Wrap Text
Unaudited condensed consolidated interim results for the six months ended 30 June 2017
Standard Bank Group
Registration number 1969/017128/06
Incorporated in the Republic of South Africa
JSE share code: SBK
ISIN: ZAE000109815
NSX share code: SNB ZAE000109815
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS AND DIVIDEND ANNOUNCEMENT 2017
FOR THE SIX MONTHS ENDED 30 JUNE
The Standard Bank Group Limited's (the group) condensed consolidated interim results, including the statement of
financial position, income statement, statement of changes in equity, statement of other comprehensive income and
statement of cash flows, for the six months ended 30 June 2017 (results) are prepared in accordance with the
requirements of the JSE Limited (JSE) Listings Requirements, the requirements of International Financial Reporting
Standards (IFRS) and its interpretations as adopted by the International Accounting Standards Board (IASB), the
South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting
Practices Committee, financial pronouncements as issued by the Financial Reporting Standards Council, the
presentation requirements of IAS 34 Interim Financial Reporting (excluding paragraph 16A(j) as permitted by the
JSE Listings Requirements) and the requirements of the South African Companies Act, 71 of 2008 applicable
to summarised financial statements.
The group's 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. This report
is presented in South African rand, which is the presentation currency of the group. All amounts are stated in millions
of rand (Rm), unless indicated otherwise. The accounting policies applied in the preparation of these unaudited condensed
consolidated interim results are in terms of IFRS and are consistent with the accounting policies applied in the
preparation of the group's previous audited consolidated annual financial statements, except for changes as required
by the mandatory and early adoption of the revised IFRS, as set out in the accounting policy elections and
restatement below.
Interim results have not been audited or independently reviewed by the group's external auditors. The group's 2016
annual financial information has been correctly extracted from the underlying audited consolidated annual financial
statements.
1H17 refers to the first half year results for 2017. 1H16 refers to the first half year results for 2016. FY16 refers
to the full year results for 2016. Change % reflects 1H17 change on 1H16.
All amounts relate to the group's results unless otherwise specified.
The directors of the group take full responsibility for the preparation of this report.
The preparation of the group's results was supervised by the group financial director, Arno Daehnke BSc, MSc, PhD,
MBA, AMP.
The results were made publicly available on 17 August 2017.
This report contains pro forma constant currency financial information. For further details refer to pro forma
constant currency financial information below. In terms of the JSE's Listings Requirements, the group no longer
posts a physical copy of this announcement to its shareholders. 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, can be found.
Shareholders are reminded that should they wish to make use of the group's electronic communication notification
system to receive all shareholder entitled communication electronically as opposed to delivery through physical mail
and have not already done so, this option can still be elected by advising the group's transfer secretaries at
the following email address edc.support@computershare.co.za or call +27 861 100 933. Other related queries can be
sent to electroniccommunication@standardbank.co.za.
Highlights
- R12 111 million
Headline earnings up 12%
1H16: R10 861 million
- 400 cents
Dividend per share up 18%
1H16: 340 cents
- 16.1%
Return on equity
1H16: 14.4%
- 56.3%
Cost-to-income ratio
1H16: 56.8%
- 756 cents
Headline earnings per share up 11%
1H16: 680 cents
- 9 554 cents
Net asset value per share up 2%
1H16: 9 381 cents
- 13.7%
Common equity tier 1 ratio
1H16: 13.2%
- 0.96%
Credit loss ratio
1H16: 1.05%
Overview of financial results
Group results
Standard Bank Group’s (SBG or the group) results for the period ended 30 June 2017 were robust, underpinned by our
universal client offering, geographic diversity and increasingly digital capabilities. Headline earnings per share
(HEPS) grew by 11% to 756 cents supporting an interim dividend per share of 400 cents, up 18% period on period.
Group credit impairments and operating costs were well managed, resulting in an overall decline in the credit loss
ratio from 105bps to 96bps and positive jaws of 1.0%. Group return on equity (ROE) improved from 14.4% to 16.1%.
As at 30 June 2017, the group’s capital position remained strong with a common equity tier 1 (CET1) ratio of 13.7%
(1H16: 13.2%).
Currency movements adversely impacted the group’s reported results, reducing group headline earnings by 7% period on
period. On a constant currency (CCY) basis, group headline earnings grew by 19%, supported by Africa Regions which grew
by 46%. Despite the dilution impact from ZAR strength, Africa Regions still increased its contribution to banking
headline earnings to 29% and contributed positively to group HEPS growth and ROE. The top five contributors to Africa
Regions’ headline earnings were Angola, Ghana, Mozambique, Nigeria and Uganda, which together represent c.60% of the Africa
Regions’ headline earnings. Against a backdrop of adverse macro-economic developments, policy uncertainty and rating agency
downgrades The Standard Bank of South Africa’s (SBSA) asset and income growth were constrained. Despite these headwinds,
SBSA demonstrated its resilience and grew its headline earnings 18% on the back of good cost management and muted credit
impairment charges.
Operating environment
In 1H17, global growth prospects firmed, supported by post-election optimism in the US and better than expected growth
in Europe and China. More specifically, China grew 6.9% in 2Q17, matching the robust momentum seen in 1Q17. Despite
better momentum, the stubbornly low inflation levels in key developed markets and slower than expected rate hikes provided
support to emerging market (EM) flows. EM markets, including South Africa, have benefited from the EM risk-on trade,
providing broad support to funding costs and currencies. This is best illustrated by the fact that despite entering a
technical recession in 1Q17 and being downgraded by three rating agencies during the period, SA funding costs remained
broadly flat and the ZAR strengthened on average against the major currencies period on period. The ZAR also appreciated
relative to all our key African Regions’ currencies over the same period; most notably the NGN, GHS and MZN.
