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SBK - Standard Bank Group Limited - Audited results and dividend announcement
for the year ended 31 December 2011
Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/017128/06)
South African Share Code: SBK
Namibian Share Code: SNB
ISIN: ZAE000109815
("Standard Bank Group" or "the group")
Audited results and dividend announcement for the year ended
31 December 2011
Headline earnings
- normalised R13 599 million, up 21% on 2010
- IFRS R13 400 million, up 22% on 2010
Dividends per ordinary share
- 425 cents (2010: 386 cents)
Capital adequacy
- tier I capital adequacy ratio of 12,0% (2010: 12,9%)
Cost-to-income ratio
- normalised 58,8% (2010: 61,4%)
- IFRS 59,0% (2010: 61,5%)
Credit loss ratio
- normalised and IFRS 0,87% (2010: 1,04%)
Return on equity (ROE)
- normalised 14,3% (2010: 12,5%)
- IFRS 14,6% (2010: 12,7%)
Net asset value (NAV) per share
- normalised 6 453 cents (2010: 5 726 cents)
- IFRS 6 541 cents (2010: 5 785 cents)
The results discussed in the following commentary are presented on an unaudited
normalised basis, unless otherwise indicated as being on an International
Financial Reporting Standards (IFRS) basis. Results are normalised to correct
the distortions caused by IFRS`s treatment of the Black Economic Empowerment
Ownership initiative and by group share exposures entered into to facilitate
client trading activities and for the benefit of Liberty policyholders that are
deemed to be treasury shares. Refer to normalised results for a detailed
explanation. The abridged audited results in accordance with IFRS are presented
separately.
The Standard Bank Group`s consolidated financial results for the year ended 31
December 2011 have been audited by the group`s external auditors. The
preparation of the group`s consolidated financial results was supervised by the
group financial director, Simon Ridley, BCom (Natal), CA (SA), AMP (Oxford).
These results were made publicly available on 8 March 2012.
Overview of financial results
Global operating environment
The year started on a relatively positive note with the global economy showing
some signs of recovery despite fears of a double-dip recession. Developing
economies continued to outperform developed economies, notwithstanding the
benefits of stimulus policies introduced during the recession, making for an
uneven pattern of recovery.
During the course of 2011 adverse conditions mounted. The "Arab Spring"
uprisings in the Middle East drove up the prices of oil, gold and silver. The
turmoil in the region also disrupted food supply and food inflation accelerated,
exacerbated by droughts and floods in other parts of the world.
The pace of recovery in developed economies slowed significantly in the second
quarter of the year as the fiscal crisis in the Eurozone deepened and concerns
about the US debt ceiling weighed on markets.
Doubts about the ability of countries to stabilise their public finances
escalated. Initial concerns about a few marginal economies in the Eurozone
extended to other countries in Europe and elsewhere. The anxiety about
sovereigns translated into apprehension about the solvency of banks, especially
in Europe, given their exposure to sovereign bonds. This weakened financial
flows as banks maintained high levels of liquidity and tightened lending.
Capital outflows from emerging market equities peaked at levels last seen at the
height of the financial crisis in 2008, indicating concerns over heightened
economic stress in emerging markets.
Africa`s performance continued to improve on the back of strengthening internal
markets and more robust external relationships and was second only to Asia in
the resilience demonstrated throughout the financial crisis. However, the region
was not immune from the global difficulties and in the second half of 2011 there
were dramatic increases in interest rates and weakening of currencies in Kenya,
Uganda and Nigeria.
Domestic operating environment
Following the relatively brisk growth rate of 4,6% recorded in early 2011, real
growth in the South African economy declined during the year and growth of 3,1%
was recorded for the year. The declines during the year were especially visible
in the main goods-producing sectors of the economy. Other contributors to the
deceleration were the poor performance of the agricultural sector, due to a
smaller maize crop, and the mining sector, due to safety-related production
stoppages and technical problems. Activity in the manufacturing sector also
contracted significantly.
Real household disposable income continued to grow in the second and third
quarters, but more slowly than in early 2011. This was reflected in weaker real
household consumption spending. While households took on additional debt, growth
was lower than the increase in disposable income, bringing down the household
debt-to-disposable income ratio to 75% from 78% in 2010. Household savings
remained at very low levels.
Heightened risk aversion led international investors to withdraw funds from
emerging markets, particularly towards the end of the third quarter. This
weakened the rand significantly in September and October 2011 and volatility in
the rand exchange rate continued for the rest of the year. The weaker rand,
along with higher food, fuel and electricity prices, pushed up the prices of
consumer goods, with the consumer price index breaching the upper band of the
inflation target in November and December 2011.
Nonetheless, given global uncertainty, relatively poor domestic growth and the
expectation that the inflation rate would return to the target range, the
Monetary Policy Committee of the South African Reserve Bank (SARB) kept the repo
rate unchanged in 2011.
The results
Overall, we delivered a strong set of results in 2011. We lifted headline
earnings to R13,6 billion, an increase of 21% on the prior year and increased
the annual dividend to shareholders by 10%. Return on equity (ROE) improved to
14,3%, compared to 12,5% in the prior year.
Strategically, we made good progress in growing universal banking operations in
our chosen African markets. We continued to right-size our activities outside of
Africa.
