial Instruments
The amendments require enhanced fair value measurement and liquidity risk
disclosures in the annual financial statements.
Amendments to IAS 40 Investment Property (included in the improvements to IFRS
2008)
These amendments result in property under construction or development for
future use as investment property being within the scope of IAS 40. Such
property is therefore measured at fair value, in accordance with the group`s
accounting policy for investment property (unless it is not possible to
measure fair value reliably). Previously, such property was measured at cost
less impairment. This change in accounting policy has been applied
prospectively (in accordance with the relevant transitional provisions) and
has not had a material impact on any of the financial statement line items or
earnings per share.
The group has also adopted all other effective new and amended IFRS
requirements (not previously early adopted) and has early adopted certain new
and amended IFRS requirements as of 1 January 2009, with no material impact on
the group`s accounting policies or results and no restatement of prior year
results.
Reclassifications and restatements
The segmental analysis comparatives have been reclassified for restructuring
of divisional responsibilities between business units. There have been no
other reclassifications or restatements in respect of the prior year.
Reports of the independent auditors
The unmodified audit reports of KPMG Inc. and PwC Inc., the
independent auditors, on the annual financial statements and the
summarised financial statements contained herein for the year ended
31 December 2009, dated 3 March 2010, are available for inspection
at the registered office of the company.
Declaration of distributions
Ordinary shareholders
Payment of a scrip distribution with a cash dividend election.
Notice is hereby given that the directors have resolved to issue fully paid
ordinary shares in the company as a scrip distribution to ordinary
shareholders. Fully paid ordinary shares of 10 (ten) cents each will be issued
as a scrip distribution, payable to ordinary shareholders recorded in the
register of Standard Bank Group on the record date, being Friday, 23 April
2010. Ordinary shareholders will be entitled, in respect of all or part of
their shareholding, to elect to receive a cash dividend of 245 cents per
ordinary share in lieu of the scrip distribution, which will be paid only to
those ordinary shareholders who elect in respect of all or part of their
shareholding, on or before 12:00 on Friday, 23 April 2010, to receive the cash
dividend.
The cash dividend will be paid out of profits of Standard Bank Group while the
new ordinary shares to be issued pursuant to the scrip distribution will be
issued as a capitalisation issue by way of capitalisation of part of Standard
Bank Group`s share premium.
The number of new ordinary shares to which ordinary shareholders participating
in the scrip distribution will become entitled, will be determined in the
ratio that 245 cents multiplied by 1,05 bears to the volume weighted average
price (VWAP) of ordinary shares in Standard Bank Group on the JSE Limited
(JSE) during the five-day trading period ending Thursday, 8 April 2010.
Details of the ratio will be released on the Securities Exchange News Service
of the JSE (SENS) by no later than 11:00 on Friday, 9 April 2010 and published
in the South African and Namibian press the following business day.
Trading in the Strate Limited environment does not permit fractions and
fractional entitlements. Accordingly, where an ordinary shareholder`s
entitlement to new ordinary shares calculated in accordance with the above
formula gives rise to a fraction of a new ordinary share, such fraction of a
new ordinary share will be rounded up to the nearest whole number where the
fraction is greater than or equal to 0,5 and rounded down to the nearest whole
number where the fraction is less than 0,5.
A circular relating to the scrip distribution and the cash dividend
alternative will be posted to shareholders on or about Monday, 8 March 2010.
Preference shareholders
Notice is hereby given that the following final distributions have been
declared:
6,5% first cumulative preference shares (first preference shares) dividend No.
81 of 3,25 cents per first preference share, payable on Monday, 19 April 2010,
to holders of first preference shares recorded in the books of the company at
the close of business on the record date, Friday, 16 April 2010. The last day
to trade to participate in the dividend is Friday, 9 April 2010. First
preference shares will commence trading ex-dividend from Monday, 12 April
2010.
Non-redeemable, non-cumulative, non-participating preference shares (second
preference shares) dividend No. 11 of 374,76 cents per second preference
share, payable on Monday, 19 April 2010, to holders of second preference
shares recorded in the books of the company at the close of business on the
record date, Friday, 16 April 2010. The last day to trade to participate in
the dividend is Friday, 9 April 2010. Second preference shares will commence
trading ex-dividend from Monday, 12 April 2010.
The salient dates and times for the scrip distribution/dividends are as
follows:
Non-redeemable,
non-cumulative,
6,5%cumulative non-
participating
preference preference
shares (First shares (Second
Ordinary preference preference
shares shares) shares)
JSE
Share code SBK SBKP SBPP
ISIN ZAE000109815 ZAE000038881 ZAE000056339
Namibian Stock
Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Distribution/Dividend 245 3,25 374,76
per share (cents)
Circular and form of Monday, 8 March
election posted to 2010
ordinary shareholders
Announcement of the Friday, 9 April
ratio applicable to 2010
the scrip
distribution, based
on the five-day
trading period ending
Thursday, 8 April
2010, released on
SENS
Announcement of the
ratio applicable to
the scrip
distribution
published in the Monday, 12 April
South African and 2010
Namibian press
Last day to trade in Friday,16 April Friday,9 April Friday, 9 April
order to be eligible 2010 2010 2010
for the scrip
distribution/cash
dividend (CUM
distribution)
Shares trade EX the Monday, 19 April Monday,12 April Monday,12 April
scrip 2010 2010 2010
distribution/dividend
Listing of the Monday, 19 April
maximum possible 2010
number of ordinary
shares that could be
issued in terms of
the scrip
distribution
Last day to elect a Friday, 23 April
cash dividend instead 2010
of the scrip
distribution by 12:00
Record date in Friday, 23 April Friday,16 April Friday, 16 April
respect of the scrip 2010 2010 2010
distribution/cash
dividend
Share certificates Monday, 26 April Monday,19 April Monday, 19 April
and dividend cheques 2010 2010 2010
posted and
CSDP/broker accounts
credited/updated
(Payment date)
Maximum number of new Wednesday, 28
ordinary shares April 2010
listed adjusted to
reflect the actual
number of ordinary
shares issued
Ordinary share certificates may not be dematerialised or rematerialised
between Monday, 19 April 2010 and Friday, 23 April 2010, both days inclusive.
Preference share certificates (first and second) may not be dematerialised or
rematerialised between Monday, 12 April 2010 and Friday, 16 April 2010, both
days inclusive.
All times provided in this announcement are South African local time. The
above dates and times are subject to change. Any changes will be released on
SENS and published in the South African and Namibian press.
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 have
dematerialised their share certificates will have their accounts at their CSDP
or broker credited on Monday, 19 April 2010. Ordinary shareholders who hold
dematerialised shares will have their accounts at their CSDP or broker
credited/updated on Monday, 26 April 2010.
On behalf of the board
Loren Wulfsohn
Group secretary
Administrative information
Standard Bank Group Limited
Registration No. 1969/017128/06
Incorporated in the Republic of South Africa
Directors
DE Cooper (Chairman), Kaisheng Yang** (Deputy chairman), SJ Macozoma (Deputy
chairman), JH Maree* (Chief executive), DDB Band, RMW Dunne#, TS Gcabashe, SE
Jonah KBE##, Sir Paul Judge#, KP Kalyan, Yagan Liu**, RP Menell, Adv KD
Moroka, AC Nissen, TMF Phaswana, 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
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
Investors are referred to www.standardbank.com where a detailed analysis of
the group financial results, including an income statement and a statement of
financial position for SBSA, can be found.
Independent sponsor
Deutsche Securities (Proprietary) Limited
Joint sponsor
Standard Bank
4 March 2010
Date: 04/03/2010 08:00:15 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
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