Wrap Text
Interim results announcement and dividend declaration
Standard Bank Group Limited
Registration number 1969/017128/06
Incorporated in the Republic of South Africa
Website: www.standardbank.com
Share and bond codes
JSE share code: SBK
ISIN: ZAE000109815
NSX share code: SNB
NSX share code: SNB ZAE000109815
SBKP ZAE000038881 (First Preference shares)
SBPP ZAE000056339 (Second preference shares)
JSE bond codes: SBS, SBK, SBN, SBR, 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 Credit Linked Note Programme)
Standard Bank Group interim unaudited results and dividend announcement
for the six months ended 30 June 2014
The Standard Bank Group Limited's (group)
condensed consolidated interim results for the
six months ended 30 June 2014 (results) are
prepared in accordance with the requirements of
the JSE Limited (JSE) Listings Requirements, the
requirements of International Financial Reporting
Standards (IFRS), as issued by the International
Accounting Standards Board, the South African
Institute of Chartered Accountants (SAICA) Financial
Reporting Guides as issued by the Accounting
Practices Committee and financial pronouncements
as issued by the Financial Reporting Standards
Council and the presentation requirements of
IAS 34 Interim Financial Reporting and the
requirements of the South African Companies Act
71 of 2008. The accounting policies applied in the
preparation of these condensed consolidated
financial statements are in terms of IFRS and are
consistent with the accounting policies applied in
the preparation of the group's previous
consolidated annual financial statements with the
exception of changes referred to on page 49.
The interim results have not been audited or
independently reviewed by the group's external
auditors. The group's 2013 annual financial
information has been correctly extracted from the
underlying consolidated annual financial statements.
The interim results are presented on a normalised
basis, unless otherwise indicated as being on an IFRS
basis. For further explanation, refer to page 10.
1H14 refers to the first half year results for 2014.
1H13 refers to the first half year results for 2013.
FY13 refers to the full year results for 2013.
Change % reflects 1H14 growth on 1H13.
The preparation of the group's results was
supervised by the group financial director, Simon
Ridley, BCom (Natal), CA(SA), AMP (Oxford).
The results were made publically available on
14 August 2014.
Contents
Overview
Financial highlights . . . . . . . . . . . . . . . . . . . . 1
Overview of financial results. . . . . . . . . . . . . 2
Declaration of dividends. . . . . . . . . . . . . . . . 8
Normalised results . . . . . . . . . . . . . . . . . . . . 10
Pro forma constant currency information . . . 11
Interim unaudited results in accordance with
IFRS
Financial statistics. . . . . . . . . . . . . . . . . . . . . 12
Condensed consolidated statement of
financial position. . . . . . . . . . . . . . . . . . . . . . 13
Condensed consolidated income statement. 14
Headline earnings. . . . . . . . . . . . . . . . . . . . . 15
Condensed consolidated statement of other
comprehensive income . . . . . . . . . . . . . . . . . 16
Condensed consolidated statement of
changes in equity . . . . . . . . . . . . . . . . . . . . . 17
Condensed consolidated statement of cash
flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Accounting policies and restatements
Accounting policies and restatements . . . . . . 49
Restatements of 30 June 2013
financial results. . . . . . . . . . . . . . . . . . . . . . . 50
Other information
Administrative and contact details. . . . . . . . . ibc
Financial highlights
Headline earnings Headline earnings — continuing operations
R8 306 million, R9 338 million
1H13:
up 2% 1H13:
R8 149 million R8 359 million
Headline earnings per share (HEPS) Return on equity (ROE) Tier I capital adequacy ratio
513 cents 12.7% 12.7%
1H13: 506 cents 1H13: 13.8% FY13: 13.2%
Dividend per share Cost-to-income ratio Credit loss ratio
259 cents 55.3% 1.13%
1H13: 233 cents 1H13: 55.5% 1H13: 1.24%
Investors are referred to www.standardbank.com/reporting where a detailed analysis of the
group's financial results, including an income statement and a statement of financial position for
The Standard Bank of South Africa Limited and Standard Bank Plc, can be found. Scan the barcode to
be taken there directly.
Overview
Overview of financial results
Group results
Group headline earnings increased by 2% to
R8 306 million and HEPS increased by 1% to
513 cents per share. Headline earnings from
continuing operations increased by 12% to R9 338
million. Net asset value per share increased by 8%
and group ROE decreased to 12.7% from 13.8%
in 1H13. An interim dividend of 259 cents per
share has been declared, an 11% increase on
1H13.
As a result of the intended sale of 60% of the
group's interest in the global markets business
outside Africa, as communicated to shareholders
on 29 January 2014, IFRS requires the results
from this business to be reflected as a single line
item in the group's income statement, being
profit/loss from discontinued operation. Prior
period comparatives have been restated
accordingly. The assets and liabilities for this
business for 1H14 and FY13 are each disclosed in
single line items in the statement of financial
position, being non-current assets/liabilities held
for sale. The commentary which follows refers to
the group's continuing banking operations and
hence excludes unless otherwise indicated, the
discontinued operation's results. Liberty's results
are discussed separately.
Total income and expenses grew by 12% while
credit impairments declined by 1% due to lower
corporate credit losses. Net income before
taxation grew by 20% and profit from continuing
operations was 15% higher after accounting for
the higher group tax rate. The net loss from
discontinued operations of R1 032 million
(1H13: R210 million loss) includes the valuation
adjustment described below.
As communicated on the Stock Exchange News
Service (SENS) of the JSE during June and July
2014, the group has commenced investigations
and legal proceedings against several parties with
respect to the group's rights to physical aluminium
held in bonded warehouses in China.
The aluminium represents the group's collateral
held for a series of commodity financing
arrangements, otherwise referred to as reverse
repurchase agreements (repos). There is emerging
evidence that the financing arrangements were
impacted by fraudulent activities in respect of
the physical aluminium. The exposure on
the group's statement of financial position as at
30 June 2014 in respect of the repos is USD167
million, against which USD210 million of
aluminium collateral is held and is subject to this
legal process. As at 30 June 2014 the group
recognised a valuation adjustment of USD80
million (R854 million) against the repos
representing management's best estimate of the
risk adjustment required in determining the fair
value of the group's net exposure. The adjustment
was recognised within the discontinued operation
line in the income statement.
Operating environment
Global growth moderated from an annual rate of
3.7% in the second half of 2013 to 2.7% in the
first quarter of 2014. In the US, the inventory
overhang at the end of 2013 turned out to be
larger than expected, leading to a correction
exacerbated by a harsh winter. In other emerging
market economies, weaker-than-projected growth
resulted both from weaker external demand,
notably from the US and China, and, in a number
of cases, softer domestic demand with weaker
investment growth. With euro area inflation in
April below expectations, the European Central
Bank cut its policy rate and deployed other easing
measures at its June meeting. However, leading
indicators point to the global recovery having
regained strength in the second quarter
of 2014.
In South Africa, GDP growth in the first quarter
of 2014 slowed to 1.6% and was affected by lost
output in the mining sector due to prolonged
industrial action. Private consumption expenditure
growth slowed to 1.8% in the first quarter of
2014, the slowest quarterly growth rate since the
third quarter of 2009. The South African Reserve
Bank (SARB) hiked the repo rate unexpectedly in
January this year by 50bps and followed up with
another 25bps increase at its July meeting as
inflation moved outside the target band for three
consecutive months. Consequently the ratio of
household debt-to-disposable income trended
sideways during the period.
Strong growth in sub-Saharan Africa continued
into 2014 supported by foreign direct investment
flows in the resource sectors, public investment in
infrastructure, and improved agricultural production.
Growth of approximately 5% is expected by the
International Monetary Fund for 2014, similar to
the growth rate attained for 2013, accompanied by
a positive inflation outlook.
Revenue
Total income grew by 12% in 1H14, with net
interest income (NII) increasing 14% primarily due
to margin expansion of 14bps that benefited from
higher South African interest rates, and growth in
deposits and advances in the rest of Africa.
Non-interest revenue (NIR) grew by 10%
with fees and commissions 12% higher than in
1H13 due to good growth in the rest of Africa
that was assisted by a fall of the average value in
the rand relative to most African currencies.
Trading revenue increased by 17% due mainly to a
strong performance in fixed income and currency
(FIC) trading, while other revenue fell by 16% due
to the non-recurrence of a 1H13 fair value gain
on a contingent interest held in Troika.
Credit impairments
Total credit impairments declined by 1% to
R4 952 million and the credit loss ratio decreased
to 1.13% from 1.24% in the prior period. Credit
impairments in Corporate & Investment Banking
(CIB) fell to R450 million from R917 million in the
prior period with its credit loss ratio improving to
0.25% from 0.57% due mainly to the non-
recurrence of a small number of high value
impairments on exposures originated outside of
South Africa.
In Personal & Business Banking (PBB), credit
losses increased from R4 083 million to
R4 502 million and its credit loss ratio increased
marginally to 1.58% from 1.57% in the prior
period. A significant reduction in the required
charge against the inclusive personal lending book
in South Africa due to reduced risk profile and
lower average lending was offset by increased
impairments in other portfolios in South Africa. In
particular, instalment sale and finance leases and
card debtors required higher provisioning due to
higher levels of customer default in the period.
Impairments in PBB's operations in the rest of
Africa fell due to a significantly lower level of
impairments in Tanzania off the high base in the
prior period with the credit loss ratio declining to
2.13% at 1H14 from 3.75% in 1H13.
Operating expenses
Operating expenses increased by 12% and by
8% on a constant currency basis relative to the
prior period and the group's cost-to-income ratio
improved to 55.3% from 55.5%. Staff expenses
increased by 7% while other operating expenses
increased by 19%, and by 15% on a constant
currency basis. Growth in other operating
expenses was affected by increased amortisation
of capitalised systems taken into production and
continued investment in information technology
platforms, an escalation in premises costs,
increases in both marketing costs and costs
associated with the group's UCount customer
loyalty programme which was launched in the
second half of 2013, and further investment
activity to support revenue growth in the rest of
Africa.
Loans and advances
Gross loans and advances to customers grew by
6% from 1H13 to 1H14. PBB balances with
customers grew by 7% and CIB balances grew by
7%. Marginal growth was recorded in secured
lending with 2% growth in residential mortgages
and 4% in instalment sale and finance leases.
Higher growth of 13% was recorded in card
debtors while lower growth in term loans was
offset by higher demand, mainly in CIB, for
overdraft and other demand loans.
Capital, funding and liquidity
The group's tier I and total capital levels remain
strong at 12.7% (FY13: 13.2%) and 15.2%
(FY13: 16.2%) respectively. Required regulatory
capital levels will rise through to 2016 and the
group is in a good position to meet the
progressively higher requirements as prescribed
by regulatory authorities across all presence
markets.
Deposits from customers increased by 11% from
1H13 to 1H14 with the majority of the increase
sourced from retail priced deposits which grew
strongly by 17%, much of this growth being from
customer current accounts. More expensive
wholesale deposits grew by just 3%.
The group's liquidity position remains resilient,
with contingent liquidity in excess of specific
prudential requirements amounting to
R169,3 billion as at 1H14 (FY13: R154,2 billion).
As at 1H14, the group's long-term funding ratio
was 19.1% (FY13: 19.4%). The group's long-term
funding ratio declined slightly over the first half of
2014 but has now stabilised over the last few
months. Notwithstanding the reduction of the
long-term funding ratio, the overall balance sheet
liquidity mismatch position is stable with sufficient
term lending capacity.
The liquidity coverage ratio (LCR) proposed by the
Basel Committee on Banking Supervision (BCBS) is
due to come into effect on 1 January 2015. SARB
has confirmed that a committed liquidity facility
will also be made available, at a fee, to assist
banks in meeting this ratio. This is in the process
of being finalised ahead of the LCR
implementation on 1 January 2015. Following a
two-year observation period, the BCBS issued a
consultative document on 12 January 2014
proposing modifications to the net stable funding
ratio (NSFR) calculation. It remains the intention
of the BCBS to implement the NSFR, including any
revisions, as a minimum standard by 1 January
2018. Notwithstanding the changes, further term
funding will have to be raised by all South African
banks to fully meet the proposed Basel III liquidity
regime in South Africa and other emerging markets.