Reflecting on 2011
- Macro and regulatory uncertainty
The group`s strong performance should be seen in the context of ongoing economic
uncertainty, particularly in developed countries, and regulatory upheaval
worldwide as policymakers grappled with widespread social dissent on the one
hand, and finding appropriate responses to the financial crisis on the other.
The ripple effects across the financial system were profound.
- Keeping costs flat, while investing for growth
In March last year we committed to keep costs flat, which we achieved through a
disciplined approach to managing headcount, and achieving additional efficiency
gains. Our efforts to control cost growth across the group as a whole were
balanced with our strategic priority to invest for growth in markets such as
Angola, Kenya and Nigeria.
- Organic growth in the rest of Africa
Our on-the-ground operations in the rest of Africa are showing good results with
headline earnings increasing by 38%. The continued investment in infrastructure
is bearing fruit as revenues benefited from a larger transacting customer and
deposit base. While an acquisition would make sense in markets where we are not
yet at scale, we will primarily concentrate on continuing to grow our businesses
organically.
- Right-sizing our operations outside Africa
We continue to reshape our international activities in line with our strategic
focus on Africa. We have announced the disposals of our strategic stake in
Troika Dialog Group (Troika) in Russia and our controlling stake in Standard
Bank Argentina. The Russian transaction has been closed and the USD372 million
upfront consideration received. The Argentinean transaction remains on track but
subject to regulatory approvals.
Scaling back our group`s banking activities internationally and in London is
complex. We are in the process of changing our operating model and Standard Bank
Plc, the principal banking entity, will increasingly be focused on origination
of business for the purposes of the group, making less use of its own balance
sheet. Standard Bank Plc will continue to act as a trading and distribution hub
for Corporate & Investment Banking and a robust counterparty for our clients.
The balance sheet will be refocused and de-risked over time. In line with the
experience of all UK banks, significant emphasis to strengthen the risk
management environment has been required and this has resulted in an increased
cost of compliance both in operating expenditure and in costs of higher
liquidity requirements. Standard Bank Plc will be fully integrated to deliver
the Corporate & Investment Banking and group strategy.
- Our partnership with the Industrial and Commercial Bank of China (ICBC)
Our strategic partnership with ICBC continues to develop and grow, especially in
the many projects we have undertaken together in key African markets as well as
other emerging markets. ICBC has opened a representative office in Africa, which
will facilitate further co-operation in the rapidly growing trade between China
and Africa.
- Determining the optimal level of capital for the group
The group`s tier I capital adequacy ratio was 12,0% at year end. After taking
account of the requirements of Basel II.5 and Basel III, this ratio, on a pro
forma basis, would be 11,0%. The details of how Basel III will be adopted in
South Africa, including the regulatory minimum capital requirements, are
expected to be determined by the SARB during 2012 and this will play a major
role in determining the optimal level of capital for the group. It is
anticipated, at this preliminary stage, that the group`s internal target for
tier I capital adequacy will be higher than the current 9% target.
The sale of our strategic stake in Troika and the partial disposal of our stake
in Standard Bank Argentina has helped inform the board`s decision to increase
our full year dividend by 10% to425 cents per share compared with our 2010
dividend of 386 cents per share, reflecting a dividend cover of slightly more
than 2,0 times.
- Balancing ROE and growth
We recognise that our current ROE of 14,3% is too low and we are managing the
levers of ROE aggressively to improve the ratio. However, we will not undermine
our growth plans to defend short-term returns nor will we pursue growth at
levels of return that are too low. We are acutely aware that striking the right
balance is integral to creating sustainable shareholder value.
Income statement analysis
Net interest income rose 7% for the year on the back of a 5% increase in average
margin earning assets and a slight margin expansion of five basis points. The
South African balance sheet absorbed the residual impact of the negative
endowment effect on transactional balances and capital, with the prime interest
rate at an average of 90 basis points lower than the prior year. This was offset
by the repricing benefit of new business written at higher margins.
Non-interest revenue was up 3% for the year. Within this result, fee and
commission revenue held up well, growing by 11%. Account transaction fees grew
9% reflecting an increased customer base and higher transactional volumes. Good
growth in advisory and structuring fees was achieved particularly in natural
resources. Card-based commissions were up 8% as a result of higher merchant
penetration and higher levels of activity.
Trading revenue declined 2%. The largest components were forex up 10%, interest
rates up 5% and commodities down 3%. Forex trading benefited from rand
volatility in the second half of 2011 and a larger corporate customer base in
key African markets. Interest rates trading benefited from the good take up of
local currency rates products in the rest of Africa executed in London. Within
commodities trading, precious and base metals fared well but the energy desk was
negatively impacted by extreme volatility in oil prices. Equity trading was down
significantly on the prior year given turbulent equity markets and the mark down
of an equity position within the group`s Asian curtailed operations.
Other revenue fell 27% largely due to the non-recurrence of positive adjustments
on unlisted equity in the prior year as well as negative adjustments to private
equity investments during 2011, both of these items reported within other income
from banking activities. Bancassurance revenue grew 6% as a result of an
increased policy base in South Africa in short- and long-term insurance
products. Property-related revenue was down 4% due to unfavourable fair value
adjustments on the listed property portfolio.