The challenges facing South Africa, namely low growth, high unemployment and high levels of inequality, are well
ventilated. During the period, despite business confidence levels remaining low overall, certain parts of the economy did
grow. The moderate recovery in commodity prices provided some support to miners. As the drought abated in certain parts of
the country, it provided much needed respite to parts of the agricultural sector. Consumers had an opportunity to catch
their breath as rates remained flat and inflation trended downwards. Inflation re-entered the South African Reserve
Bank’s (SARB) 3% - 6% target range in April and remained in the range for the rest of the period. Underlying credit growth
remained lacklustre, supported by low single digit real corporate growth whilst household credit continued to contract,
albeit at a slower rate.
Across the 19 African countries in which we operate outside of South Africa, the dynamics continue to be diverse. In
the oil-export reliant countries on the west coast, such as Nigeria and Angola, prospects improved as oil recovered from
lows in 1H16. In contrast, foreign currency liquidity constraints continued for most of the period, depressing market
activity. East Africa suffered the effects of a drought. In Kenya specifically, the combination of the drought, the
effects of the regulatory caps and floors introduced in September 2016 and pre-election anxiety resulted in a slowdown in
credit growth. Mozambique’s currency, although weaker than in 1H16, stabilised in 1H17.
The combination of higher rates, higher cash balances on the back of foreign currency liquidity constraints, flight to
quality and improved macros provided support for the Africa Regions’ performance.
Revenue
Total income declined by 1% period on period to R49 336 million, driven primarily by weaker non-interest revenue
(NIR) which decreased 7%. Net interest income (NII) increased 4% underpinned by net interest margin (NIM) expansion.
NIM expanded 22bps to 394bps driven by higher average rates, loan pricing and funding margin. Total income grew by
8% in CCY, supported by 11% growth in NII and 4% growth in NIR.
NIR was impacted negatively by trading revenue which declined 19% in ZAR and 8% in CCY. Relatively lower volatility in
SA and in various Africa Regions’ markets reduced the opportunity to generate revenue. Despite recording strong growth
in Africa Regions (up 23% in CCY) and 4% growth in SBSA, group net fee and commission income declined 2% period on
period due to currency headwinds. Other revenue was broadly flat.
Credit impairment charges
Declines in early arrears and non-performing loans (NPL) underpinned the decline in credit impairment charges period
on period, while coverage levels remained broadly flat overall. The credit loss ratio decreased marginally from 105bps to
96bps. In Personal & Business Banking (PBB), declines in early arrears, and portfolio provisions, were driven by continued
improvements in collections, including early interventions. PBB’s specific impairment charges increased across card,
personal unsecured and business lending. Business lending charges increased following the migration of a few larger
exposures to NPLs in the period. Improvements in mortgages, as poorer vintages continue to roll-off, and vehicle and asset
finance (VAF), as the quality of the book improved, resulted in declines in the credit loss ratios for those portfolios.
Corporate & Investment Banking’s (CIB) impairment charges declined from elevated levels in the prior period, in particular,
Africa Regions’ portfolio impairments. CIB SA’s portfolio impairment charges increased period on period. Coverage ratios
increased across card debtors, personal unsecured and business lending as well as CIB portfolios in the current period.
Operating expenses
Operating expenses declined 2% period on period driven by tight control on headcount, focus on discretionary spend and
favourable currency tailwinds. On a CCY basis, operating costs grew by 7%. Despite the challenging revenue environment,
the group managed to deliver positive jaws, in ZAR and CCY, in line with our strategic focus to reduce the
cost-to-income ratio. The cost-to-income ratio declined from 56.8% to 56.3%.
In 1H16 the group recorded an operational loss of R300 million related to a fraud incident in Japan which did not
recur in 1H17. IT function spend decreased 3% in ZAR, as the R261 million increase in IT amortisation charge was more
than offset by decreases in other IT spend. Certain USD licensing and maintenance costs were also lower once translated
into ZAR.
Loans and advances
Gross loans and advances to customers grew 1% period on period, supported by PBB which grew by 3% to R598 billion
while CIB declined by 3% to R359 billion. On a CCY basis, Africa Regions’ PBB grew 7% and CIB declined 5%. As at
30 June 2017, Africa Regions represented c.9% of the PBB portfolio and c.12% of the CIB portfolio. Although the PBB
SA portfolio recorded low single digit growth overall, business lending grew 15% period on period in line with our
strategic focus to grow in this business. On average, mortgage and VAF disbursements in SA amounted to more than
R5.7 billion a month. CIB loans recorded a decline of 3% in ZAR and 1% in CCY basis, as trends seen in 2H16
continued into 1H17.
Capital, funding and liquidity
The group remains well capitalised with a CET1 ratio of 13.7% (1H16: 13.2%) and a total capital adequacy ratio of
16.2% (1H16: 15.9%). The group’s capital position remains strong and in excess of the group’s target ranges. In line
with the group’s objective to optimise its capital stack, SBG successfully executed its inaugural Basel III compliant
Additional Tier 1 (AT1) bond issue in March 2017, raising R1.7 billion. The group will issue further AT1 subject to
pricing and market conditions. The group continues to monitor a number of developments locally and internationally
which could negatively impact the group’s capital ratios, most pertinent of which are IFRS 9 and the finalisation
of the Basel III reforms. The IFRS 9 impact will be moderated by the removal of the capital deduction relating to
the existing shortfall of credit provisions to expected losses, which amounted to R2.0 billion as at 30 June 2017.