Overview of business unit performance
Headline earnings by business unit
Change 1H14 1H13 FY13
% Rm Rm Rm
Personal & Business Banking 13 4 193 3 700 8 363
Corporate & Investment Banking – continuing
operations 1 3 853 3 809 6 974
Central and other >100 271 (74) 65
Banking activities – continuing operations 12 8 317 7 435 15 402
Liberty 10 1 021 924 2 211
Standard Bank Group – continuing operations 12 9 338 8 359 17 613
Discontinued operation – Global markets
outside Africa (>100) (1 032) (210) (419)
Standard Bank Group 2 8 306 8 149 17 194
Personal & Business Banking
PBB recorded headline earnings of R4 193 million,
13% higher than in the prior period. This was
assisted by good growth of 14% and 13%
respectively in NII and NIR, and slightly lower
growth in credit impairments of 10%. PBB's
cost-to-income ratio declined marginally to 59.7%,
while ROE declined to 16.0% from 16.9% in the
prior period due to higher capital allocated.
PBB South Africa headline earnings grew by 6%,
impacted by the difficult economic conditions
affecting personal customers. PBB rest of Africa
recorded headline earnings of R53 million from a
loss of R201 million in 1H13 supported by
broad-based improvement across most of its
African operations.
Transactional products grew headline earnings by
11% over the prior period to R1 195 million. Good
balance growth in savings, transactional and
investment portfolio balances and the effect of
higher domestic interest rates and higher
transaction volumes, particularly in business
banking, supported income growth.
Mortgage lending headline earnings grew by 16%
to R900 million, supported by moderate growth in
new business registrations, tight concession
management and resilient NIR growth that helped
total income grow by 12%. Credit impairments were
9% higher in the period due mainly to higher losses
on accounts written off and limited opportunity to
renegotiate customer accounts. Non-performing
loans increased by 3%, broadly in line with total
portfolio growth.
Instalment sale and finance leases recorded
a headline loss of R29 million in spite of
growing revenue by 14% to R1 585 million.
Substantially higher impairments of R727 million
(1H13: R388 million) reflects a decline in the
quality of the lending portfolio within personal
markets and was the major reason for the fall in
performance in this product.
Card product headline earnings grew by 5% to
R615 million. Good income growth of 14% was
supported by higher average balances and higher
interest rates as well as increased activity by card
holders and merchants. Higher non-performing loan
formation in this product led to a 47% increase in
credit impairments that affected an otherwise good
operating performance.
Lending products headline earnings more than
doubled to R510 million mainly due to credit
impairments declining significantly as risk appetite
in the low income segment of the unsecured loan
market was reduced. Total revenue increased by
11%, supported by higher business lending,
overdraft and revolving credit balances and lower
credit impairments. Inclusive personal term loans
have declined significantly due to reduced risk
appetite in that market. The blended lending
product credit loss ratio fell to 2.24% from
3.26% in 1H13.
Bancassurance and wealth delivered headline
earnings of R1 002 million, 10% up year-on-year,
and driven by growth in total income of 16%.
The value of insurance new business has improved
against prior year and the introduction of higher
benefit funeral plans boosted revenue. The
significant growth in assets under management in
Nigeria's pension fund business further assisted
revenues. Underwriting margins came under
sustained pressure due to claims arising from
adverse weather conditions but was partially offset
by good control over operating expenses.
Corporate & Investment Banking
CIB's continuing operations delivered headline
earnings of R3 853 million, 1% higher than the
comparative R3 809 million achieved in the prior
year. The discontinued operation, including the fair
value adjustment on repo positions relating to
aluminium financing in China described earlier,
recorded a headline loss of R1 032 million. Total
income grew 8% with good NII growth of 16% and
moderate fee and commission and trading income
growth, which was partly offset by a fall in other
income due to the non-recurrence of a fair value
gain on a contingent interest in Troika in the prior
year. Credit impairment charges were substantially
lower as expected but costs increased by 13%
including 7% as a result of the weaker rand and
strategic investment to protect and grow the
franchise.
Transactional products and services business
delivered another excellent performance, growing
earnings 29% to R1 387 million off revenue growth
of 16%. Good revenue growth was experienced
across the main product areas of cash management,
trade finance and investor services with particularly
strong growth in the rest of Africa that was assisted
by average rand depreciation over the prior period.
Significant client mandates were won during the
period reflecting the benefit to clients of our
positioning across the continent.
Global markets' continuing operations grew
earnings by 5% over the prior period to
R1 585 million off an overall increase of
13% in revenue to R5 270 million. Continued
strong revenue growth in the rest of Africa
was moderated by somewhat lower growth in
South Africa. Good FIC trading was offset by
difficult conditions in commodities.
Investment banking total revenue fell by 6% off the
high base generated in 1H13, resulting in a
reduction in credit risk from the de-risking of
off-strategy assets and reduced advisory fees from
lower client activity and extended time to deal
closure. Although the effect of this was somewhat
offset by lower credit impairments, the effect of
higher expenses inflated by rand depreciation and
the need to develop the franchise in the rest of
Africa impacted short-term profitability and headline
earnings declined by 25% from the prior period.
Real estate and principal investment management
(PIM) revenue declined 33% on prior year due to
lower property revenue and losses in the PIM
investment portfolio. The PIM portfolio and private
equity activity continues to be wound-down with
minimal remaining distressed debt net exposure.
Central and other
Headline earnings of R271 million improved from
the loss of R74 million recorded in the prior period.
The improvement was largely due to the
attributable income from the 20% associate
investment that the group retains in Argentina
amounting to R275 million compared with
R88 million in 1H13.
Liberty
The financial results reported are the consolidated
results of our 54% investment in Liberty Holdings
Limited. Bancassurance results are included in PBB.
Liberty's headline earnings for the six months to
30 June 2014 increased by 10% to R1 881 million
of which R1 021 million was attributable to the
group.
Liberty's long-term insurance operations indexed
new business grew 10% to R3 437 million,
supported by very strong single premium
investment sales. Net customer cash inflows were
R4,5 billion, including a R912 million contribution
from the recently launched retail linked investment
services platform. Corporate business customer
flows of R0,9 billion were positive for the first time
since 2007. New business margin at 1.8% has been
negatively impacted by a 25bps increase in the risk
discount rate and reflects the typical lower first half
sales seasonality. The business continues to manage
within the long-term actuarial expense and
policyholder behaviour assumptions.
LibFin Markets produced a strong result, due to the
ongoing build of the credit book and a positive
asset liability management contribution which
benefited from low realised volatility in equity and
interest rate markets. The group asset management
operations have attracted net external customer
cash inflows of R11,6 billion which are 29% up
compared to 1H13, over R7,5 billion of which were
invested in its money market offerings. Assets
under management across the group grew by 5%
from FY13 to R639 billion.
Prospects
Global economic growth in 2014 is likely to improve, albeit
only modestly, rising from around 3.2%
in 2013 to 3.4% in 2014. Growth is expected to be
influenced by developed market countries, while
emerging markets are expected to struggle to
match the growth rates achieved in 2013. While
the US is expected to grow in 2014, momentum in
the Eurozone economy is still weak. Global monetary
policy is expected to tighten relative to 2013.
Sluggishness in the South African economy is
expected to persist for the remainder of 2014 which
is likely to hamper domestic revenue growth and may
affect the confidence of our customer base.
However, the group's positioning in South Africa
is strong and our selected exposure to expanding
economies in sub-Saharan Africa provides a robust
platform on which to maintain the operational and
financial momentum in our continuing operations.
We remain firmly committed to delivering improved
returns on equity to shareholders over the medium
term while investing in our people and systems to
meet the demands of a rapidly evolving environment.
Sim Tshabalala Ben Kruger
Group chief executive Group chief executive
Fred Phaswana
Chairman
13 August 2014
Declaration of dividends
Shareholders of Standard Bank Group Limited
(the company) are advised of the following dividend
declarations out of income reserves in respect of
ordinary shares and preference shares.
Ordinary shares
Ordinary shareholders are advised that the board of
directors (the board) has resolved to declare an
interim gross cash dividend No. 90 of 259,00 cents
per ordinary share (the cash dividend) to ordinary
shareholders recorded in the register of the
company at the close of business on Friday,
12 September 2014. The last day to trade to
participate in the dividend is Friday, 5 September
2014. Ordinary shares will commence trading
ex dividend from Monday, 8 September 2014. No
STC credits were utilised as part of the ordinary
dividend declaration.
The salient dates and times for the cash dividend
are set out in the table that follows.
Ordinary share certificates may not be
dematerialised or rematerialised between Monday,
8 September 2014, and Friday, 12 September
2014, both days inclusive. Ordinary shareholders
who hold dematerialised shares will have their
accounts at their Central Securities Depository
Participant (CSDP) or broker credited or updated
on Monday, 15 September 2014.
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 shares
Preference shareholders are advised that the board
has resolved to declare the following interim
distributions:
- 6.5% first cumulative preference shares (first
preference shares) dividend No. 90 of
3,25 cents (gross) per first preference share,
payable on Monday, 8 September 2014, to
holders of first preference shares recorded in
the books of the company at the close of
business on the record date, Friday,
5 September 2014. The last day to trade to
participate in the dividend is Friday,
29 August 2014. First preference shares will
commence trading ex dividend from Monday,
1 September 2014. No STC credits were utilised
as part of the dividend declaration in respect of
the first preference shares.
- Non-redeemable, non-cumulative, non-
participating preference shares (second
preference shares) dividend No. 20 of
340,58 cents (gross) per second preference
share, payable on Monday, 8 September 2014,
to holders of second preference shares recorded
in the books of the company at the close of
business on the record date, Friday,
5 September 2014. The last day to trade to
participate in the dividend is Friday,
29 August 2014. Second preference shares will
commence trading ex dividend from Monday,
1 September 2014. No STC credits were utilised
as part of the dividend declaration in respect of
the second preference shares.
The salient dates and times for the preference
share distributions are set out in the table
that follows.
Preference share certificates (first and second)
may not be dematerialised or rematerialised
between Monday, 1 September 2014 and Friday,
5 September 2014, both days inclusive. Preference
shareholders (first and second) who hold
dematerialised shares will have their accounts at
their CSDP or broker credited on Monday,
8 September 2014.
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.
The relevant dates for the payment of dividends are as follows:
Non-redeemable,
6.5% non-cumulative
cumulative, non-participating
preference shares preference shares
Ordinary (First (Second
shares preference shares) preference shares)
JSE Limited
Share code SBK SBKP SBPP
ISIN ZAE000109815 ZAE000038881 ZAE000056339
Namibian Stock Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Dividend number 90 90 20
Gross distribution/dividend per
share (cents) 259,00 3,25 340,58
Last day to trade in order to be Friday, Friday, Friday,
eligible for the cash dividend 5 September 2014 29 August 2014 29 August 2014
Shares trade ex the cash dividend Monday, Monday, Monday,
8 September 2014 1 September 2014 1 September 2014
Record date in respect of the cash Friday, Friday, Friday,
dividend 12 September 2014 5 September 2014 5 September 2014
Dividend cheques posted and
CSDP/broker accounts credited/ Monday, Monday, Monday
updated (payment date) 15 September 2014 8 September 2014 8 September 2014
The above dates are subject to change. Any changes will be released on SENS and published in the South
African and Namibian press.
Tax implications
The cash dividend received under the ordinary
shares and the preference shares is likely to have
tax implications for both resident and non-resident
ordinary and preference shareholders. Such
shareholders are therefore encouraged to consult
their professional tax advisers.
In terms of the Income Tax Act, 58 of 1962, the cash
dividend will, unless exempt, be subject to dividend
withholding tax (DT) that was introduced with effect
from 1 April 2012. South African resident ordinary
and preference shareholders that are not exempt
from DT, will be subject to DT at a rate of 15% of
the cash dividend, and this amount will be withheld
from the cash dividend with the result that they will
receive a net amount of 220,15000 cents per
ordinary share, 2,76250 cents per first preference
share and 289,49090 cents per second preference
share. Non-resident ordinary and preference
shareholders may be subject to DT at a rate of less
than 15% depending on their country of residence
and the applicability of any Double Tax Treaty
between South Africa and their country of residence.