Credit impairment charges were 13% lower at R6 436 million (credit loss ratio of
0,87%) from R7 394 million (credit loss ratio of 1,04%) in 2010, reflecting an
improved credit environment. Non-performing loans reduced to 4,1% of the book at
year end (2010: 5,8%) as the ability of households and businesses to service
their debt stabilised, particularly in South Africa. After experiencing a net
reversal in portfolio impairments in 2010, the group incurred a more normal
portfolio charge during 2011. Specific impairments amounting to USD105 million
in Corporate & Investment Banking arose from exposures in the Middle East and
related to client sectors which are no longer being serviced.
Total costs were flat on the prior year. Staff costs were up 4%, other operating
expenses increased by only 1% and, together with the non-recurrence of
retrenchment costs, this allowed the group to achieve its objective of no cost
growth in 2011. The cost-to-income ratio improved to 58,8%.
Headcount was 4% lower than the prior year following the 2010 restructuring
process, which took final effect in early 2011, combined with natural attrition
and tight headcount management. The combination of lower headcount and salary
increases resulted in fixed remuneration growing by 4%. Variable remuneration
was slightly lower than the prior year due to a higher component of deferred
incentives in line with worldwide trends to strengthen the link between risk and
incentive remuneration.
Given the relative inflexibility of the IT depreciation charge which grew by
30%, much focus was placed on containing other operating expenses during the
year, which ended the year 1% up. The biggest savings were in marketing and
professional fees.
Overview of business unit performance
Headline earnings by business unit
% change 2011 2010
Rm Rm
Personal & Business Banking 40 6 092 4 364
Corporate & Investment Banking 11 5 816 5 252
Discontinued operations (Argentina)(1) 39 457 329
Central and other (194) (55)
Banking activities 23 12 171 9 890
Liberty 3 1 428 1 393
Total 21 13 599 11 283
(1) Following the agreement reached with ICBC in August 2011, in
terms of which ICBC will acquire 80% of Standard Bank Argentina -
55% from Standard Bank Group and 25% from non-controlling
interests - the group`s full 75% investment in Standard Bank
Argentina is classified as a discontinued operation. The
transaction remains subject to regulatory approval and, once
implemented, the group`s remaining 20% investment in Standard Bank
Argentina will be accounted for on the equity basis.
Personal & Business Banking
Personal & Business Banking delivered headline earnings of R6,1 billion,
surpassing the record profits achieved in 2007 and 40% higher than the prior
year. The main contributors to this result were the continued reduction in
credit impairment charges, income growth that outstripped cost growth, and well-
priced loan growth.
Personal & Business Banking grew net interest income by 9% to R19,9 billion on
the back of asset growth, improved pricing and reduced funding costs, despite a
negative endowment impact mainly due to the low interest rate environment in
South Africa. The results were supported by a 19% reduction in credit
impairments from R6,7 billion in 2010 to R5,4 billion in 2011. The cost-to-
income ratio improved slightly to 61,3% from 62,2%. An ROE of 21,6% was
achieved, a substantial improvement on the 16,9% recorded in the prior year.
Mortgage lending returned to profitability in the second half of 2010 and this
trend continued in 2011 with the mortgage book generating headline earnings of
R639 million. In South Africa, the number of new applications continued on an
upward trend, growing 18%, and we extended R34,5 billion of new loans to our
customers during the year. This translated into encouraging asset growth of 6%,
above the industry average. We continued to price new business more
appropriately for term funding and credit risk. The average lending rate for new
business was prime plus 11 basis points, compared to prime less 20 basis points
for the prior year.
The level of non-performing mortgage loans continued to decline from its peak in
September 2010 to 6,7% at the end of the year compared to 9,4% at the end of
2010. The credit loss ratio for mortgages reduced from 1,15% to 1,07%, with room
for further improvement, as the low interest rate environment assisted customers
to service their debt. We bolstered our mortgage lending coverage ratio from 17%
in the prior year to 20% at the end of 2011. We are comfortable with this level
given the highly collateralised nature of the portfolio, and the level of
portfolio provisions accumulated during the year.
Revenues and headline earnings in instalment sale and finance leases grew as a
result of asset growth and improved pricing. Payouts improved during the year
with buoyant vehicle sales in South Africa and the overall book grew 13%. Market
share in South Africa increased for the first time in many years to 18%, albeit
from a low base. In the rest of Africa, growth in instalment sale and finance
leases was particularly strong in Ghana, Nigeria and Kenya. Overall credit
impairment charges in instalment finance reduced by 65% and the credit loss
ratio returned to a more normal level of 0,72% from 2,10% in the prior year.
Although income from our credit card business was flat, an increase of 6% in
headline earnings to R728 million was achieved through lower impairments. The
number of credit card accounts in South Africa grew by 5%, and the overall
credit card debtors` book grew 5% to R20,7 billion, with lower average balances
as household credit uptake remained low due to high debt levels. Sales through
our own point-of-sale devices increased as a result of the acquisition of
several large retail store accounts during the year. Fraud losses were curbed in
the second half of the year following the roll out of more than two million EMV
chip-and-pin cards and the good uptake of our SMS notification system known as
MyUpdates. Credit impairment charges almost halved, with the credit loss ratio
at 1,91% at the end of the year, compared to 3,56% in 2010.