Deposits and current accounts from customers increased 4% period on period, and 8% in CCY. Retail-priced deposits
increased 6% in ZAR and 12% in CCY. The group remains focused on sourcing stable deposits from a diverse range of
sources. The group’s established, on-the-ground franchises across our African footprint provide locally sourced
deposits complemented by the USD and GBP funding raised through the group’s offshore operations in Isle of Man
and Jersey.
During the period, the group’s liquidity position remained strong and within approved risk appetite and tolerance
limits. Market cost of liquidity widened marginally during the period. As at 30 June 2017 the group’s quarterly average
Basel III liquidity coverage ratio (LCR) amounted to 116%, exceeding the minimum phased-in Basel III LCR requirement of 80%.
The group is appropriately positioned to meet the minimum Basel III net stable funding ratio requirements on 1 January
2018.
Gross loans and advances to customers
CCY1 Change 1H17 1H16 FY16
% % Rm Rm Rm
Personal & Business Banking 4 3 598 422 582 076 588 353
Mortgage loans 3 3 342 128 332 782 336 451
Vehicle and asset finance 1 (0) 80 889 80 929 81 035
Card debtors 2 1 32 119 31 683 31 229
Other loans and advances 10 5 143 286 136 682 139 638
Corporate & Investment Banking (1) (3) 359 486 370 822 360 336
Corporate loans (2) (5) 291 899 306 981 294 817
Commercial property finance 6 6 67 587 63 841 65 519
Central and other 56 56 (3 730) (8 534) (5 056)
Gross loans and advances to customers 3 1 954 178 944 364 943 633
1 Constant currency change.
Deposits and current accounts from customers
CCY Change 1H17 1H16 FY16
% % Rm Rm Rm
Personal & Business Banking 9 5 509 276 486 515 497 558
Retail priced deposits 12 6 412 022 389 910 401 497
Wholesale priced deposits 1 1 97 254 96 605 96 061
Corporate & Investment Banking 7 4 623 208 598 024 616 601
Central and other 6 6 (3 870) (4 121) (4 413)
Deposits and current accounts
from customers 8 4 1 128 614 1 080 418 1 109 746
Comprising:
Retail priced deposits and
current accounts 12 6 412 022 389 910 401 497
Wholesale priced deposits 6 4 716 592 690 508 708 249
Deposits and current accounts
from customers 8 4 1 128 614 1 080 418 1 109 746
Headline earnings by business unit
CCY Change 1H17 1H16 FY16
% % Rm Rm Rm
Personal & Business Banking 15 11 6 109 5 523 12 748
Corporate & Investment Banking 19 10 5 335 4 856 10 339
Central and other (1) (5) (427) (406) (1 025)
Banking activities 18 10 11 017 9 973 22 062
Other banking interests >100 >100 212 2 (8)
Liberty (attributable to the group) (0) (0) 882 886 955
Standard Bank Group 19 12 12 111 10 861 23 009
Overview of business unit performance
Personal & Business Banking
PBB’s headline earnings grew 11% to R6.1 billion and ROE improved from 16.5% to 17.7%. On a CCY basis, headline
earnings grew 15%. Credit impairments were flat on the back of improved collection strategies. PBB headcount
declined 1% driven by PBB SA. PBB continues to grow the client base in its target segments, namely prestige
and private banking as well as business banking.
PBB SA’s earnings grew by 13% to R5.7 billion. Total income grew 6% supported by target customer growth and product
yield. Operating expenses grew 5%, delivering positive jaws. In line with our clear focus on client experience, staff are
being re-skilled, branch formats revised and rationalised and digital capabilities enhanced. Headcount, branch numbers
as well as branch size, all recorded declines in the period. Credit impairments declined 6% period on period. Ongoing
improvements in the mortgage and VAF performance were partially offset by a reduction in post write-off recoveries and a
deterioration in card and business lending. Wealth recorded an improvement in the product mix and pricing in the brokerage
and underwriting business as well as good asset growth. Wealth income was impacted by losses associated with the storm
and fire events in the Western Cape.
Results outside SA were impacted by relative currency depreciation. To better reflect the underlying trends, the
commentary below refers to movements in the PBB Africa Regions and PBB International businesses on a constant currency
basis, unless indicated otherwise.
PBB Africa Regions continues to gain momentum. Customer loans and deposits grew by 7% and 12% respectively, supporting
income growth of 11%. This growth was underpinned by a combination of an expanding active customer base in targeted
countries and an increasing adoption of digital banking. Active PBB customers increased by more than 10% in each of the
following countries: Kenya, Nigeria, Botswana, Mozambique and Tanzania. NII was supported by positive endowment in Nigeria
and Mozambique on cash management, savings and investment portfolios. Regulatory changes in Swaziland, Zimbabwe and
Malawi impacted fees. In 1H17 the credit loss ratio increased by c.44bps to 264bps, driven predominantly by increased
charges in Nigeria following an accelerated write-off of NPLs. Measured in ZAR, PBB Africa Regions earnings were
materially impacted by the depreciation of the NGN period on period.