The issued share capital of the company, as at
declaration date, is as follows:
- 1 618 210 308 ordinary shares
- 8 000 000 first preference shares
- 52 982 248 second preference shares
The company's tax reference number is
9800/211/71/7 and registration number is
1969/017128/06.
Normalised results
With effect from 2004, the group's results reported
under IFRS have been normalised to reflect the
group's view of the economic and legal substance
of the following arrangements (normalised results):
- Preference share funding for the group's Tutuwa
transaction is deducted from equity and reduces
the shares in issue in terms of IFRS.
- Group company shares held for the benefit of
Liberty policyholders 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 its normal trading operations, a group
subsidiary offers to its clients trading positions
over listed shares, including its own shares. To
hedge the risk on these trades, the group buys
(sells short) its own shares in the market.
Although the share exposure on the group's
own shares is deducted/(added) from/(to)
equity and the related fair value movements are
reversed in the income statement, the client
trading position and fair value movements are
not eliminated, resulting in an accounting
mismatch.
A common element in these transactions relates to
shares in issue which are deemed by IFRS to be
treasury shares. Consequently, the net value of the
shares is recognised in equity and the number of
shares used for per-share calculation purposes is
materially lower than the economic substance,
resulting in inflated per-share ratios.
The normalisation adjustments reinstate the shares
as issued, recognise the related transaction in the
statement of financial position as an asset or
liability (as appropriate) and recognise the changes
in the value of the related transaction (together
with dividend income) in the income statement.
The normalised results reflect the basis on which
management manages the group and is consistent
with that reported in the group's segmental report,
where the normalised adjustments have been made
within Liberty, and central and other. The results of
the other business units are unaffected.
The result of these normalised adjustments is shown in the table below.
Normalised headline earnings
for the six months ended 30 June 2014
Weighted average Headline Growth on
number of shares earnings 1H13
'000 Rm %
Disclosed on an IFRS basis 1 585 915 8 230 2
Tutuwa initiative 27 726 63
Group shares held for the benefit
of Liberty policyholders 7 100 61
Share exposures held to facilitate
client trading activities (1 973) (48)
Normalised 1 618 768 8 306 2
Pro forma constant currency information
The pro forma constant currency information disclosed in these results is the responsibility of the group's
directors. The pro forma constant currency information has been presented to illustrate the impact of
changes in currency rates on the group's results and may not fairly present the group's results of operations.
In determining the change in constant currency terms, the comparative financial reporting period's results
have been adjusted for the difference between the current and prior period's average exchange rates
(determined as the average of the daily exchange rates). The measurement has been performed for each of
the group's material currencies, being the US dollar, Nigerian naira, Kenyan shilling, Zambian kwacha and
Ugandan shilling.
The following average exchange rates were used in the determination of the pro forma constant currency
information.
Nigerian Kenyan Zambian Ugandan
US dollar naira shilling kwacha shilling
1H14 average exchange rate 10,70 0,07 0,12 0,0018 0,0042
1H13 average exchange rate 9,22 0,06 0,11 0,0017 0,0035
Interim unaudited results in
accordance with IFRS
Financial statistics
for the six months ended 30 June 2014
Change 1H14 1H13(1) FY13
% Unaudited Unaudited Audited
Number of ordinary shares in issue (000's)
End of period 0 1 588 000 1 586 514 1 584 449
Weighted average 3 1 585 915 1 546 914 1 566 694
Diluted weighted average 2 1 621 109 1 594 734 1 606 782(2)
Cents per ordinary share
Headline earnings (0) 518,9 520,1 1 084,2
Continuing operations 9 584,0 533,7 1 110,9
Discontinued operation >100 (65,1) (13,6) (26,7)
Diluted headline earnings 1 507,7 504,5 1 057,1
Continuing operations 10 571,3 517,7 1 083,2
Discontinued operation >100 (63,6) (13,2) (26,1)
Dividend 11 259,0 233,0 533,0
Net asset value 8 8 333 7 712 8 138
Financial performance (%)
ROE 12.7 14.0 14.2
Net interest margin on continuing banking operations 3.75 3.60 3.67
Credit loss ratio on continuing banking operations 1.13 1.24 1.12
Cost-to-income ratio on continuing banking operations 55.2 55.6 56.8
Capital adequacy ratios (%)
Basel III
Tier I capital 12.7 12.3 13.2
Total capital 15.2 15.4 16.2
(1) Restated. Refer to pages 49 to 51.
(2) Updated to reflect diluted weighted average shares as reported in the group's 2013 annual financial statements.
Condensed consolidated statement of financial position
as at 30 June 2014
1H14 1H13(1) FY13
Change Unaudited Unaudited Audited
% Rm Rm Rm
Assets
Cash and balances with central banks (17) 46 786 56 041 53 310
Financial investments, trading and pledged assets 1 498 449 494 697 457 018
Non-current assets held for sale(2) 100 189 032 183 284
Loans and advances (3) 886 615 910 332 839 620
Derivative and other assets (53) 82 536 175 486 90 634
Interest in associates and joint ventures (33) 3 422 5 109 4 797
Investment property 6 25 645 24 259 27 299
Goodwill and other intangible assets 19 19 719 16 594 18 085
Property and equipment (1) 16 073 16 200 16 882
Total assets 4 1 768 277 1 698 718 1 690 929
Equity and liabilities
Equity 9 157 110 144 123 152 648
Equity attributable to ordinary shareholders 8 132 332 122 348 128 936
Preference share capital and premium 5 503 5 503 5 503
Non-controlling interest 18 19 275 16 272 18 209
Liabilities 4 1 611 167 1 554 595 1 538 281
Deposit and current accounts (1) 976 348 989 319 921 738
Derivative, trading and other liabilities (33) 197 129 292 906 193 579
Non-current liabilities held for sale(2) 100 137 016 134 504
Policyholders' liabilities 16 278 898 241 414 263 944
Subordinated debt (30) 21 776 30 956 24 516
Total equity and liabilities 4 1 768 277 1 698 718 1 690 929
(1) Restated. Refer to pages 49 to 51.
(2) Refer to page 24 for further explanation.
Condensed consolidated income statement
for the six months ended 30 June 2014
1H14 1H13(1) FY13
Change Unaudited Unaudited Audited
% Rm Rm Rm
Continuing operations
Income from banking activities 13 39 838 35 303 73 406
Net interest income 15 21 615 18 834 39 095
Non-interest revenue 11 18 223 16 469 34 311
Income from investment management and life insurance activities 36 42 019 30 835 85 240
Total income 24 81 857 66 138 158 646
Credit impairment charges (1) 4 952 5 002 9 158
Benefits due to policyholders 46 31 579 21 593 63 295
Income after credit impairment charges and
policyholders' benefits 15 45 326 39 543 86 193
Revenue sharing agreements with group companies >100 40 15 142
Income after revenue sharing agreements with
group companies 15 45 286 39 528 86 051
Operating expenses in banking activities 12 22 222 19 776 42 055
Staff costs 7 12 063 11 235 23 087
Other operating expenses 19 10 159 8 541 18 968
Operating expenses in investment management and life
insurance activities 16 7 216 6 200 14 226
Net income before goodwill impairment and gains on
disposal of subsidiaries 17 15 848 13 552 29 770
Goodwill impairment 100 4
Gains on disposal of subsidiaries 64
Net income before share of profits from associates
and joint ventures 17 15 844 13 552 29 834
Share of profit from associates and joint ventures 49 388 260 685
Net income before indirect taxation 18 16 232 13 812 30 519
Indirect taxation 19 1 026 862 1 911
Profit before direct taxation 17 15 206 12 950 28 608
Direct taxation 27 3 915 3 076 7 580
Profit for the period from continuing operations 14 11 291 9 874 21 028
Discontinued operation(2) >100 (1 032) (210) (1 022)
Profit for the period 6 10 259 9 664 20 006
Attributable to non-controlling interests 30 1 845 1 422 3 451
Attributable to preference shareholders (1) 175 176 349
Attributable to ordinary shareholders 2 8 239 8 066 16 206
Basic earnings per share (cents) (0) 519,5 521,4 1 034,4
Continuing operations 9 584,6 535,0 1 099,6
Discontinued operation >100 (65,1) (13,6) (65,2)
Diluted earnings per share (cents) 0 508,2 505,8 1 008,6
Continuing operations 10 571,9 519,0 1 072,2
Discontinued operation >100 (63,7) (13,2) (63,6)
(1) Restated. Refer to pages 49 to 51.
(2) Gains and losses relating to the group's global markets outside Africa business has been presented as a single amount
relating to their after-tax profits.
Headline earnings
for the six months ended 30 June 2014 1H14 1H13(1) FY13
Change Unaudited Unaudited Audited
% Rm Rm Rm
Profit for the period from continuing operations 12 9 271 8 276 17 228
Headline adjustable items (reversed)/added (20) (36) 350
Goodwill impairment – IAS 36 4
Loss/(profit) on sale of property and equipment - IAS 16 6 (1) (4)
Realised foreign currency translation profit on foreign
operations – IAS 21 (16)
Gains on the disposal of businesses and divisions - IAS 27 (91)
Impairment of intangible assets – IAS 36 477
Realised gains on available-for-sale assets - IAS 39 (30) (35) (16)
Taxation on headline earnings adjustable items (4) (88)
Non-controlling interests' share of headline earnings
adjustable items 15 16 (85)
Standard Bank Group headline earnings from
continuing operations 12 9 262 8 256 17 405
Loss for the period from discontinued operation >100 (1 032) (210) (1 022)
Headline adjustable item added
Impairment of non-current assets held for sale – IFRS 5 603
Standard Bank Group headline earnings from
discontinued operation >100 (1 032) (210) (419)
Standard Bank Group headline earnings 2 8 230 8 046 16 986
(1) Restated. Refer to pages 49 to 51.