Total income from transactional and lending products improved 9% to R21,4
billion from R19,7 billion in 2010. Deposit product margins were again adversely
affected by the negative endowment effect of lower interest rates in South
Africa. However, transaction and deposit accounts continued to generate good
growth in fee income, helped by the 17% growth in the retail priced deposit
base. We added over 1,3 million active accounts in Personal & Business Banking
in South Africa and almost 285 000 transactional banking accounts in the rest of
Africa.
In line with our inclusive banking strategy in South Africa, unsecured lending
showed good growth and ended the year with a loan book of R2 billion,
appropriately priced for risk. In the business segment loan balances grew 3%,
assisted by winning new business in the public sector. We experienced higher
demand for term lending in the rest of Africa as a result of our branch network
expansion and marketing campaigns. The credit loss ratio improved to 1,97% as
the more benign economic environment for customers continued to improve their
ability to service debt. Overall, headline earnings from transactional lending
products improved 24% to R2 billion.
Bancassurance and wealth comprises insurance-related activities across the
African continent as well as wealth businesses in the Isle of Man and Jersey.
Standard Bank continued to forge closer operational ties with Liberty Holdings
Limited (Liberty)to deliver growth in bancassurance volumes resulting in a 4%
increase in headline earnings to R1,3 billion. In South Africa we grew simple
embedded and short-term insurance policies in line with our focus on increasing
penetration of core products. Underwriting profit benefited from improved claims
loss ratios and repricing. Headline earnings in the Channel Islands increased by
11% to R111 million. The deposit base in the Isle of Man increased by 33%, and
this remains a trusted destination for our private banking clients across
Africa.
Corporate & Investment Banking
Corporate & Investment Banking reported headline earnings of R5,8 billion, up
11% on the prior year. This robust result was delivered in a particularly
challenging environment for our Investment Banking and Global Markets
businesses. Total revenue grew 4% with strong growth achieved in fee income and
a more subdued result in margin and trading income, given the very competitive
and uncertain environment. Our tightened strategic focus, while important for
the long-term competitiveness of our business, has been a constraining factor on
revenue growth. Credit impairment charges almost doubled to R1 020 million from
a very low base in 2010, and the credit loss ratio increased to 0,30%. The loan
book remains healthy with impairments as a percentage of total gross loan
exposure down to 0,91% from 1,14% in the prior year. Costs reduced by 1%, mainly
as a result of well-managed staff costs, and the cost-to-income ratio improved
from 62,8% to 60,4%. An ROE of 13,3% was recorded for the period.
The Global Markets business continues to be the larger element of Corporate &
Investment Banking`s revenue. Despite volatile financial markets in 2011,
characterised by lower appetite for risk and intensified competition in African
markets, the Global Markets business was able to grow revenues by 7%. The driver
of this performance was the South African business, where increased levels of
co-
ordination between originating teams led to several large client hedging
transactions in the year. In addition, we saw a substantial improvement in
client activity in the second half of the year, particularly in the foreign
exchange business as rand volatility increased. Revenues from our commodities
franchise grew in line with the additional investment made and our focus on
natural resources. A strong focus on cost containment contributed to headline
earnings growth of 12% to R2 billion.
Investment Banking revenues were up 6% to R6,1 billion. This was despite
volatile market conditions, which lead to longer lead times and made the
securing of deals more difficult, particularly outside South Africa. As a
result, the teams in these regions have focused on strengthening existing client
relationships and improving origination levels to reverse the declining trend in
the loan book. Results from our mining sector business have been encouraging,
with increased fees and commission income following significant deal activity.
Headline earnings rose 9% to R2,5 billion.
Income from transactional products and services was up 8% to R6,3 billion. The
rest of Africa was the major contributor with deposit growth, coupled with
increased rates and margins, leading to an improvement in net interest income.
Several large cross-border trade deals also supported this result. In contrast,
the South African business continued to absorb the negative endowment effect of
the current low interest rate environment. Despite this, the domestic franchise
remains strong, winning new mandates and retaining clients during the year.
Drawdowns in short-term banking facilities towards the end of the year supported
a recovery in net interest income.
Principal investment management comprises investments in private equity, real
estate and debt funds. Fair value mark downs of the listed property portfolio
and lower fair value gains on the equity portfolio compared to 2010 impacted
this business and headline earnings fell from R485 million in 2010 to R124
million for 2011.
Certain activities considered to be non-core to the group`s strategy were
curtailed in 2010 and are still in the process of being wound down. These
activities incurred a headline loss of R329 million for the year (2010: R1 098
million) following further fair value losses on the Asian distressed debt
portfolio, including a write down of an equity component of this portfolio. The
remaining exposure of this portfolio is USD176 million at the end of 2011.
In 2011 we equity accounted our portion of Troika`s earnings retrospectively for
the last quarter of 2010 until the date of sale. In terms of IFRS, the
investment in Troika was classified as held for sale from 1 January 2011 and no
income relating to 2011 was accrued.
Liberty
The Liberty results reflect the group`s 53,6% investment in Liberty. Liberty`s
headline earnings ended at R2 663 million, 3% higher than 2010. Of these
headline earnings, R1 428 million was attributable to the Standard Bank Group.
Bancassurance results are included under Personal & Business Banking
A key positive feature has been the resolution of the policyholder persistency
issue in Liberty`s retail business in South Africa and the substantial
improvement in the value of in-force contracts. New long-term insurance business
sales were pleasing across all the operations with indexed new business up 19%.