PBB International’s headline earnings grew 41% supported by an 18% increase in the deposit base in GBP, margin
expansion and growth in the trust business.
Collaboration with Liberty has been enhanced, with a focus on improving alignment of product development and sales
initiatives. Opportunities to better leverage the respective customer bases both in SA and in Africa Regions continue
to be pursued.
Digital adoption continued to gain traction. PBB SA recorded close on 500 million mobile transactions, up 55% relative
to the prior period while ATM and teller volumes were down 5% and 15% respectively. Africa Regions recorded 100 million
digital transactions, up 47% period on period.
Corporate & Investment Banking
CIB’s headline earnings grew 10% to R5.3 billion and ROE improved from 17.8% to 21.4%. On a CCY basis, headline
earnings grew 19% supported by strong revenue growth, better credit performance and tight management of costs.
CIB recorded targeted asset growth in the Consumer, Financial Institutions and Real Estate sectors. Due to the
impact of currency, all growth percentages reported hereafter are on a CCY basis.
NII grew 18% supported by higher customer deposits, an improved mix towards current accounts as well as positive
endowment. Fees increased 18% following improvements in client activity across the debt and equity capital markets
business. Trading revenue declined by 5% due to a combination of compressed margins and lower volumes as a result of
low market volatility. Total income grew 10% to R17.4 billion underpinned by CIB’s diversified and sustainable
franchise, reflecting the successful deepening of client relationships. Tightly managed headcount and discretionary
spend assisted in containing cost growth. Operating costs increased 3%, delivering positive jaws of 7% and a lower
cost-to-income ratio of 52.2%.
The credit loss ratio to customers declined from 71bps in the prior period to 45bps, as prior period impairments on
specific names in SA, Nigeria and Ghana were not repeated.
Global markets headline earnings declined 6% to R2.0 billion. Income growth was subdued at 2% due to lower client
activity and reduced market volatility across various countries, including SA. Liquidity shortages and regulatory
constraints impacted trading revenues in Nigeria, Mozambique and Uganda.
Transactional products and services headline earnings grew 67% to R1.9 billion. Total income was 20% higher than the
prior period due to continued good deposit growth and positive endowment underpinned by new clients gained. Impairment
charges declined from elevated levels in the prior year. Costs were well contained.
Investment banking headline earnings increased 18% to R1.4 billion. Total income increased 10%, mainly as a result of
strong fee and commission income growth from certain landmark deals concluded in the period. Despite a subdued macro
environment, loans and advances grew, supporting NII growth. The quality of the book improved, which was reflected in
lower margins and NII growth. Impairment charges declined and cost discipline delivered positive jaws for the period.
Central and other
This segment includes costs associated with corporate activities and servicing the group capital requirements, namely
the preference shares. The net headline loss for the period was broadly in line with the prior period.
Other banking interests
Headline earnings from other banking interests increased from R2 million in 1H16 to R212 million in 1H17. The headline
earnings contribution from the group’s 40% stake in ICBC Standard Bank Plc (ICBCS) amounted to R48 million, a significant
improvement on the R356 million loss recorded in the prior period. The headline earnings contribution from the group’s
20% stake in ICBC Argentina declined 54% from R358 million to R164 million on the back of lower trading revenue, a weaker
macro-economic environment in Argentina, higher impairments and a weaker Argentinian Peso.
Liberty
The financial results reported are the consolidated results of the group’s 56% investment in Liberty, adjusted for the
group’s shares held by Liberty for the benefit of Liberty policyholders and treated as treasury shares in the group’s
consolidated accounts. Liberty’s normalised headline earnings for the period decreased 30% to R1.3 billion, driven, in
particular, by continued pressure in new business margins affecting Individual Arrangements and the performance of
STANLIB. Liberty’s IFRS headline earnings, post the impact of BEE preference shares and the Liberty Two Degrees listed
Real Estate Investment Trust accounting mismatch, was 15% lower at R1.5 billion. Shareholders are referred to the full
Liberty announcement dated 4 August 2017 for further detail. The impact of Liberty’s deemed treasury shares period on
period amounted to R139 million. Liberty’s IFRS headline earnings attributable to the group, adjusted for the impact
of Liberty’s deemed treasury shares, was R882 million, down slightly from the R886 million recorded in the prior period.
Prospects
Looking ahead, stronger global growth and firmer commodity prices should provide some support in 2H17. In July, the
IMF reaffirmed its outlook for global growth of 3.5% in 2017 and 3.6% in 2018. Global trade is expected to grow faster.
The EM trajectory is also favourable underpinned by supportive policy in China as well as broader infrastructure spend in
Asia. In sub-Saharan Africa, the macro environment is expected to continue to improve and interest rates to trend down
as inflation moderates. The IMF expects sub-Saharan Africa’s GDP growth to recover in 2017 and 2018, from a low of 1.3%
in 2016 to 2.7% and 3.5% respectively. More specifically, the GDP growth across our Africa Regions franchises is expected
to accelerate to 3.3% in West, 3.9% in South and Central and 5.9% in East in 2018. Nigeria’s economy is expected to
recover from a 1.6% contraction in 2016 to positive growth of 0.8% in 2017 and accelerate to 1.9% in 2018. In terms of
South Africa’s outlook, the expectations of a recovery in 2017 have moderated and the current SARB forecast is for 0.5%
growth for the year. The threat of further rating agency downgrades remains. Declining interest rates, in SA and in some
of the countries in our Africa Regions, will be a headwind in 2H17.