Condensed consolidated statement of other comprehensive income
for the six months ended 30 June 2014
1H14 1H13 FY13
Non-
controlling
Ordinary interests
share- and
holders' preference Total Total Total
equity shareholders equity equity equity
Unaudited Unaudited Unaudited Unaudited Audited
Rm Rm Rm Rm Rm
Profit for the period 8 239 2 020 10 259 9 664 20 006
Other comprehensive income
(OCI) after tax for the period (847) (41) (888) 4 702 7 903
Items that may be reclassified
subsequently to profit or loss:
Exchange rate differences on
translating equity investments
in foreign operations (753) (12) (765) 5 512 8 085
Foreign currency hedge of net
investments 112 112 (239) (176)
Cash flow hedges (42) (22) (64) (54) 239
Available-for-sale financial assets 9 (2) 7 (83) 91
Items that may not be
reclassified to profit or loss:
Defined benefit fund adjustments (177) (5) (182) (468) (186)
Other gains/(losses) 4 4 34 (150)
Total comprehensive income
for the period 7 392 1 979 9 371 14 366 27 909
Attributable to non-controlling
interests 1 804 1 804 2 550 5 149
Attributable to equity holders
of the parent 7 392 175 7 567 11 816 22 760
Attributable to preference
shareholders 175 175 176 349
Attributable to ordinary
shareholders 7 392 7 392 11 640 22 411
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2014
Ordinary Preference Non-
shareholders' share capital controlling Total
equity and premium interest equity
Rm Rm Rm Rm
Balance at 1 January 2013 (audited) 111 085 5 503 14 301 130 889
Total comprehensive income for the period 11 640 176 2 550 14 366
Transactions with owners, recorded directly
in equity (377) (176) (502) (1 055)
Equity-settled share-based payment transactions 218 20 238
Deferred tax on share-based payment transactions 63 63
Transactions with non-controlling shareholders (19) 57 38
Issue of share capital and share premium and
capitalisation of reserves 2 2
Net decrease in treasury shares 301 38 339
Redemption of preference shares 1 676 1 676
Net dividends paid (2 618) (176) (617) (3 411)
Unincorporated property partnerships capital
reductions and distributions (77) (77)
Balance at 30 June 2013 (unaudited) 122 348 5 503 16 272 144 123
Balance at 1 July 2013 (unaudited) 122 348 5 503 16 272 144 123
Total comprehensive income for the period 10 771 173 2 599 13 543
Transactions with owners, recorded directly
in equity (4 183) (173) (733) (5 089)
Equity-settled share-based payment transactions 24 18 42
Deferred tax on share-based payment
transactions 13 13
Transactions with non-controlling shareholders (31) (53) (84)
Issue of share capital and share premium and
capitalisation of reserves 163 163
Share buy-back (343) (343)
Net increase in treasury shares (278) (2) (280)
Net dividends paid (3 731) (173) (696) (4 600)
Unincorporated property partnerships capital
reductions and distributions 71 71
Balance at 31 December 2013 (audited) 128 936 5 503 18 209 152 648
Ordinary Preference
share- share Non-
holders' capital and controlling Total
equity premium interest equity
Rm Rm Rm Rm
Balance at 1 January 2014 (audited) 128 936 5 503 18 209 152 648
Total comprehensive income for the period 7 392 175 1 804 9 371
Transactions with owners, recorded directly
in equity (3 996) (175) (675) (4 846)
Equity-settled share-based payment transactions 326 24 350
Deferred tax on share-based payment transactions 183 183
Transactions with non-controlling shareholders (74) (72) (146)
Issue of share capital and share premium and
capitalisation of reserves 283 283
Share buy-back (382) (382)
Net decrease in treasury shares 468 4 472
Net dividends paid (4 800) (175) (631) (5 606)
Unincorporated property partnerships capital
reductions and distributions (63) (63)
Balance at 30 June 2014 (unaudited) 132 332 5 503 19 275 157 110
Condensed consolidated statement of cash flows
for the six months ended 30 June 2014
1H14 1H13 FY13
Unaudited Unaudited Audited
Rm Rm Rm
Net cash (outflow)/inflow from operating activities (863) (6 455) 24 020
Operational cash flows 2 860 (2 418) 31 079
Direct taxation paid (3 723) (4 037) (7 059)
Net cash flows used in investing activities (4 693) (602) (17 345)
Capital expenditure on property, equipment and intangible assets (3 218) (3 295) (8 143)
Other investing cash flows (1 475) 2 693 (9 202)
Net cash flows used in financing activities (8 691) (3 285) (9 238)
Proceeds from the issue of share capital 283 2 165
Share buy-back (382) (343)
Release of empowerment reserve 1 676 1 676
Net subordinated debt cash flows (1 906) (1 499) (1 890)
Other financing cash flows (6 686) (3 464) (8 846)
Effect of exchange rate changes on cash and cash
equivalents 573 4 398 7 987
Net (decrease)/increase in cash and cash equivalents (13 674) (5 944) 5 424
Cash and cash equivalents at beginning of the period 67 409 61 985 61 985
Cash and cash equivalents at the end of the period 53 735 56 041 67 409
Comprising:
Cash and balances with central banks 46 786 56 041 53 310
Cash and balances with central banks held for sale 6 949 14 099
Cash and cash equivalents at the end of the period 53 735 56 041 67 409
Notes
Segment report
for the six months ended 30 June 2014
1H14 1H13(1,2) FY13(2)
Change Unaudited Unaudited Unaudited
% Rm Rm Rm
Revenue contribution by business unit
Personal & Business Banking 14 26 111 23 002 48 570
Corporate & Investment Banking 8 13 901 12 879 25 914
Central and other (60) (191) (481) (979)
Banking activities 12 39 821 35 400 73 505
Liberty 37 42 163 30 836 85 406
Standard Bank Group – normalised 24 81 984 66 236 158 911
Adjustments for IFRS 30 (127) (98) (265)
Standard Bank Group – IFRS 24 81 857 66 138 158 646
Profit or loss attributable to ordinary
shareholders
Personal & Business Banking 13 4 190 3 705 8 276
Corporate & Investment Banking (22) 2 815 3 620 6 488
Central and other >100 289 (80) (503)
Banking activities 1 7 294 7 245 14 261
Liberty 10 1 021 924 2 153
Standard Bank Group – normalised 2 8 315 8 169 16 414
Adjustments for IFRS (26) (76) (103) (208)
Standard Bank Group – IFRS 2 8 239 8 066 16 206
Total assets by business unit
Personal & Business Banking 10 603 132 549 092 571 583
Corporate & Investment Banking (1) 853 503 863 816 805 204
Central and other >100 (42 392) (18 884) (18 930)
Banking activities 1 1 414 243 1 394 024 1 357 857
Liberty 16 356 391 307 104 335 826
Standard Bank Group – normalised 4 1 770 634 1 701 128 1 693 683
Adjustments for IFRS (2) (2 357) (2 410) (2 754)
Standard Bank Group – IFRS 4 1 768 277 1 698 718 1 690 929
Total liabilities by business unit
Personal & Business Banking 9 546 354 503 130 522 583
Corporate & Investment Banking (1) 802 829 813 438 757 473
Central and other 46 (71 427) (48 958) (55 360)
Banking activities 1 1 277 756 1 267 610 1 224 696
Liberty 16 333 484 287 055 313 615
Standard Bank Group – normalised 4 1 611 240 1 554 665 1 538 311
Adjustments for IFRS 4 (73) (70) (30)
Standard Bank Group – IFRS 4 1 611 167 1 554 595 1 538 281
(1) Refer to pages 49 to 51.
(2) Where responsibility for individual cost centres and divisions within business units change, the comparative figures are
reclassified accordingly.
Contingent liabilities and capital commitments
as at 30 June 2014
1H14 FY13
Unaudited Audited
Rm Rm
Letters of credit and bankers' acceptances 9 482 17 303
Guarantees 38 398 50 287
Contingent liabilities 47 880 67 590
Contracted capital expenditure 4 774 1 315
Capital expenditure authorised but not yet contracted 8 796 11 411
Capital commitments 13 570 12 726
Private equity associates and joint ventures
The following table provides disclosure of those private equity associates and joint ventures that are equity
accounted in terms of IAS 28 Investments in Associates and Joint Ventures and have been ring-fenced in terms of
the requirements of Circular 2/2013 Headline Earnings, issued by SAICA at the request of the JSE. On the
disposal of these associates and joint ventures held by the group's private equity division, the gain or loss on the
disposal will be included in headline earnings.
1H14 FY13
Unaudited Audited
Rm Rm
Cost 88 150
Carrying value 559 631
Fair value 559 579
Attributable income before impairment 1 92
Equity securities
During the year the group issued nil shares (FY13: 10 281 204 shares) as a scrip dividend distribution,
allotted 3 008 952 shares (FY13: 4 304 866 shares) in terms of the group's share incentive schemes and
repurchased 2 642 773 shares (FY13: 2 877 768 shares). The total equity securities held as treasury
shares at the end of the period was 2 483 491 shares (FY13: 5 669 530 shares).
Subordinated debt
During the period the group issued nil (FY13: R1 billion) and redeemed R1,9 billion (FY13: R1,9 billion)
subordinated debt instruments.
Related party transactions
The group entered into the following transactions
with related parties:
Tutuwa initiative refinancing
The group concluded its Tutuwa initiative in October
2004 when it sold an effective 10% interest in its
South African banking operations to a broad-based
grouping of black-owned entities. The group
subscribed for 8.5% redeemable, cumulative
preference shares that were issued by structured
entities, including Tutuwa Strategic Holdings 1
Proprietary Limited (Tutuwa 1) and Tutuwa Strategic
Holdings 2 Proprietary Limited (Tutuwa 2) that
used the funds to acquire shares in the group.
These two entities were in turn acquired by
Shanduka Group Proprietary Limited and Safika
Holdings Proprietary Limited, respectively. From an
IFRS perspective, all of the preference shares
subscribed for by the group were accounted for as a
negative empowerment reserve. During 2013,
Tutuwa 1 and Tutuwa 2 obtained third party
financing and repaid their outstanding preference
share funding in full and accrued dividends thereon
of R668 million and R1 007 million respectively, to
the group.
In terms of IFRS, the redemption of the preference
share funding resulted in a release of the group's
negative empowerment reserve relating to Tutuwa
1 and Tutuwa 2 and resulted in 35,8 million
ordinary shares being recognised by IFRS as
issued shares during 2013.
Other significant related party
transactions
At 30 June 2014, the ICBC, a 20.1% shareholder,
had a deposit with the group of R66 million
(FY13: R161 million). The group earned net income
of R51 million (FY13: R50 million) from transactions
with the ICBC.
Post-employment benefit plans
Details of transactions between the company and the group's post-employment benefit plans are listed
below:
1H14 FY13
Unaudited Audited
Rm Rm
Fee income 21 33
Deposits held with the group 379 363
Interest paid 37 47
Value of assets under management 12 124 11 276
Investments held in bonds and money market instruments 854 797
Value of ordinary SBG shares held 7 240 7 281
Aluminium reverse repurchase
agreements
As communicated on the SENS of the JSE during
June and July 2014, Standard Bank Plc (SB Plc)
commenced investigations and legal proceedings
against several parties with respect to SB Plc's
rights to physical aluminium held in bonded
warehouses in China. The aluminium represents
SB Plc's collateral held for a series of commodity
financing arrangements, otherwise characterised as
repos. The gross exposure in SB Plc's statement of
financial position as at 30 June 2014 in respect of
the repos is USD167 million, against which USD210
million of aluminium collateral is held and is subject
to this legal process. As at 30 June 2014, SB Plc
recognised a valuation adjustment of USD80 million
against the repos, representing management's best
estimate of the risk adjustment required in
determining the fair value of SB Plc's net exposure.
The valuation adjustment was recognised within the
discontinued operation line item in the income
statement. Consequently, the exposure has been
reclassified into level 3 in the fair value hierarchy. In
determining the valuation adjustment, SB Plc
considered the collateral, the client's ability to
perform and the obligation of the custodians to
account for the collateral. The group also maintains
insurance for such loss events and will recognise the
value of its rights to compensation once the
applicable IFRS recognition criteria have been met.
Change in group directorate
The following changes in directorate took place during the six months ended 30 June 2014:
Appointments
Kaisheng Yang as director 16 January 2014
Wenbin Wang as director 16 January 2014
F du Plessis as director 14 March 2014
AC Parker as director 14 March 2014
BS Tshabalala as director 14 March 2014
Resignations and retirements
Hongli Zhang as director 16 January 2014
Yagan Liu as director 16 January 2014
KP Kalyan as director 3 March 2014
AC Nissen as director 29 May 2014
DDB Band as director 29 May 2014
Non-current assets and liabilities held
for sale
RCS Investment Holdings Proprietary Limited
(RCS)
On 9 April 2014 the group concluded an
agreement to dispose of its 45% investment in RCS
to BNP Paribas, subject to regulatory approval, at a
selling price of approximately R1,0 billion (to be
adjusted by the movement in RCS's attributable net
asset value from July 2013 to the effective date of
the transaction).
The investment has accordingly been classified as
held for sale. In terms of IFRS, equity accounting has
been suspended from the date of classification as
held for sale.
The profit on sale will be recognised on the
completion date of the transaction and will be
excluded from headline earnings.
Brazil
During March 2014, the group announced that it
reached an agreement with Grupo Financiero
Inbursa SAB, the listed Mexican banking group,
(Inbursa) in terms of which Inbursa will acquire the
group's Brazilian licensed banking subsidiary, Banco
Standard de Investimentos SA (BSI), subject to
regulatory approvals, for a price to be determined,
with reference to the closing net asset value of BSI
which was approximately USD45 million.
The group has accordingly included BSI in the
statement of financial position within non-current
assets and liabilities held for sale.
Standard Bank Plc
During 2013, the group announced that it was in
discussions regarding the disposal of a controlling
interest in its global markets business outside Africa
through the sale of a controlling interest in SB Plc,
the group's London banking operation (disposal of
OA GM). This was followed by an announcement
during 2014 that transaction agreements had been
signed with the ICBC. Standard Bank shareholder
approval for the transaction was obtained on
28 March 2014.
Accordingly, the group's IFRS results have been
adjusted as follows:
- Presentation of OA GM in the statement of
financial position within non-current assets and
liabilities held for sale.