Long-term insurance client net cash flows were positive at R4,2 billion, a good
result in the current consumer environment.
Investment markets were volatile, nonetheless a strong final quarter local
equity performance supported a gross return of 8,1% on the shareholder
investment portfolio. Normalised equity value (embedded value) improved by 10%
to more than R100 per share and return on group equity value was 15,3%.
Liberty`s balance sheet management capability continues to ensure reduced
earnings volatility through improved asset liability management. Fund
performance at Stanlib has continued to improve and headline earnings improved
by 15% over 2010 and Liberty`s property division produced another solid result.
Capital management and liquidity
The group`s capital position was sustained in 2011 due to strong internal
capital generation which supported robust growth in loans and advances. At 31
December we had a common equity tier I ratio of 11,3%, a tier I capital ratio of
12,0% and a total capital ratio of 14,3% - all well above the group`s internal
targets. These ratios are expected to be enhanced in 2012 through the conclusion
of the sale of Troika and the partial disposal of the group`s majority stake in
Standard Bank Argentina. During 2011 equity injections into African subsidiaries
of USD110 million were concluded to support organic growth opportunities.
Liberty`s capital adequacy level at December 2011 was strong at 2,89 times the
regulatory minimum. It remains our key focus to reduce capital utilisation in
our activities outside Africa and ensure that business is only booked if it is
in line with our refined strategy.
Following subdued asset growth during 2010, the liquidity focus during 2011 was
optimisation of liquidity resources while efficiently managing buffers. Ongoing
attention was applied to the implications of the latest Basel III regulations
and the potential far-reaching business effects of the proposals. New term
lending volumes were carefully monitored and priced to include consideration of
potential costs associated with the anticipated regulatory changes.
In the South African market, the price of term funding was stable during the
first half of the year while conditions tightened during the second half with
renewed domestic demand combined with the effects of the ongoing Eurozone
sovereign debt crisis. Investor appetite for capital markets issuance remained
reasonably healthy and The Standard Bank of South Africa successfully placed
R8,9 billion of debt funding in the domestic bond market. The group ended the
year with an ample liquidity buffer totalling R148,1 billion (2010: R106,8
billion).
Dividends
From 2007 to 2010, the group`s annual dividend per share was maintained at 386
cents per share, notwithstanding headline earnings per share declining over this
period. Despite the resulting higher payout ratios, the group`s capital position
is strong and will be enhanced in 2012 by releases of capital from strategic
disposals. This, together with strong headline earnings per share growth in
2011, meant it was appropriate to consider an increase in the dividend for the
2011 year. A final cash dividend of 284 cents per share has been declared. This
declaration results in a total dividend for the year of 425 cents, an increase
of 10% and a dividend cover ratio marginally in excess of 2,0 times.
Shareholders should anticipate that, over time and as asset growth increases, it
will again become necessary for the group to retain a greater portion of
earnings.
Both the group`s final ordinary dividend and the group`s preference share
dividends (which were declared on 29 February) will have record dates in March
and will be subject to the secondary tax on companies regime prior to the
introduction of dividend withholding tax.
With respect to the perpetual preference share dividends, the terms of the
preference shares and our articles of association/memorandum of incorporation
require that we increase the preference share dividend by the amount of the 10%
benefit that Standard Bank will enjoy through the abolition of secondary tax on
companies as from 1 April 2012. Going forward, the dividend calculation will
accordingly be changed from 70% to 77% of the prime rate multiplied by the
subscription price of the preference shares held.
Prospects
The Eurozone debt crisis looks set to continue through much of 2012 and could
still worsen in spite of government efforts to stabilise the situation. The
contagion risks are being felt around the world, but the BRIC economies will
remain at the forefront of global growth. African economies have by no means
escaped the recession but the long-term structural drivers of Africa`s GDP
growth remain intact. We therefore remain positive about Africa`s growth
prospects even though we expect cyclical headwinds in 2012. Uncertainty in the
global economy has had a pronounced effect on the South African economy. Short-
term indicators suggest further softening in the economy before a turnaround can
be expected.
Our strategy is very clear and we know what is required of us to fulfil our aim
of being the leading financial services organisation in Africa. We will continue
to focus on maintaining our strong position in South Africa, and on growing in
our chosen markets in the rest of Africa. We remain committed to right-sizing
our operations outside of Africa in a responsible and deliberate manner.
We look forward to the finalisation of new banking regulations over the coming
months. This will enable us to strike the right balance between the regulatory
trends to hold more capital and liquidity, the requirements of shareholders for
higher returns and the need to facilitate economic growth in our core markets.
We are anticipating subdued revenue growth in 2012 but intend to maintain focus
on costs and to drive further improvement in our ROE.
Stakeholders should note that any forward-looking information in this
announcement has not been reviewed or reported on by the group`s external
auditors.
Jacko Maree Fred Phaswana
Chief executive Chairman
7 March 2012
Declaration of dividends
Notice is hereby given that the following final dividend has been declared:
Ordinary dividend No. 85 of 284 cents per ordinary share (share codes: SBK and
SNB, ISIN: ZAE000109815), payable on Monday, 2 April 2012, to ordinary
shareholders recorded in the books of the company at the close of business on
the record date, Friday, 30 March 2012. The last day to trade to participate in
the dividend is Friday, 23 March 2012. Ordinary shares will commence trading ex-
dividend from Monday, 26 March 2012.