In the period, we have successfully embedded the five value drivers of client focus, employee engagement, risk and
conduct, financial outcomes and social, economic and environmental (SEE) impact in the businesses. They underpin our
decisions and drive the group’s shared value outcomes.
Across our CIB franchise, we remain committed to partnering our clients on their growth journeys and delivering
exceptional client experiences. We bank clients, not economies, and will continue to seek out pockets of growth. In August
2017, we opened our doors in Abidjan, Ivory Coast, the biggest economy in the West African Economic and Monetary Union
(WAEMU) and one of the fastest growing economies on the continent, providing our clients with on-the-ground CIB capabilities
and access to the broader WAEMU region. In Africa Regions, we continue to develop our PBB franchises in a consciously
systematic manner; banking the employees, suppliers and customers of our corporate clients. Our strategy of banking the
ecosystems surrounding our clients continues to gain traction.
We will continue to invest in our digital capabilities and the re-skilling of our employees, with the primary
objective of improving the client experience. We recognise that we are not where we want to be in terms of customer
satisfaction and are making changes to ensure that we improve this going forward. Our core banking replacement journey
in SA and Africa Regions remains on track to close by the end of the year. Although it has been a long and costly exercise,
we remain of the opinion that it provides us with the resilient platform required to compete in a digital world. Our
innovation initiatives extend across analytics, robotics, cyber security and blockchain. We will continue to seek
opportunities to successfully collaborate with FinTechs and support relevant IT skills development initiatives.
In a complex business environment, we rely on the people across our network to navigate the challenges each business
faces and make appropriate decisions in line with strategic priorities. Doing the right business the right way remains a
priority. We take swift action against those who are proved to be at odds with this. Regulatory change, both locally and
internationally, has continued apace and appears unlikely to slow. We continue to engage with policymakers and regulators
across our footprint to broker appropriately balanced outcomes. In South Africa specifically, we will continue to actively
engage in the debates around the banking sector’s role in promoting transformation and inclusive growth, and on
specific issues such as the importance of the SARB’s mandate and independence.
As underpinned by our purpose of driving Africa’s growth, our view is that a financial institution’s role in society
is broader than providing superior returns to shareholders. In terms of our SEE impact, we have a responsibility to
facilitate growth in the markets in which we operate, improve financial literacy and access, and develop local markets
in a responsible and sustainable way.
We remain committed to our medium term targets of delivering through-the-cycle HEPS growth and ROE within our target
range of 15% - 18%. We are focused on the levers available to deliver on our targets, including positive jaws, efficient
capital management and improving returns from PBB Africa Regions.
Sim Tshabalala Ben Kruger
Group chief executive Group chief executive
Thulani Gcabashe
Chairman
16 August 2017
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. 96 of 400 cents per ordinary share (the cash dividend) to ordinary shareholders recorded in the
register of the company at the close of business on Friday, 15 September 2017. The last day to trade to participate
in the dividend is Tuesday, 12 September 2017. Ordinary shares will commence trading ex dividend from
Wednesday, 13 September 2017.
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 Wednesday, 13 September 2017, and
Friday, 15 September 2017, both days inclusive. Ordinary shareholders who hold dematerialised shares will have their
accounts at their Central Securities Depository Participant (CSDP) or broker credited on Monday, 18 September 2017.
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 dividend:
- 6.5% first cumulative preference shares (first preference shares) dividend No. 96 of 3,25 cents (gross) per first
preference share, payable on Monday, 11 September 2017, to holders of first preference shares recorded in the books
of the company at the close of business on the record date, Friday, 8 September 2017. The last day to trade to
participate in the dividend is Tuesday, 5 September 2017. First preference shares will commence trading ex dividend
from Wednesday, 6 September 2017.
- Non-redeemable, non-cumulative, non-participating preference shares (second preference shares) dividend No. 26 of
400,93 cents (gross) per second preference share, payable on Monday, 11 September 2017, to holders of second preference
shares recorded in the books of the company at the close of business on the record date, Friday, 8 September 2017.
The last day to trade to participate in the dividend is Tuesday, 5 September 2017. Second preference shares will
commence trading ex dividend from Wednesday, 6 September 2017.
The salient dates and times for the preference share dividend are set out in the table that follows.
Preference share certificates (first and second) may not be dematerialised or rematerialised between Wednesday,
6 September 2017, and Friday, 8 September 2017, both days inclusive. Preference shareholders (first and second) who
hold dematerialised shares will have their accounts at their CSDP or broker credited on Monday, 11 September 2017.
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,
non-cumulative,
6.5% cumulative non-participating
Ordinary preference shares preference shares
shares (First preference shares) (Second preference shares)
JSE Limited
Share code SBK SBKP SBPP
ISIN ZAE000109815 ZAE000038881 ZAE000056339
Namibian Stock Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Dividend number 96 96 26
Dividend per share (cents) 400,00 3,25 400,93
Last day to trade in order to be Tuesday, Tuesday, Tuesday,
eligible for the cash dividend 12 September 2017 5 September 2017 5 September 2017
Wednesday, Wednesday, Wednesday,
Shares trade ex the cash dividend 13 September 2017 6 September 2017 6 September 2017
Friday, Friday, Friday,
Record date in respect of the cash dividend 15 September 2017 8 September 2017 8 September 2017
Dividend cheques posted and CSDP/broker Monday, Monday, Monday,
account credited/updated (payment date) 18 September 2017 11 September 2017 11 September 2017
The above dates are subject to change. Any changes will be released on the Stock Exchange News Service (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 South African Income Tax Act, 58 of 1962, the cash dividend will, unless exempt, be subject to
dividends tax that was introduced with effect from 1 April 2012. South African resident ordinary and preference
shareholders that are not exempt from dividends tax, will be subject to dividends tax at a rate of 20% 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 320 cents per ordinary share, 2,6 cents per first preference share and 320,744 cents per second preference share.