- Presentation of OA GM's results as a single line
item in the group's discontinued operations in
the income statement. In addition, the
previously eliminated intercompany transactions
between the group's continuing and
discontinued operations have been presented
separately within the group's continuing and
discontinuing operations as applicable.
- Recognition of an impairment loss, being the
difference between OA GM's fair value less
costs to sell and its recognised carrying value.
The impairment loss has been limited to the
value of OA GM's non-financial assets. The
remaining loss will be recognised in the income
statement at the time at which the transaction is
completed.
The fair value of OA GM was determined using
valuation techniques that incorporate unobservable
inputs. Accordingly, the non-current assets and
liabilities held for sale have been classified within
level 3 of the fair value hierarchy. However, for
disclosure purposes, the financial assets and
financial liabilities within the non-current assets and
liabilities held for sale classification that are
measured at fair value have been categorised as
level 1, 2, and 3 as appropriate in these results' fair
value disclosures.
Day one profit or loss
The table below sets out the aggregate net day one profits yet to be recognised in profit or loss at the
beginning and end of the period with a reconciliation of changes in the balances during the period.
Derivative Trading
instruments assets Total
Rm Rm Rm
Unrecognised net profit – 1 January 2013 (audited) 384 13 397
Additional net profit on new transactions 13 13
Recognised in profit or loss during the year (153) (153)
Exchange differences 3 3
Unrecognised net profit – 1 January 2014 (audited) 244 16 260
Additional net loss on new transactions (137) (137)
Recognised in profit or loss during the year 29 29
Unrecognised net profit – 30 June 2014 (unaudited) 136 16 152
Fair value disclosures
Financial assets and liabilities
measured at fair value
Fair value hierarchy of instruments
measured at fair value
In terms of IFRS, the group is either required to or
elects to measure a number of its financial assets and
financial liabilities at fair value, being the price that
would, respectively, be received to sell an asset or
paid to transfer a liability in an orderly transaction in
the principal (or most advantageous) market
between market participants at the measurement
date. Fair value is therefore a market-based
measurement and uses the assumptions that market
participants would use when pricing an asset or
liability under current market conditions. When
determining fair value it is presumed that the entity
is a going concern and the fair value is therefore not
an amount that represents a forced transaction,
involuntary liquidation or a distressed sale.
Information obtained from the valuation of financial
instruments is used to assess the performance of the
group and, in particular, provides assurance that the
risk and return measures that the group has taken
are accurate and complete.
Valuation process
The group's valuation control framework governs
internal control standards, methodologies, and
procedures over its valuation processes, which include:
Prices quoted in an active market: The existence
of quoted prices in an active market represents the
best evidence of fair value. Where such prices exist,
they are used in determining the fair value of
financial assets and financial liabilities.
Valuation techniques: Where quoted market
prices are unavailable, the group establishes fair
value using valuation techniques that incorporate
observable inputs, either directly, such as quoted
prices, or indirectly, such as derived from quoted
prices, for such assets and liabilities. Parameter
inputs are obtained directly from the market,
consensus pricing services or recent transactions in
active markets, whenever possible.
Where such inputs are not available, the group makes
use of theoretical inputs in establishing fair value
(unobservable imputs). Such inputs are based on
other relevant inputs sources of information and incorporate
assumptions that include prices for similar transactions,
historic data, economic fundamentals, and research
information, with appropriate adjustment to reflect the
terms of the actual instrument being valued and
current market conditions. Changes in these
assumptions would affect the reported fair values of
these financial instruments.
Valuation techniques used for financial instruments
include the use of financial models that are
populated using market parameters that are
corroborated by reference to independent market
data, where possible, or alternative sources, such
as, third party quotes, recent transaction prices or
suitable proxies. The fair value of certain financial
instruments is determined using industry standard
models such as, discounted cash flow analysis and
standard option pricing models. These models are
generally used to estimate future cash flows and
discount these back to the valuation date. For
complex or unique instruments, more sophisticated
modelling techniques may be required, which
require assumptions or more complex parameters
such as correlations, prepayment spreads, default
rates and loss severity.
Valuation adjustments: Valuation adjustments are
an integral part of the valuation process. In making
appropriate valuation adjustments, the group follows
methodologies that consider factors such as bid-offer
spreads, liquidity, counterparty and own credit risk.
Validation and control: All financial instruments
carried at fair value, regardless of classification,
and for which there are no quoted market prices
for that instrument, are fair valued using models
that conform to international best practice and
established financial theory. These models are
validated independently by the group's model
validation unit and formally reviewed and approved
by the market risk methodologies committee. This
control applies to both off-the-shelf models as well
as those developed internally by the group.
Further, all inputs into the valuation models are
subject to independent price validation procedures
carried out by the group's market risk unit. Such
price validation is performed on at least a monthly,
basis but daily where possible given the availability
of the underlying price inputs. Independent
valuation comparisons are also performed and any
significant variances noted are appropriately
investigated. Less liquid risk drivers, which are
typically used to mark level 3 assets and liabilities
to model, are carefully validated and tabled at the
monthly price validation forum to ensure that these
are reasonable and used consistently across all
entities in the group. Sensitivities arising from
exposures to such drivers are similarly scrutinised,
together with movements in level 3 fair values.
They are also disclosed on a monthly basis at the
market risk and asset and liability committees.
Portfolio exception: The group has, on meeting
certain qualifying criteria, elected the portfolio
exception to measure the fair value of certain
groups of financial assets and financial liabilities on
a net basis.
Fair value hierarchy
The tables that follow analyses the group's financial
instruments carried at fair value, by level of fair
value hierarchy. The different levels are based on
the extent to which observable and unobservable
market data is used in the calculation of the fair
value of the financial instruments. The levels have
been defined as follows:
Level 1 – fair value is based on quoted market
prices (unadjusted) in active markets for an
identical financial asset or liability. An active market
is a market in which transactions for the asset or
liability take place with sufficient frequency and
volume to provide pricing information on an
ongoing basis.
Level 2 – fair value is determined through valuation
techniques based on observable inputs, either
directly, such as quoted prices, or indirectly, such as
those derived from quoted prices. This category
includes instruments valued using quoted market
prices in active markets for similar instruments,
quoted prices for identical or similar instruments in
markets that are considered less than active or
other valuation techniques where all significant
inputs are directly or indirectly observable from
market data.
Level 3 – fair value is determined through valuation
techniques using significant unobservable inputs.
This category includes all instruments where the
valuation technique includes inputs not based on
observable data and the unobservable inputs have a
significant effect on the instrument's valuation. This
category includes instruments that are valued based
on quoted prices for similar instruments where
significant unobservable adjustments or
assumptions are required to reflect differences
between the instrument being valued and the
similar instrument.
Significant unobservable inputs
The fair value of level 3 financial assets and liabilities
is determined using valuation techniques which
include reference to recent arm's length transactions,
discounted cash flow analyses, pricing models and
other valuation techniques commonly used by market
participants. However, such techniques typically have
unobservable inputs that are subject to management
judgement. Although the group believes that its
estimates of fair values are appropriate, changing
one or more of these assumptions to reasonably
possible alternative values could impact the fair value
of the financial instruments. These inputs include,
but are not limited to, credit spreads on illiquid
issuers, implied volatilities on thinly traded stocks,
correlation between risk factors, prepayment rates,
and other illiquid risk drivers. Exposure to such
illiquid risk drivers is typically managed by:
- using bid-offer spreads that are reflective of the
relatively low liquidity of the underlying risk
driver
- quantifying and reporting the sensitivity to each
risk driver
- raising day one profit provisions in accordance
with IFRS and
- limiting exposure to such risk drivers and
analysing this exposure on a regular basis.
Accounting classifications and fair values of financial assets and liabilities
The unaudited table below categorises the group's assets and liabilities as at 30 June 2014 between that which
is financial and non-financial. All financial assets and liabilities have been classified according to their
measurement category with disclosure of the fair value being provided for those items.
Held-for- Designated Held-to-
trading(1) at fair value maturity
Rm Rm Rm
Assets
Cash and balances with central banks
Derivative assets 55 282
Trading assets 65 458
Pledged assets 2 465 6 364
Non-current assets held for sale 116 441
Financial investments 366 135 15 576
Loans and advances to banks 1 443
Loans and advances to customers 482
Interest in associates and joint ventures
Investment property
Other financial assets(4)
Other non-financial assets
239 646 374 424 15 576
Liabilities
Derivative liabilities 60 950
Trading liabilities 43 487
Non-current liabilities held for sale 60 280 1 039
Deposits from banks
Deposits from customers 24 555
Policyholders' liabilities 79 997
Subordinated debt
Other financial liabilities(4) 42 456
Other non-financial liabilities
164 717 148 047
(1) Includes derivative assets or liabilities designated as hedging instruments in hedge relationships.
(2) Includes financial assets and financial liabilities for which the carrying value has been adjusted for changes in fair value due
to designated hedged risks.
(3) Carrying value has been used where it closely approximates fair value, excluding non-financial assets and liabilities.
(4) The carrying value of other financial assets/liabilities approximates fair value due to their short-term nature.
Other
Other non-financial Total
Loans and Available-for- amortised assets/ carrying
receivables(2) sale cost(2) liabilities amount Fair value(3)
Rm Rm Rm Rm Rm Rm
46 786 46 786 46 786
55 282 55 282
65 458 65 458
217 2 014 11 060 11 066
70 647 32 1 912 189 032 182 020
7 891 32 329 421 931 422 686
102 813 104 256 104 099
781 877 782 359 786 425
3 422 3 422
25 645 25 645
6 661 6 661
56 385 56 385
1 016 892 34 375 87 364 1 768 277
60 950 60 950
43 487 43 487
75 174 523 137 016 132 096
83 851 83 851 84 460
867 942 892 497 913 839
198 901 278 898 79 997
21 776 21 776 19 626
20 243 62 699
29 993 29 993
1 068 986 229 417 1 611 167
Held-for- Designated Held-to-
trading(1) at fair value maturity
Rm Rm Rm
Assets
Cash and balances with central banks
Derivative assets 64 474
Trading assets 54 588
Pledged assets 3 324 1 348
Non-current assets held for sale 107 306
Financial investments 506 342 896 13 264
Loans and advances to banks 668
Loans and advances to customers 1 074 181 4
Interest in associates and joint ventures
Investment property
Other financial assets(4)
Other non-financial assets
231 272 345 093 13 268
Liabilities
Derivative liabilities 69 244
Trading liabilities 35 368
Non-current liabilities held for sale 57 194 294
Deposits from banks 961
Deposits from customers 24 377
Policyholders' liabilities 74 146
Subordinated debt
Other financial liabilities(4) 39 983
Other non-financial liabilities
161 806 139 761
(1) Includes derivative assets or liabilities designated as hedging instruments in hedge relationships.
(2) Includes financial assets and financial liabilities for which the carrying value has been adjusted for changes in fair value
due to designated hedged risks.
(3) Carrying value has been used where it closely approximates fair value, excluding non-financial assets and liabilities.
(4) The carrying value of other financial assets/liabilities approximates fair value due to their short-term nature.