The relevant dates for the payment of dividends are as follows:
Ordinary shares
JSE Limited (JSE)
Share code SBK
ISIN ZAE000109815
Namibian Stock Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Dividend per share (cents) 284,0
Last day to trade "CUM" dividend Friday, 23 March 2012
Shares trade "EX" dividend Monday, 26 March 2012
Record date Friday, 30 March 2012
Payment date Monday, 2 April 2012
Ordinary share certificates may not be dematerialised or rematerialised between
Monday, 26 March 2012 and Friday, 30 March 2012, 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. Ordinary shareholders who hold dematerialised shares will have
their accounts at their CSDP or broker credited on Monday, 2 April 2012.
On behalf of the board
Loren Wulfsohn
Group secretary
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.
The group also enters 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 adjusted for 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 Headline Growth on
average earnings 2010
number of Rm %
shares
`000
Disclosed on an IFRS basis 1 510 352 13 400 22
Tutuwa initiative 63 479 241
Group shares held for the 13 994 (42)
benefit of Liberty
policyholders
Share exposures held to (771)
facilitate client trading
activities
Normalised 1 587 054 13 599 21
Accounting policies
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 AC 500 standards as issued by the Accounting Practices
Board or its successor, the Listings Requirements of the JSE Limited and the
South African Companies Act 71 of 2008, as amended. The consolidated financial
results 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.
The consolidated financial statements are presented in South African rand. All
amounts are stated in millions of rand (Rm), unless indicated otherwise.
Changes in accounting policies
The accounting policies are consistent with those adopted in the previous year
except for the standards noted below and are in terms of IFRS.
Adoption of new standards and interpretations effective for the current
financial year
The group has adopted the following revised IFRS prospectively as of 1 January
2011:
- IAS 1 Presentation of Financial Statements (2011 Improvements to IFRS);
- IAS 24 Related Party Transactions (revised);
- IAS 34 Interim Financial Reporting (2010 Improvements to IFRS); and
- IFRS 7 Financial Instruments: Disclosures (2010 Improvements to IFRS).
None of the revised IFRS have had any effect on the group`s reported earnings or
financial statement position but have affected the group`s disclosures.
Restatements
Following a review of the group`s commodity transactions in terms of IFRS and
group accounting policies, certain commodity transactions that had previously
been classified as deposits from banks were reclassified to trading liabilities
in 2009. The subsequent settlement of those trading liabilities reduced pledged
assets and deposits from banks in 2010. The group believes that this restatement
better reflects the nature of the underlying transactions. The restatement had
no impact on reserves or the income statement.
Investors are referred to www.standardbank.com for more information.
Abridged audited results in accordance with IFRS
Consolidated income statement
for the year ended 31 December 2011
% 2011 2010
change Rm Rm
Income from banking activities 5 58 552 55 644
Net interest income 7 28 827 26 843
Non-interest revenue 3 29 725 28 801
Income from investment management and life (5) 48 835 51 149
insurance activities
Total income 1 107 387 106 793
Credit impairment charges (13) 6 436 7 394
Benefits due to policyholders (9) 33 799 37 335
Income after credit impairment charges and 8 67 152 62 064
policyholders` benefits
Operating expenses in banking activities 0 34 725 34 579
Operating expenses in investment 11 10 410 9 388
management and life insurance activities
Net income before goodwill impairment 22 22 017 18 097
Goodwill impairment (58) 61 144
Net income before associates and joint 22 21 956 17 953
ventures
Share of profit from associates and joint (54) 284 621
ventures
Net income before indirect taxation 20 22 240 18 574
Indirect taxation 15 1 384 1 204
Profit before direct taxation 20 20 856 17 370
Direct taxation 19 5 713 4 791
Profit for the year from continuing 20 15 143 12 579
operations
Profit for the year from discontinued 50 641 428
operations(1)
Profit for the year 21 15 784 13 007
Attributable to non-controlling interests 20 2 213 1 846
Attributable to preference shareholders (11) 345 387
Attributable to ordinary shareholders 23 13 226 10 774
Basic earnings per share (cents) 21 875,7 722,1
-'Continuing operations 21 843,9 698,8
-'Discontinued operations 36 31,8 23,3
Diluted earnings per share (cents) 22 849,2 696,0
-'Continuing operations 21 818,3 673,5
-'Discontinued operations 37 30,9 22,5
(1) The income and expenses relating to Standard Bank Argentina,
which qualifies as a discontinued operation, have been presented
as a single amount relating to its after tax profit for 2011 and
2010.