Non-resident ordinary and preference shareholders may be subject to dividends tax at a rate of less than 20% 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 the date of declaration, is as follows:
- 1 618 211 936 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.
Financial statistics
for the six months ended 30 June 2017
Change 1H17 1H16 FY16
% Unaudited Unaudited Audited
Number of ordinary shares in issue (000's)
End of period 1 602 748 1 595 627 1 596 583
Weighted average 1 603 040 1 597 746 1 597 739
Diluted weighted average 1 622 574 1 618 260 1 619 444
Cents per ordinary share
Basic earnings 14 769,8 676,7 1 389,8
Headline earnings 11 755,5 679,8 1 440,1
Diluted headline earnings 11 746,4 671,2 1 420,8
Dividend 18 400 340 780
Net asset value 2 9 554 9 381 9 442
Financial performance (%)
ROE 16.1 14.4 15.3
Net interest margin on banking activities 3.94 3.72 3.83
Credit loss ratio on banking activities 0.96 1.05 0.86
Cost-to-income ratio on banking activities 56.3 56.8 56.3
Capital adequacy ratios (%)
Basel III
Common equity tier 1 (CET1) capital
adequacy ratio 13.7 13.2 13.9
Tier 1 capital adequacy ratio 14.2 13.6 14.3
Total capital adequacy ratio 16.2 15.9 16.6
Condensed consolidated statement of financial position
as at 30 June 2017
1H17 1H161 FY16
Unaudited Unaudited Audited
Rm Rm Rm
Assets
Cash and balances with central banks 70 949 73 442 77 474
Derivative assets 53 690 79 942 68 620
Trading assets 126 565 122 839 129 845
Pledged assets 17 447 18 324 18 777
Financial investments 519 084 470 968 483 774
Current and deferred tax assets 2 264 1 962 2 467
Loans and advances 1 043 398 1 071 206 1 065 405
Policyholders' assets 7 689 7 661 7 314
Other assets 30 547 29 127 21 547
Interest in associates and joint ventures 9 712 8 827 8 196
Investment property 31 508 30 955 31 155
Property and equipment 15 852 16 210 16 041
Goodwill and other intangible assets 23 814 23 970 23 675
Total assets 1 952 519 1 955 433 1 954 290
Equity and liabilities
Equity 183 817 176 257 179 359
Equity attributable to ordinary shareholders 153 132 149 690 150 757
Equity attributable to other equity
instrument holders2 7 247 5 503 5 503
Non-controlling interests 23 438 21 064 23 099
Liabilities 1 768 702 1 779 176 1 774 931
Derivative liabilities 59 861 90 951 75 083
Trading liabilities 45 758 46 848 47 867
Current and deferred tax liabilities 7 970 7 992 8 317
Deposits and debt funding 1 212 115 1 197 155 1 213 621
Policyholders' liabilities 309 200 312 111 307 230
Subordinated debt 24 954 28 438 25 997
Provisions and other liabilities 108 844 95 681 96 816
Total equity and liabilities 1 952 519 1 955 433 1 954 290
1 Refer to the accounting policy elections and restatement regarding details of the change in presentation policy.
2 Other equity instruments comprise: preference share capital of R5 503 million (1H16 and FY16: R5 503 million) and
AT1 capital of R1 744 million (1H16 and FY16: Rnil). Refer to the subordinated debt instruments paragraph within other
reportable items for further details regarding the AT1 capital.