Other
Other non-financial Total
Loans and Available-for- amortised assets/ carrying
receivables(2) sale cost(2) liabilities amount Fair value(3)
Rm Rm Rm Rm Rm Rm
53 310 53 310 53 310
64 474 64 474
54 588 54 588
2 041 6 713 6 713
74 871 29 1 078 183 284 180 051
11 162 27 889 395 717 396 243
94 236 94 904 95 034
743 457 744 716 736 389
4 797 4 797
27 299 27 299 27 299
8 365 8 365
52 762 52 762
985 401 29 959 85 936 1 690 929
69 244 69 244
35 368 35 368
75 505 1 511 134 504 130 031
67 689 68 650 68 877
828 711 853 088 858 875
189 798 263 944 74 146
24 516 24 516 22 096
31 347 71 330
17 637 17 637
1 027 768 208 946 1 538 281
Financial assets and liabilities measured at fair value (unaudited)
as at 30 June 2014
Level 1 Level 2 Level 3 Total
Rm Rm Rm Rm
Financial assets
Measured on a recurring basis
Derivative assets 781 53 708 793 55 282
Trading assets 21 169 40 913 3 376 65 458
Pledged assets 6 636 4 207 10 843
Financial investments 187 650 201 475 9 339 398 464
Loans and advances to banks 707 736 1 443
Loans and advances to customers 7 468 7 482
Measured on a non-recurring basis
Non-current assets held for sale(1) 34 228 76 444 5 801 116 473
251 178 377 951 19 316 648 445
Comprising:
Held-for-trading 239 646
Designated at fair value 374 424
Available-for-sale 34 375
648 445
Financial liabilities
Measured on a recurring basis
Derivative liabilities 53 520 7 430 60 950
Trading liabilities 27 862 15 091 534 43 487
Deposits from customers 297 24 258 24 555
Policyholders' liabilities 79 997 79 997
Other financial liabilities 42 456 42 456
Measured on a non-recurring basis
Non-current liabilities held for sale(1) 11 251 43 977 6 091 61 319
39 410 259 299 14 055 312 764
Comprising:
Held-for-trading 164 717
Designated at fair value 148 047
312 764
(1) While the disposal group has been classified as held for sale and has been measured to its fair value less costs to sell, the disposal
group's fair value measured assets and liabilities have been categorised within the fair value hierarchy.
Financial assets and liabilites measured at fair value (audited) continued as at 31 December 2013
Level 1 Level 2 Level 3 Total
Rm Rm Rm Rm
Financial assets
Measured on a recurring basis
Derivative assets 91 62 293 2 090 64 474
Trading assets 19 477 33 001 2 110 54 588
Pledged assets 3 525 3 180 8 6 713
Financial investments 178 044 189 066 4 181 371 291
Loans and advances to banks 668 668
Loans and advances to customers 7 1 205 43 1 255
Measured on a non-recurring basis
Non-current assets held for sale(1) 24 942 76 780 5 613 107 335
226 754 365 525 14 045 606 324
Comprising:
Held-for-trading 231 272
Designated at fair value 345 093
Available-for-sale 29 959
606 324
Financial liabilities
Measured on a recurring basis
Derivative liabilities 162 61 207 7 875 69 244
Trading liabilities 18 384 16 552 432 35 368
Deposits from banks 961 961
Deposits from customers 389 23 988 24 377
Policyholders' liabilities 74 146 74 146
Other financial liabilities 39 983 39 983
Measured on a non-recurring basis
Non-current liabilities held for sale(1) 7 981 42 579 6 928 57 488
26 916 259 416 15 235 301 567
Comprising:
Held-for-trading 161 806
Designated at fair value 139 761
301 567
(1) While the disposal group has been classified as held for sale and has been measured to its fair value less costs to sell, the disposal
group's fair value measured assets and liabilities have been categorised within the fair value hierarchy.
Level 2 and 3 – valuation techniques
and inputs
Derivative financial instruments
Derivative financial instruments comprise foreign
exchange, interest rate, commodity, credit and equity
derivatives that are either held-for-trading or
designated as hedging instruments in hedge
relationships. Standard derivative contracts are valued
using market accepted models and quoted parameter
inputs. More complex derivative contracts are
modelled using more sophisticated modelling
techniques applicable to the instrument. Inputs used
in the valuation process include spot prices of the
underlying, dividend yields, risk-free rates, risk-
premiums, timing of settlement, storage/services
costs, credit risks, volatilities, prepayment risk/
surrender risk and recovery rates/loss given default.
Trading assets and liabilities, pledged
assets and financial investments
Trading assets and liabilities comprise instruments
which are part of the group's underlying trading
activities. These instruments include sovereign and
corporate debt, commodities, collateral, collateralised
lending agreements and equity securities.
Pledged assets comprise instruments that may be
sold or repledged by the group in the absence of
default by the group. Pledged assets are non-trading
assets that include sovereign and corporate debt,
commodities pledged in terms of repurchase
agreements and commodities that have been leased
to third parties.
Financial investments are non-trading financial assets
and comprise of listed and unlisted equity
instruments, listed sovereign or corporate debt,
investments in debentures issued by SARB,
investments in mutual fund investments and
unit-linked investments.
Where there are no recent transactions, fair value is
derived from the last available market price adjusted
for changes in risks and information since that date.
Where a proxy instrument is quoted in an active
market, the fair value for the financial investment is
determined by adjusting the proxy fair value for
differences between the proxy instrument and the
financial investment. Where proxies are not available,
then fair value is estimated using more complex
modelling techniques. These techniques include
discounted cash flow and Black-Scholes models using
current market rates for credit, interest, liquidity,
volatility and other risks. Combination techniques are
used to value unlisted equity securities and include
inputs such as earnings and dividend yields of the
underlying entity.
Loans and advances
Loans and advances comprise:
- Loans and advances to banks: call loans,
loans granted under resale agreements and
balances held with other banks.
- Loans and advances to customers: mortgage
loans (home loans and commercial mortgages),
other asset-based loans, including collateralised
debt obligations (instalment sale and finance
leases), and other secured and unsecured loans
(card debtors, overdrafts, other demand
lending, term lending and loans granted under
resale agreements).
For certain loans fair value may be determined from
the market price of a recently occurring transaction
adjusted for changes in risks and information
between the transaction and valuation dates. Loans
and advances are reviewed for observed and verified
changes in credit risk and the credit spread is
adjusted at subsequent dates if there has been an
observable change in credit risk relating to a
particular loan or advance. In the absence of an
observable market for these instruments, discounted
cash flow models are used to determine fair value.
Discounted cash flow models incorporate parameter
inputs for interest rate risk, foreign exchange risk,
liquidity and credit risk, as appropriate. For credit
risk, probability of default and loss given default
parameters are determined using credit default
swaps (CDS) markets, where available and
appropriate, as well as the relevant terms of the loan
and loan counterparty such as the industry
classification and subordination of the loan.
Deposits from banks and customers and
other financial liabilities
Deposits from banks and customers comprise
amounts owed to depositors, deposits under
repurchase agreements, negotiable certificates of
deposit and other deposits.
For certain deposits, fair value may be determined
from the market price on a recently occurring
transaction adjusted for all changes in risks and
information between the transaction and valuation
dates. In the absence of an observable market for
these instruments discounted cash flow models are
used to determine fair value based on the contractual
cash flows related to the instrument. The fair value
measurement incorporates all market risk factors
including a measure of the group's credit risk relevant
for that financial liability. The market risk parameters
are valued consistently to similar instruments held as
assets stated in the section above. Where the financial
liabilities designated at fair value through profit or loss
under the fair value option are collateralised, such as
securities loaned and securities pledged under
repurchase agreements, the credit enhancement is
incorporated into the fair valuation of the liability.
The fair value of third party financial liabilities
arising on the consolidation of mutual funds are
determined using the quoted put (exit) price
provided by the fund manager and discounted for
the applicable notice period.
The fair value of a financial liability with a demand
feature is not less than the amount payable on
demand, discounted from the first date on which
the amount could be required to be paid.
Policyholder liabilities
Policyholder liabilities comprise unit-linked policies
and annuity certains. The fair value for these items
is derived as follows:
- Unit-linked policies: assets which are linked
to the investment contract liabilities are owned
by the group. The investment contract obliges
the group to use these assets to settle these
liabilities. Therefore, the fair value of
investment contract liabilities is determined
with reference to the fair value of the
underlying assets (i.e. amount payable on
surrender of the policies).
- Annuity certains: discounted cash flow
models are used to determine the fair value of
the stream of future payments and incorporate
parameter inputs for interest rate risk, liquidity
and credit risk as appropriate.
Level 2 financial assets and financial liabilities
The following table sets out the group's principal valuation techniques used in determining the fair value of
its financial assets and financial liabilities that are classified within level 2 of the fair value hierarchy.
Valuation basis/technique Main inputs and assumptions
Derivative instruments Discounted cash flow, Black- Discount rate*, spot price of the
Scholes and combination underlying, volatility and correlation
technique models factors, dividend yield, earnings yield
and valuation multiples.
Trading assets Discounted cash flow model Discount rate* and spot price of the
underlying.
Pledged assets Discounted cash flow model Discount rate* and spot price of the
underlying.
Financial investments Discounted cash flow, combination Discount rate*, spot price of the
technique models and adjusted underlying, notice period, dividend
quoted exit price model yield, earnings yield and valuation
multiples.
Loans and advances to banks and Discounted cash flow model Discount rate*
customers
Trading liabilities Discounted cash flow model Discount rate* and spot price of the
underlying.
Deposits from banks and Discounted cash flow model Discount rate*
customers
Policyholder liabilities. Discounted cash flow model and Discount rate* and spot price of the
unit-linked underlying asset underlying.
value method
Other financial liabilities Quoted put (exit) price provided N/A
by the fund manager
*Discount rates, where applicable, include the risk-free rate, risk premiums, liquidity spreads, credit risk (own and counterparty as appropriate),
timing of settlement, service costs, prepayment and surrender risk assumptions.
Level 3 financial assets and financial liabilities
The tables below set out the reconciliation of financial assets that are measured at fair value based on
inputs that are not based on observable market data (level 3):
Reconciliation of level 3 financial assets measured on a recurring basis
Derivative Trading Pledged
assets assets assets
Rm Rm Rm
Balance at 1 January 2013 (audited) 3 397 6 344
Classified as held for sale (1 914) (5 992)
Total gains/(losses) included in profit or loss 1 282 (60)
Interest income
Trading revenue 1 282 (60)
Other revenue
Investment gains
Total gains/(losses) included in OCI 1
Originations and purchases 499 3 087 6
Sales and settlements(1) (1 182) (2 019)
Transfers into level 3(3) 12 798
Transfers out of level 3(2) (7) (13)
Exchange movements 2 (35) 2
Balance at 1 January 2014 (audited) 2 090 2 110 8
Total (losses)/gains included in profit or loss (9) (50)
Interest income
Trading revenue (9) (50)
Other revenue
Investment gains
Total losses included in OCI
Originations and purchases 264 2 160
Sales and settlements(1) (1 797) (296) (8)
Transfers into level 3(3) 245
Transfers out of level 3(2)
Reclassifications (IAS 39)(4) (546)
Exchange movements (2)
Balance at 30 June 2014 (unaudited) 793 3 376
(1) Derivative fair values represent the net present value of positive and/or negative future cash flows. Settlements may increase or
decrease the carrying value of derivative assets.
(2) The valuation inputs of certain financial assets became unobservable. The fair value of these assets was
transferred into level 3.
(3) The valuation inputs of certain level 3 financial assets became observable. The fair value of these financial assets
was transferred into level 2.
(4) Certain trading assets were, as permitted by IAS 39, reclassified to loans and receivables.
Measured on a
non-recurring
Measured on a recurring basis basis
Loans and Non-current
advances to Financial assets held
customers investments for sale Total
Rm Rm Rm Rm
215 5 528 15 484
(5) 7 911
132 207 (1 589) (28)
(2) (2)
132 (22) (1 589) (257)
225 225
6 6
(1)
1 325 961 5 878
(291) (3 267) (2 748) (9 507)
118 928
(21) (36) (77)
8 312 1 078 1 367
43 4 181 5 613 14 045
(13) 42 527 497
10 10
(13) (12) 527 443
23 23
21 21
(5) (5)
5 868 315 8 607
(31) (596) (1 070) (3 798)
1 045 1 290
(139) (705) (844)
(546)
8 (12) 76 70
7 9 339 5 801 19 316
Level 3 financial assets and financial liabilities
The table below provides disclosure of the unrealised (losses)/gains included in profit or loss for level 3
financial assets that are held at the end of the respective reporting periods:
Measured on a
non-recurring
Measured on a recurring basis basis
Non-current
Derivative Trading Financial assets held
assets assets investments for sale Total
Rm Rm Rm Rm Rm
30 June 2014
(unaudited)
Interest income 10 10
Trading revenue (63) (38) 913 812
Other revenue (9) (9)
(63) (38) 1 913 813
31 December 2013
(audited)
Trading revenue 1 271 (35) 913 2 149
Other revenue 76 76
1 271 (35) 76 913 2 225
The following table provides a reconciliation of the opening to closing balance for all financial liabilities that
are measured at fair value based on inputs that are not based on observable market data (level 3).