Headline earnings
for the year ended 31 December 2011
% 2011 2010
change Rm Rm
Profit for the year from continuing 22 12 745 10 426
operations
Headline adjustable items added 231 334
Goodwill impairment - IFRS 3 61 144
Loss on deemed disposal of associate - 22 10
IFRS 3
Profit on sale of property and equipment - (62) (23)
IAS 16
Impairment of property and equipment - IAS 29
16
Impairment of non-current assets held for 37
sale - IFRS 5
Realised foreign currency translation 21
reserve loss on foreign operations - IAS
21
Losses on the disposal of businesses and 30
divisions - IAS 27
Impairment of associates - IAS 28 29
Reversal of impairment of associates - IAS (19)
28
Impairment of intangible assets - IAS 38 109 179
Realised losses/(gains) on available-for- 35 (37)
sale assets - IAS 39
Taxation on headline earnings adjustable (33) (41)
items
Non-controlling interests` share of (79)
headline earnings adjustable items
Standard Bank Group headline earnings from 22 12 943 10 640
continuing operations
Profit for the year from discontinued 38 481 348
operations
Headline adjustable items reversed (49) (38)
Profit on sale of property and equipment - (1)
IAS 16
Realised gains on available-for-sale (48) (38)
assets - IAS 39
Taxation on headline earnings adjustable 17 13
items
Non-controlling interests` share of 8 6
headline earnings adjustable items
Standard Bank Group headline earnings from 39 457 329
discontinued operations
Standard Bank Group headline earnings 22 13 400 10 969
Consolidated statement of financial position
as at 31 December 2011
% 2011 2010(1) 2009(1)
change Rm Rm Rm
Assets
Cash and balances with 11 31 907 28 675 24 983
central banks
Financial investments, 5 385 881 366 465 355 287
trading and pledged assets
Non-current assets held for 34 085
sale(2)
Loans and advances 13 801 308 710 722 721 389
Derivative and other assets 3 174 569 169 203 140 601
Interest in associates and 32 13 935 10 533 9 529
joint ventures
Investment property 9 23 470 21 521 19 058
Goodwill and other 23 12 754 10 383 9 409
intangible assets
Property and equipment 0 14 920 14 907 12 250
Total assets 12 1 492 829 1 332 409 1 292 506
Equity and liabilities
Equity 14 117 533 103 198 99 369
Equity attributable to 14 99 042 87 073 84 022
ordinary shareholders
Preference share capital - 5 503 5 503 5 503
and premium
Non-controlling interest 22 12 988 10 622 9 844
Liabilities 12 1 375 296 1 229 211 1 193 137
Deposit and current 12 876 777 785 601 765 161
accounts
Derivative, trading and 7 237 261 222 594 217 020
other liabilities
Non-current liabilities 27 939
held for sale(2)
Policyholders` liabilities 5 208 565 197 878 184 300
Subordinated debt 7 24 754 23 138 26 656
Total equity and 12 1 492 829 1 332 409 1 292 506
liabilities
(1) Restated.
(2) The agreed disposal of the group`s investments in Standard
Bank Argentina and Troika, an associate of the group, resulted in
the assets and liabilities of Standard Bank Argentina and the
interest in the associate being classified as held for sale as at
31 December 2011.
Contingent liabilities and capital commitments
as at 31 December 2011
2011 2010
Rm Rm
Letters of credit and bankers` acceptances 15 345 10 407
Guarantees 36 307 29 327
Contingent liabilities 51 652 39 734
Contracted capital expenditure 2 846 2 662
Capital expenditure authorised but not yet 7 901 8 415
contracted
Capital commitments 10 747 11 077
Consolidated cash flow information
for the year ended 31 December 2011
2011 2010(1)
Rm Rm
Net cash flows from operating activities 24 605 26 840
Net cash flows used in investing activities (10 138) (13 867)
Net cash flows used in financing activities (8 388) (7 531)
Effects of exchange rate changes on cash and 2 002 (1 750)
cash equivalents
Net increase in cash and cash equivalents 8 081 3 692
Cash and cash equivalents at beginning of the 28 675 24 983
year
Cash and cash equivalents at end of the year 36 756 28 675
Comprising:
Cash and balances with central banks 31 907 28 675
Cash and balances with central banks held for 4 849
sale
Cash and cash equivalents at the end of the 36 756 28 675
year
(1) Restated.
Consolidated statement of other comprehensive income
for the year ended 31 December 2011
2011 2010
Ordinary Non- Total Total
shareholders` controlling equity equity
equity interests Rm Rm
Rm and
preference
shareholders
Rm
Profit for the year 13 226 2 558 15 784 13 007
Other comprehensive 4 080 776 4 856 (5 125)
income after tax for
'the year - continuing
operations
Exchange rate 4 551 980 5 531 (4 162)
differences on
translating
'equity investment in
foreign operations
Foreign currency hedge (279) (279) (768)
of net investments
Cash flow hedges 55 6 61 (214)
Available-for-sale (282) (256) (538) 100
financial assets
Revaluation and other 35 46 81 (81)
gains/(loss)
Other comprehensive 83 79 162 (228)
income after tax for
' the year -
discontinued
operations
Total comprehensive 17 389 3 413 20 802 7 654
income for the year
Attributable to non- 3 068 3 068 1 002
controlling interests
Attributable to equity 17 389 345 17 734 6 652
holders of the parent
Attributable to 345 345 387
preference
shareholders
Attributable to 17 389 17 389 6 265
ordinary shareholders
Consolidated statement of changes in equity
for the year ended 31 December 2011
Ordinary Preference Non- Total