Condensed consolidated income statement
for the six months ended 30 June 2017
1H17 1H16 FY16
Unaudited Unaudited Audited
Rm Rm Rm
Income from banking activities 49 336 49 863 99 857
Net interest income 28 770 27 775 56 892
Non-interest revenue 20 566 22 088 42 965
Income from investment management and life
insurance activities 12 097 11 695 21 365
Total income 61 433 61 558 121 222
Credit impairment charges (5 155) (5 815) (9 533)
Net income before operating expenses 56 278 55 743 111 689
Operating expenses in banking activities (27 769) (28 340) (56 235)
Operating expenses in insurance activities (8 822) (8 433) (17 374)
Net income before non-trading and capital related items 19 687 18 970 38 080
Non-trading and capital related items 214 (214) (1 123)
Share of post tax profit from associates and joint ventures 412 152 187
Net income before indirect taxation 20 313 18 908 37 144
Indirect taxation (1 154) (1 137) (2 418)
Net income before direct taxation 19 159 17 771 34 726
Direct taxation (4 526) (4 716) (8 932)
Profit for the period 14 633 13 055 25 794
Attributable to ordinary shareholders 12 340 10 812 22 206
Attributable to other equity instrument holders 257 196 406
Attributable to non-controlling interests 2 036 2 047 3 182
Earnings per share
Basic earnings per ordinary share (cents) 769,8 676,7 1 389,8
Diluted earnings per ordinary share (cents) 760,5 668,1 1 371,2
Condensed consolidated statement of other comprehensive income
for the six months ended 30 June 2017
1H17 1H16 FY16
Unaudited Unaudited Audited
Rm Rm Rm
Profit for the period 14 633 13 055 25 794
Other comprehensive loss after tax for the period (2 473) (9 364) (14 647)
Items that may be reclassified subsequently
to profit and loss (2 368) (9 306) (14 773)
Exchange differences on translating foreign operations (2 697) (9 315) (14 680)
Movement in the cash flow and net investment
hedging reserve 25 28 30
Net change in fair value of cash flow and net investment
in foreign operations' hedges (7) (1 164) (1 319)
Realised fair value adjustments of cash flow hedges
transferred to profit or loss 32 1 192 1 349
Movement in the available-for-sale revaluation reserve 304 (19) (123)
Items that may not be reclassified to profit and loss
Defined benefit fund and other remeasurements (105) (58) 126
Total comprehensive income for the period 12 160 3 691 11 147
Attributable to ordinary shareholders 10 547 3 689 10 882
Attributable to other equity instrument holders 257 196 406
Attributable to non-controlling interests 1 356 (194) (141)
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2017
Equity
attributable
Ordinary to other Non-
shareholders' equity controlling Total
equity holders1 interest equity
Rm Rm Rm Rm
Balance at 1 January 2016 (audited) 151 069 5 503 22 336 178 908
Total comprehensive income for the period 3 689 196 (194) 3 691
Transactions with owners, recorded directly in equity (5 068) (196) (970) (6 234)
Equity-settled share-based payment transactions2 487 16 503
Deferred tax on share-based payment transactions 47 47
Transactions with non-controlling shareholders (126) (302) (428)
Net dividends paid (5 979) (196) (693) (6 868)
Other equity movements 503 9 512
Unincorporated property partnerships' capital
reductions and distributions (108) (108)
Balance at 30 June 2016 (unaudited) 149 690 5 503 21 064 176 257
Balance at 1 July 2016 149 690 5 503 21 064 176 257
Total comprehensive income for the period 7 193 210 53 7 456
Transactions with owners, recorded directly in equity (6 126) (210) 2 093 (4 243)
Equity-settled share-based payment transactions2 (361) 32 (329)
Deferred tax on share-based payment transactions 160 160
Transactions with non-controlling shareholders (522) 2 407 1 885
Net dividends paid (5 484) (210) (405) (6 099)
Other equity movements 81 59 140
Unincorporated property partnerships' capital
reductions and distributions (111) (111)
Balance at 31 December 2016 (audited) 150 757 5 503 23 099 179 359
Balance at 1 January 2017 (audited) 150 757 5 503 23 099 179 359
Total comprehensive income for the period 10 547 257 1 356 12 160
Transactions with owners, recorded directly in equity (8 172) 1 487 (905) (7 590)
Equity-settled share-based payment transactions2 (348) 7 (341)
Deferred tax on share-based payment transactions (45) (45)
Transactions with non-controlling shareholders 81 (67) 14
Net dividends paid (7 100) (257) (814) (8 171)
Other equity movements (760) 1 744 (31) 953
Unincorporated property partnerships' capital
reductions and distributions (112) (112)
Balance at 30 June 2017 (unaudited) 153 132 7 247 23 438 183 817
1 Other equity holders are holders of preference share capital and AT1 capital. The group issued no preference shares for
1H17 (1H16 and FY16: nil) and issued R1 744 million AT1 capital for 1H17 (1H16 and FY16: nil).
2 Includes hedges of the group's equity settled share incentive schemes.
Condensed consolidated statement of cash flows
for the six months ended 30 June 2017
1H17 1H16 FY16
Unaudited Unaudited Audited
Rm Rm Rm
Net cash flows from operating activities 17 401 10 839 40 255
Cash outflow from direct taxation paid (5 187) (4 745) (9 232)
Cash flow from other operating activities 22 588 15 584 49 487
Net cash flows (used in)/generated from investing activities (10 382) 1 969 (13 377)
Cash outflow from capital expenditure (2 185) (3 123) (7 537)
Cash flow from other investing activities (8 197) 5 092 (5 840)
Net cash flows used in financing activities (5 944) (5 736) (12 030)
Cash flow from equity transactions with non-controlling interests 1 674 (524) 1 575
Cash outflow from subordinated debt instruments redeemed (1 400) (3 175)
Cash inflow from subordinated debt instruments issued 2 001 1 714 2 694
Cash outflow from dividends paid (8 171) (6 868) (12 967)
Cash flow from other financing activities (48) (58) (157)
Effect of exchange rate changes on cash and cash equivalents (7 600) (8 742) (12 486)
Net (decrease)/increase in cash and cash equivalents (6 525) (1 670) 2 362
Cash and cash equivalents at beginning of the period 77 474 75 112 75 112
Cash and cash equivalents at the end of the period 70 949 73 442 77 474
Comprising:
Cash and balances with central banks 70 949 73 442 77 474
Notes
Condensed segment report
for the six months ended 30 June 2017
The group’s primary segments comprise the group’s banking activities (comprising PBB, CIB and central and other), the
group’s other banking interests (comprising the group’s interest in ICBC Argentina and ICBCS) and Liberty (comprising
the group’s investment management and life insurance activities).