Reconciliation of level 3 financial liabilities
Measured
on a non-
recurring
Measured on a recurring basis basis
Policy- Non-current
Derivative Trading holders' assets held
liabilities liabilities liabilities for sale Total
Rm Rm Rm Rm Rm
Balance at 1 January 2013
(audited) 2 335 5 021 10 7 366
Classified as held for sale (898) (5 021) 5 919
Total losses/(gains) included in
profit or loss – trading revenue 4 084 (27) (434) 3 623
Originations and purchases 3 050 458 590 4 098
Sales and settlements(3) (633) (856) (1 489)
Transfers into level 3(2) 58 378 436
Transfers out of level 3(1) (8) (8)
Net change in policyholders'
liabilities (10) (10)
Exchange movements (113) 1 1 331 1 219
Balance at 1 January 2014
(audited) 7 875 432 6 928 15 235
Total losses/(gains) included in
profit or loss – trading revenue 1 025 (9) 655 1 671
Originations and purchases 89 166 255
Sales and settlements(3) (1 711) (1 199) (2 910)
Transfers into level 3(2) 244 23 267
Transfers out of level 3(1) (2) (556) (558)
Exchange movements (1) (1) 97 95
Balance at 30 June 2014
(unaudited) 7 430 534 6 091 14 055
(1) The valuation inputs of certain financial liabilities became unobservable. The fair value of these liabilities was transferred
into level 3.
(2) The valuation inputs of certain level 3 financial assets became observable. The fair value of these financial liabilities was
transferred into level 2.
(3) Derivative fair values represent the net present value of positive and/or negative future cash flows. Settlements may
increase or decrease the carrying value of derivative liabilities.
The following table provides disclosure of the unrealised losses/(gains) included in profit or loss for level 3
financial liabilities that are held at the end of the respective reporting period.
Measured on a
non-recurring
Measured on a recurring basis basis
Derivative Trading Non-current assets
liabilities liabilities held for sale Total
Rm Rm Rm Rm
30 June 2014 (unaudited)
Trading revenue 897 (9) 400 1 288
31 December 2013 (audited)
Trading revenue 3 862 (32) 436 4 266
Sensitivity and interrelationships of inputs
The behaviour of the unobservable parameters used to fair value level 3 assets and liabilities is not
necessarily independent, and may often hold a relationship with other observable and unobservable market
parameters. Where material and possible, such relationships are captured in the valuation by way of
correlation factors, though these factors are, themselves, frequently unobservable. In such instances, the
range of possible and reasonable fair value estimates is taken into account when determining appropriate
model adjustments. The table that follows indicates the valuation techniques and main assumptions used in
the determination of the fair value of the level 3 assets and liabilities measured at fair value on a recurring
basis. The table further indicates the effect that a significant change in one or more of the inputs to a
reasonably possible alternative assumption would have on profit or loss and OCI (where viable) at the
reporting date (where the change in the unobservable input would change the fair value of the asset or
liability significantly). The changes in the inputs that have been used in the analysis on the next page have
been determined taking into account several considerations such as the nature of the asset or liability and
the market within which the asset or liability is transacted.
The valuation techniques used in determining the fair value of financial assets and liabilities
classified within level 3 (unaudited)
as at 30 June 2014
Effect on profit or loss
Variance in
fair value (Un-
Valuation basis/ Main inputs and measure- Favourable favourable)
technique assumptions ment Rm Rm
Derivative instruments Discounted cash Discount rate*, (1%) – 1% 269 (269)
flow, Black-Scholes spot price of the
and combination underlying,
technique models volatility and
correlation factors,
dividend yield,
earnings yield and
valuation multiples
Trading assets Discounted cash Discount rate* and (1%) – 1% 436 (438)
flow model spot price of the
underlying
Financial investments Discounted cash Discount rate*, (1%) – 1% 376 (317)
flow and spot price of the
combination underlying,
technique models dividend yield,
earnings yield and
valuation multiples
Loans and advances Discounted cash Discount rate* (1%) – 1% – –
to customers flow model
Trading liabilities Discounted cash Discount rate* and (1%) – 1% 2 (314)
flow model spot price of the
underlying
1 083 (1 338)
* Discount rates, where applicable, include risk-free rate, risk premiums, liquidity spreads, credit risk (own and counterparty
as per appropriate) timing of settlement, service costs, pre-payment and surrender risk assumptions.
Level 3 non-current assets and liabilities are included in the separate asset classes, inputs and changes in assumptions
above.
The valuation techniques used in determining the fair value of financial assets and liabilities
classified within level 3 (unaudited)
as at 31 December 2013(1)
Effect on profit or loss
Variance in
fair value (Un-
Valuation basis/ Main inputs and measure- Favourable favourable)
technique assumptions ment Rm Rm
Derivative instruments Discounted cash Discount rate*, (1%) – 1% 207 (209)
flow, Black-Scholes spot price of the
and combination underlying,
technique models volatility and
correlation
factors, dividend
yield, earnings
yield and
valuation
multiples
Trading assets Discounted cash Discount rate* (1%) – 1% 548 (548)
flow model and spot price of
the underlying
Financial investments Discounted cash Discount rate* (1%) – 1% 235 (205)
flow and spot price of the
combination underlying,
technique models dividend yield,
earnings yield
and valuation
multiples
Loans and advances to Discounted cash Discount rate* (1%) – 1% 1 (1)
customers flow model
Trading liabilities Discounted cash Discount rate* (1%) – 1% 126 (126)
flow model and spot price of
the underlying
1 117 (1 089)
* Discount rates, where applicable, include risk-free rate, risk premiums, liquidity spreads, credit risk (own and counterparty
as per appropriate) timing of settlement, service costs, pre payment and surrender risk assumptions.
(1) Additional detail provided based on the group's existing valuation techniques and model inputs.
Level 3 non-current assets and liabilities are included in the separate asset classes, inputs and changes in assumptions
above.
Financial instruments subject to offsetting, enforceable master netting
arrangements or similar agreements
IFRS requires financial assets and a financial liabilities to be offset and the net amount presented in the
statement of financial position when, and only when, the group has a current legally enforceable right to
set off recognised amounts, as well as the intention to settle on a net basis or to realise the asset and
settle the liability simultaneously. There are no instances where the group has a current legally
enforceable right to offset, without the intention to settle on a net basis or to realise the asset and settle
the liability simultaneously.
The following table sets out the impact of offset, as well as financial assets and financial liabilities that are
subject to enforceable master netting arrangement or similar agreement, irrespective of whether they have
been offset in accordance with IFRS. There are no items measured on different measurement basis within
the line items in the tables
It should be noted that the information below is not intended to represent the group's actual credit
exposure, nor will it agree to that presented in the statement of financial position.
Gross
amounts of
recognised
financial Financial
liabilities instruments,
Gross offset financial
amount of in the Net collateral
recognised statement amounts and cash
financial of financial of financial collateral Net
assets(1) position(2) assets(3) received(4) amount
Rm Rm Rm Rm Rm
30 June 2014
(unaudited)
Assets
Derivative assets 104 244 (24 941) 79 303 (55 115) 24 188
Trading assets 14 191 14 191 (14 191)
Loans and advances(5) 131 276 (32 750) 98 526 (95 519) 3 007
249 711 (57 691) 192 020 (164 825) 27 195
Refer to page 46 for the footnotes.
Gross
amounts of
recognised
financial Financial
assets instruments,
Gross offset financial
amount of in the Net collateral
recognised statement amounts and cash
financial of financial of financial collateral Net
liabilities(1) position(2) liabilities(3) received(6) amount
Rm Rm Rm Rm Rm
30 June 2014
(unaudited)
Liabilities
Derivative liabilities 106 791 (24 941) 81 850 (56 173) 25 677
Trading liabilities 4 858 4 858 (4 781) 77
Deposit and current
accounts(5) 48 374 (32 750) 15 624 (5 732) 9 892
160 023 (57 691) 102 332 (66 686) 35 646
Refer to page 46 for the footnotes.
Gross
amounts of
recognised
financial Financial
liabilities instruments,
Gross offset financial
amount of in the Net collateral
recognised statement amounts and cash
financial of financial of financial collateral Net
assets(1) position(2) assets(3) received(4) amount
Rm Rm Rm Rm Rm
31 December 2013
(audited)
Assets
Derivative assets 104 088 (16 236) 87 852 (73 437) 14 415
Trading assets 19 079 19 079 (18 506) 573
Loans and advances(5) 116 322 (33 743) 82 579 (79 294) 3 285
239 489 (49 979) 189 510 (171 237) 18 273
Refer to page 46 for the footnotes.
Gross
amounts of
recognised
financial Financial
assets instruments,
Gross offset financial
amount of in the Net collateral
recognised statement amounts and cash
financial of financial of financial collateral Net
liabilities(1) position(2) liabilities(3) received(6) amount
Rm Rm Rm Rm Rm
31 December 2013
(audited)
Liabilities
Derivative liabilities 107 339 (16 236) 91 103 (72 749) 18 354
Trading liabilities 7 879 7 879 (7 879)
Deposit and current
accounts(5) 47 696 (33 743) 13 953 (3 932) 10 021
162 914 (49 979) 112 935 (84 560) 28 375
(1) Gross amounts are disclosed for recognised assets and liabilities that are either offset in the statement of financial position
or subject to a master netting arrangement or a similar agreement, irrespective of whether the IFRS offsetting criteria is
met.
(2) The amounts that qualify for offset in accordance with the IFRS criteria.
(3) Refer to the reconciliation on page 47.
(4) Related amounts not offset in the statement of financial position that are subject to a master netting arrangement or
similar agreement, including financial collateral (whether recognised or unrecognised) and cash collateral. In most cases,
the group is allowed to sell/repledge collateral received.
(5) The most material amounts offset in the statement of financial position pertain to cash management accounts. The cash
management accounts allow holding companies (or central treasury functions) to manage the cash flows of a group by
linking current accounts of multiple legal entities within a group. This allows for cash balances of the different legal
entities to be offset against each other to arrive a net balance for those groups. The cash management accounts are offset
in the statement of financial position in terms of IFRS.
(6) Related amounts not offset in the statement of financial position that are subject to a master netting arrangement or
similar agreement, including financial (whether recognised or unrecognised) and cash collateral. In most instances, the
counterparty may not sell or repledge collateral pledged by the group.
Reconciliation of net amounts included in the statement of financial
position after application offset
Net
amounts Amounts
presented disclosed
in the in the
statement Amounts statement
of financial not subject Held of financial
position to offset Total for sale position
Rm Rm Rm Rm Rm
30 June 2014 (unaudited)
Assets
Cash and balances with central banks 53 735 53 735 6 949 46 786
Derivative assets 79 303 16 463 95 766 40 484 55 282
Trading assets 14 191 118 134 132 325 66 867 65 458
Pledged assets 20 150 20 150 9 090 11 060
Financial investments 421 962 421 962 31 421 931
Loans and advances 98 526 846 632 945 158 58 543 886 615
Non-current assets held for sale (189 032) 189 032
Other financial and non-financial
assets 99 181 99 181 7 068 92 113
192 020 1 576 257 1 768 277 1 768 277
Liabilities
Derivative liabilities 81 850 21 533 103 383 42 433 60 950
Trading liabilities 4 858 56 476 61 334 17 847 43 487
Deposit and current accounts 15 624 1 024 410 1 040 034 63 686 976 348
Subordinated debt 29 445 29 445 7 669 21 776
Policyholders' liabilities 278 898 278 898 278 898
Non-current liabilities held for sale (137 016) 137 016
Other financial and non-financial
liabilities 98 073 98 073 5 381 92 692
102 332 1 508 835 1 611 167 1 611 167
31 December 2013 (audited)
Assets
Cash and balances with central banks 67 409 67 409 14 099 53 310
Derivative assets 87 852 16 042 103 894 39 420 64 474
Trading assets 19 079 96 856 115 935 61 347 54 588
Pledged assets 13 252 13 252 6 539 6 713
Financial investments 395 746 395 746 29 395 717
Loans and advances 82 579 815 597 898 176 58 556 839 620
Non-current assets held for sale (183 284) 183 284
Other financial and non-financial
assets 96 517 96 517 3 294 93 223
189 510 1 501 419 1 690 929 1 690 929
Liabilities
Derivative liabilities 91 103 17 362 108 465 39 221 69 244
Trading liabilities 7 879 45 462 53 341 17 973 35 368
Deposit and current accounts 13 953 972 828 986 781 65 043 921 738
Subordinated debt 31 963 31 963 7 447 24 516
Policyholders' liabilities 263 944 263 944 263 944
Non-current liabilities held for sale (134 504) 134 504
Other financial and non-financial
liabilities 93 787 93 787 4 820 88 967
112 935 1 425 346 1 538 281 1 538 281
The table below sets out the nature of the agreements and the rights relating to items which do not qualify
for offset but that are subject to a master netting arrangement or similar agreement.