shareholders` share capital controlling equity
equity and premium interest Rm
Rm Rm Rm
Balance at 1 84 022 5 503 9 844 99 369
January 2010
Total 6 265 387 1 002 7 654
comprehensive
income for the
year
Transactions with (3 214) (387) (224) (3 825)
owners, recorded
directly in
equity
Equity-settled 412 32 444
share-based
payment
transactions
Deferred tax on 2 2
share-based
payment
transactions
Transactions with (37) 36 (1)
non-controlling
shareholders
Issue of share 205 30 235
capital and share
premium and
capitalisation of
reserves
Net (23) 449 426
(increase)/decrea
se in treasury
shares
Net dividends (3 773) (387) (771) (4 931)
paid
Balance at 31 87 073 5 503 10 622 103 198
December 2010
Balance at 1 87 073 5 503 10 622 103 198
January 2011
Total 17 389 345 3 068 20 802
comprehensive
income for the
year
Transactions with (5 420) (345) (702) (6 467)
owners, recorded
directly in
equity
Equity-settled 336 30 366
share-based
payment
transactions
Deferred tax on (83) (83)
share-based
payment
transactions
Transactions with (89) (98) (187)
non-controlling
shareholders
Issue of share 142 142
capital and share
premium and
capitalisation of
reserves
Net decrease in 309 237 546
treasury shares
Net dividends (6 035) (345) (871) (7 251)
paid
Balance at 31 99 042 5 503 12 988 117 533
December 2011
Financial statistics
for the year ended 31 December 2011
% 2011 2010
change
Number of ordinary shares in issue
(000`s)
-'end of year 1 1 514 097 1 505 093
-'weighted average 1 1 510 352 1 491 956
-'diluted weighted average 1 1 557 415 1 548 001
Cents per ordinary share
Headline earnings (cents) 21 887,2 735,2
- Continuing operations 20 857,0 713,2
- Discontinued operations 37 30,2 22,0
Diluted headline earning (cents) 21 860,4 708,6
- Continuing operations 21 831,1 687,3
- Discontinued operations 38 29,3 21,3
Dividend (cents) 10 425,0 386,0
Basic earnings (cents) 21 875,7 722,1
- Continuing operations 21 843,9 698,8
- Discontinued operations 36 31,8 23,3
Diluted earnings (cents) 22 849,2 696,0
- Continuing operations 21 818,3 673,5
- Discontinued operations 37 30,9 22,5
Net asset value per share 13 6 541 5 785
Financial performance (%)
ROE 14,6 12,7
Net interest margin on continuing 2,91 2,86
operations
Credit loss ratio on continuing 0,87 1,04
operations
Cost-to-income ratio on continuing 59,0 61,5
operations
Capital adequacy (%)
Capital ratios (unaudited)
-'tier I capital 12,0 12,9
-'total capital 14,3 15,3
Segment report
for the year ended 31 December 2011
% 2011 2010
change Rm Rm
Revenue contribution by business unit
Personal & Business Banking 8 36 775 34 020
Corporate & Investment Banking 4 22 538 21 591
Central and other >100 (562) 137
Banking activities 5 58 751 55 748
Liberty (5) 48 806 51 466
Standard Bank Group - normalised 0 107 557 107 214
Adjustments for IFRS (170) (421)
Standard Bank Group - IFRS 1 107 387 106 793
Profit or loss attributable to
ordinary shareholders
Personal & Business Banking 39 6 059 4 362
Corporate & Investment Banking 8 5 632 5 213
Central and other 61 306 190
Banking activities 23 11 997 9 765
Liberty 8 1 428 1 323
Standard Bank Group - normalised 21 13 425 11 088
Adjustments for IFRS (199) (314)
Standard Bank Group - IFRS 23 13 226 10 774
Private equity associates and joint ventures
as at 31 December 2011
2011 2010
Rm Rm
Cost 287 382
Carrying value 613 641
Fair value 591 651
Loans to/(from) associates and joint ventures 195 (37)
Equity accounted income 83 43
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
abridged financial statements contained herein for the year ended
31 December 2011, dated 7 March 2012, are available for inspection
at the registered office of the company.
Administrative information
Standard Bank Group Limited
Registration No. 1969/017128/06'''
Incorporated in the Republic of South Africa
Registered office
9th Floor, Standard Bank Centre
5 Simmonds Street, Johannesburg 2001. PO Box 7725, Johannesburg 2000.
Directors
TMF Phaswana (Chairman), Hongli Zhang** (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**, Adv KD Moroka, AC Nissen,
MC Ramaphosa, SP Ridley*, MJD Ruck, Lord Smith of Kelvin, Kt#, EM Woods
*Executive director'
**Chinese'#British'##Ghanaian
Group secretary
L Wulfsohn
Share transfer secretaries in South Africa
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Share transfer secretaries in Namibia
Transfer Secretaries Proprietary Limited
Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek
PO Box 2401, Windhoek
Share and bond codes
JSE share code: SBK ZAE000109815
SBKP ZAE000038881 (first preference shares)
SBPP ZAE000056339 (second preference shares)
NSX share code: SNB ZAE000109815
JSE bond codes: SBS, SBK, SBN, SBR, SBSI, ETN series, SSN series and CLN
series (all JSE listed bonds issued in terms of The Standard Bank of South
Africa Limited`s Domestic Medium Term Note Programme and Structured Note
Programme)
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 The Standard Bank of South
Africa Limited can be found.
JSE independent sponsor
Deutsche Securities Proprietary Limited
Namibian sponsor
Simonis Storm Securities Proprietary Limited
JSE joint sponsor
Standard Bank
Johannesburg
8 March 2012
Date: 08/03/2012 08:00:31 Supplied by www.sharenet.co.za
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