Financial asset/liability Nature of agreement Related rights to offset
Derivative assets and liabilities International swaps and The agreement allows for offset in the
derivatives event of default
Trading assets and trading Global master repurchase The agreement allows for offset in the
liabilities agreements event of default
Loans and advances to banks Banks Act In the event of liquidation or
bankruptcy, offset shall be enforceable
subject to Banks Act requirements
being met.
Deposit and current accounts Banks Act In the event of liquidation or
bankruptcy, offset shall be enforceable
subject to Banks Act requirements
being met.
Accounting policies and restatements
Basis of preparation
The interim results are prepared in accordance with
the going concern principle under the historical cost
basis as modified by the fair value accounting of
certain assets and liabilities where required or
permitted by IFRS.
The accounting policies applied in the preparation
of the consolidated financial statements from which
the interim results have been derived are in terms
of IFRS and are consistent with the accounting
policies applied in the preparation of the group's
previous consolidated annual financial statements,
except for changes as required by the mandatory
and early adoption of new and revised IFRS, as set
out below:
Adoption of new and amended
standards effective for the current
financial year
The accounting policies are consistent with those
reported in the previous year except as required in
terms of the adoption of the following standards
and interpretation effective for the current period:
- IAS 32 Financial Instruments: Presentation
– Amendment to Offsetting Financial Assets and
Financial Liabilities (IAS 32)
- IFRS 10 Consolidated Financial Statements –
Investment Entities amendment (IFRS 10)
- IFRIC 21 Levies (IFRIC 21).
Early adoption of revised standards
- Amendment to IAS 16 Property, Plant and
Equipment (IAS 16) and IAS 38 Intangible
Assets (IAS 38) – Clarification of Acceptable
Methods of Depreciation and Amortisation
(2014 amendment)
- IFRS 14 Regulatory Deferral Accounts
(2014 issued) (IFRS 14).
Restatements
The abovementioned IFRS standards and
interpretation adopted on 1 January 2014 did not
have any effect on the group's previously reported
financial results or disclosures.
Other restatements and
reclassifications
The comparative income statement and statement
of financial position as at 30 June 2013 has been
adjusted to reflect the presentation consequences
of the following restatements and reclassifications:
IFRS 5 – Non-current Assets Held for Sale
and Discontinued Operations (IFRS 5)
Following the announcement in 2013 regarding the
intended disposal of the group's controlling interest
in the global markets business outside Africa, the
group's previously reported income statement has,
in accordance with IFRS 5, been restated in order to
present the discontinued operation's results as a
separate line item.
Deposits from customers to trading
liabilities
Liabilities of R6 805 million that are part of a
portfolio of assets and liabilities that are managed
together and for which there is evidence of a
recent actual pattern of short-term profit, were
previously classified as designated at fair value
through profit or loss within deposits from
customers. In accordance with IFRS and the group's
accounting policies, these liabilities should have
been classified as trading liabilities. The liabilities
have accordingly been reclassified from deposits
from customers to trading liabilities. The
restatement aligns to the presentation in the
group's 2013 annual financial statements. The
restatement had no impact on the group's reserves
or profit and loss.
IFRS 10: Restatement between interests
in associates and financial investments
An amount of R15 088 million relating to interests
in associates that were measured at fair value and
that were, in the group's June 2013 statement of
financial position, classified within interests in
associates have been reclassified to financial
investments, which now includes interests in
associates measured on a fair value basis. The
restatement aligns to the presentation in the
group's 2013 annual financial statements. The
restatement had no impact on the group's reserves
or profit and loss.
Accounting policies and restatements
Restatements of 30 June 2013
financial results
Consolidated income statement
for the six months ended 30 June 2013
As previously
reported Restatement Restated
Unaudited Unaudited
Rm Rm Rm
Continuing operations
Income from banking activities 36 541 (1 238) 35 303
Net interest income 18 809 25 18 834
Non-interest revenue 17 732 (1 263) 16 469
Income from investment management and life insurance activities 30 835 30 835
Total income 67 376 (1 238) 66 138
Credit impairment charges 5 065 (63) 5 002
Benefits due to policyholders 21 593 21 593
Income after credit impairment charges and policyholders'
benefits 40 718 (1 175) 39 543
Revenue sharing agreements with group companies (15) (15)
Income after revenue sharing agreements with group
companies 40 718 (1 190) 39 528
Operating expenses in banking activities 21 129 (1 353) 19 776
Staff costs 12 082 (847) 11 235
Other operating expenses 9 047 (506) 8 541
Operating expenses in investment management and life insurance
activities 6 200 6 200
Net income before share of profits from associates and
joint ventures 13 389 163 13 552
Share of profit from associates and joint ventures 260 260
Net income before indirect taxation 13 649 163 13 812
Indirect taxation 892 (30) 862
Profit before direct taxation 12 757 193 12 950
Direct taxation 3 093 (17) 3 076
Profit for the period from continuing operations 9 664 210 9 874
Discontinued operation (210) (210)
Profit for the period 9 664 9 664
Attributable to non-controlling interests 1 422 1 422
Attributable to preference shareholders 176 176
Attributable to ordinary shareholders 8 066 8 066
Consolidated statement of financial position
as at 30 June 2013
As previously
reported Restatements Restated
Unaudited Unaudited
Rm Rm Rm
Assets
Cash and balances with central banks 56 041 56 041
Financial investments, trading and pledged assets 479 609 15 088 494 697
Loans and advances 910 332 910 332
Derivative and other assets 175 486 175 486
Interest in associates and joint ventures 20 197 (15 088) 5 109
Investment property 24 259 24 259
Goodwill and other intangible assets 16 594 16 594
Property and equipment 16 200 16 200
Total assets 1 698 718 1 698 718
Equity and liabilities
Equity 144 123 144 123
Equity attributable to ordinary shareholders 122 348 122 348
Preference share capital and premium 5 503 5 503
Non-controlling interest 16 272 16 272
Liabilities 1 554 595 1 554 595
Deposit and current accounts 996 124 (6 805) 989 319
Deposits from banks 162 450 162 450
Deposits from customers 833 674 (6 805) 826 869
Derivative, trading and other liabilities 286 101 6 805 292 906
Policyholders' liabilities 241 414 241 414
Subordinated debt 30 956 30 956
Total equity and liabilities 1 698 718 1 698 718
Abbreviations and acronyms
BCBS ............... ................................ Basel Committee on Banking Supervision
bps ................ ...........................................................Basis points
BSI................. .................................... Banco Standard de Investimentos SA
CAGR................ ........................................... Compound annual growth rate
CDS ................ ...................................................Credit default swaps
CIB................. .........................................Corporate & Investment Banking
CSDP ............... ............................. Central Securities Depository Participant
DT.................. .............................................. Dividend withholding tax
FIC ................ ............................................. Fixed income and currency
GDP................. .................................................Gross domestic product
HEPS ............... ........................................... Headline earnings per share
IAS................. .................................... International Accounting Standards
ICBC ............... ............................... Industrial and Commercial Bank of China
IFRIC .............. ............International Financial Reporting Interpretations Committee
IFRS ............... ............................International Financial Reporting Standards
JSE ................ ............................................................JSE Limited
LCR................. ...............................................Liquidity coverage ratio
Liberty............. .................................................Liberty Holdings Group
NII ................ ................................................... Net interest income
NIR ................ ...................................................Non-interest revenue
NSFR ............... ...............................................Net stable funding ratio
OA GM .............. ......................................... Outside Africa global markets
OCI ................ ....................................Other comprehensive income business
PBB ................ ........................................... Personal & Business Banking
PIM ................ ....................................... Principal investment management
RCS................. ........................... RCS Investment Holdings Proprietary Limited
repos .............. ..........................................Reverse repurchase agreements
ROE ................ ...................................................... Return on equity
SAICA............... .......................South African Institute of Chartered Accountants
SARB ............... .............................................South African Reserve Bank
SB Plc ............. ..................................................... Standard Bank Plc
SBG ................ ................................................... Standard Bank Group
SENS ............... ........................................... Stock Exchange News Service
STC ................ .............................................Secondary tax on companies
the group .......... ................................................... Standard Bank Group
Troika ............. ........................................... Troika Dialog Group Limited
Tutuwa ............. ....................... Black economic empowerment ownership initiative
USD ................ .................................................. United States Dollar
Administrative and contact details
Standard Bank Group Limited Share transfer secretaries in
Registration number 1969/017128/06 South Africa
Incorporated in the Republic of South Africa Computershare Investor Services
Website: www.standardbank.com Proprietary Limited
70 Marshall Street, Johannesburg 2001
Registered office PO Box 61051, Marshalltown 2107
9th Floor, Standard Bank Centre
5 Simmonds Street, Johannesburg 2001 Share transfer secretaries in Namibia
PO Box 7725, Johannesburg 2000 Transfer Secretaries (Proprietary) Limited
4 Robert Mugabe Avenue
Group secretary (entrance in Burg Street), Windhoek
Zola Stephen PO Box 2401, Windhoek
Tel: +27 11 631 9106
JSE independent sponsor
Head: Investor relations Deutsche Securities (SA) Proprietary Limited
David Kinsey
Tel: +27 11 631 3931 Namibian sponsor
Simonis Storm Securities (Proprietary) Limited
Group financial director
Simon Ridley JSE joint sponsor
Tel: +27 11 636 3756 The Standard Bank of South Africa Limited
Head office switchboard Share and bond codes
Tel: +27 11 636 9111 JSE share code: SBK
ISIN: ZAE000109815
Directors NSX share code: SNB
TMF Phaswana (Chairman) NSX share code: SNB ZAE000109815
Kaisheng Yang** (Deputy chairman) SBKP ZAE000038881 (First preference shares)
SJ Macozoma (Deputy chairman) SBPP ZAE000056339 (Second preference shares)
RMW Dunne#, F du Plessis, TS Gcabashe, BJ Kruger* JSE bond codes: SBS, SBK, SBN, SBR, ETN series
(Chief executive), Adv KD Moroka, AC Parker, SSN series and CLN series (all JSE-listed bonds
SP Ridley*, MJD Ruck, Lord Smith of Kelvin KT#, issued in terms of The Standard Bank of South
PD Sullivan†, BS Tshabalala, SK Tshabalala* Africa Limited's Domestic Medium Term Note
(Chief executive), Wenbin Wang**, EM Woods Programme and Credit Linked Note Programme)
*Executive director **Chinese #British
†Australian
Please direct all customer queries and comments to:
information@standardbank.co.za
Please direct all shareholder queries and comments to:
InvestorRelations@standardbank.co.za
www.standardbank.com
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positioned to serve the anticipated growth in demand for banking and
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enable socioeconomic development and personal wealth creation in the
countries in which we operate.
Pictured is CfC Stanbic Bank Limited's (Kenya) head office in Nairobi.
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