1H17 1H16 FY16
Unaudited Unaudited1 Audited1
Rm Rm Rm
Revenue contribution by business unit
Personal & Business Banking 33 398 33 617 67 622
Corporate & Investment Banking 17 441 17 732 35 274
Central and other (1 503) (1 486) (3 039)
Banking activities 49 336 49 863 99 857
Liberty 12 097 11 695 21 365
Standard Bank Group 61 433 61 558 121 222
Profit or loss attributable to ordinary shareholders
Personal & Business Banking 6 124 5 499 12 637
Corporate & Investment Banking 5 307 4 832 10 247
Central and other (213) (407) (1 625)
Banking activities 11 218 9 924 21 259
Other banking interests 240 2 (8)
Liberty 882 886 955
Standard Bank Group 12 340 10 812 22 206
Total assets by business unit
Personal & Business Banking 696 189 677 600 689 183
Corporate & Investment Banking 858 127 911 751 897 565
Central and other (22 312) (40 059) (42 990)
Banking activities 1 532 004 1 549 292 1 543 758
Other banking interests 7 811 7 028 6 445
Liberty 412 704 399 113 404 087
Standard Bank Group 1 952 519 1 955 433 1 954 290
Total liabilities by business unit
Personal & Business Banking 622 077 606 450 618 113
Corporate & Investment Banking 800 774 851 516 842 751
Central and other (38 852) (52 853) (62 425)
Banking activities 1 383 999 1 405 113 1 398 439
Liberty 384 703 374 063 376 492
Standard Bank Group 1 768 702 1 779 176 1 774 931
1 Where responsibility for individual cost centres and divisions within business units change, the comparative figures
have been reclassified accordingly.
Headline earnings
for the six months ended 30 June 2017
1H17 1H16 FY16
Unaudited Unaudited Audited
Rm Rm Rm
Profit for the period 12 340 10 812 22 206
Headline adjustable items (reversed)/added (230) 80 989
IAS 16 - (Gain)/loss on sale of property and equipment (18) 5 50
IAS 21 - Realised foreign currency profit on foreign operations (214) (62)
IAS 27/IAS 28 - Loss/(gains) on disposal of businesses 18 3 (11)
IAS 28/IAS 36 - Impairment of associate 10 10
IAS 36 - Impairment of intangible assets 196 654
IAS 36 - Goodwill impairment 482
IAS 39 - Realised gains on available-for-sale assets (16) (134) (134)
Taxation on headline earnings adjustable items (1) (26) (178)
Non-controlling interests’ share of headline earnings
adjustable items 2 (5) (8)
Standard Bank Group headline earnings 12 111 10 861 23 009
Headline earnings per ordinary share (cents)
Headline earnings per ordinary share 755,5 679,8 1440,1
Diluted headline earnings per ordinary share 746,4 671,2 1420,8
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 2/2015 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.
1H17 FY16
Unaudited Audited
Rm Rm
Cost 47 48
Carrying value 411 389
Fair value 411 389
Realised gains on disposal for the period
included in headline earnings 45
Attributable income before impairment 22 3
Contingent liabilities and commitments
as at 30 June 2017
1H17 FY16
Unaudited Audited
Rm Rm
Letters of credit and bankers’ acceptances 12 791 12 607
Guarantees 62 793 64 076
Contingent liabilities 75 584 76 683
Investment property 514 633
Property and equipment 357 315
Other intangible assets 397 399
Commitments 1 268 1 347
Day one profit or loss
The table below sets out the aggregate net day one profits or loss 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
Balance as at 1 January 2016 (audited) 295 582 877
Additional net profit on new transactions during the year 2 137 139
Recognised in profit or loss during the year (16) (131) (147)
Exchange differences (120) (120)
Balance as at 31 December 2016 (audited) 161 588 749
Balance as at 1 January 2017 (audited) 161 588 749
Additional net profit on new transactions during the period 411 37 448
Recognised in profit or loss during the period (25) (36) (61)
Balance as at 30 June 2017 (unaudited) 547 589 1 136
Related party transactions
Tutuwa related parties
Tutuwa participants were allowed to access their underlying equity value post the expiry of the lock-in period on
31 December 2014. For both 1H17 as well as FY16 the shares in issue financed by the group had an opening and closing
balance of 5 750 291 shares, with no movements in these shares for both periods. The weighted number of shares thus
also equated to 5 750 291 for both periods.
Post-employment benefit plans
The group manages R11 193 million (FY16: R11 918 million) of the post-employment benefit plans’ assets. Other
significant balances between the group and the group’s post-employment benefit plans are listed below:
1H17 FY16
Unaudited Audited
Rm Rm
Investments held in bonds and money market instruments 1 023 947
Value of ordinary group shares held 528 570
Balances and transactions with ICBCS
The following significant balances and transactions were entered into between the group and ICBCS, an associate of the
group.
1H17 FY16
Unaudited Audited
Rm Rm
Derivative assets 1 308 1 856
Loans and advances 11 301 30 111
Other assets 1 928 256
Derivative liabilities (1 975) (2 271)
Deposits and debt funding (712) (1 315)
Provisions and other liabilities (1 199) (287)
The group entered into certain transitional service level arrangements with ICBCS in order to manage the orderly
separation of ICBCS from the group post the sale of 60% of Standard Bank Plc (SB Plc). In terms of these arrangements,
services are delivered to and received from ICBCS for the account of each respective party. As at 30 June 2017 the
expense recognised in respect of these arrangements amounted to R106 million (FY16: R202 million).
Balances and transactions with the Industrial and Commercial Bank of China (ICBC)
The following significant balances and transactions were entered into between the group and ICBC, a 20.1% shareholder
of the group.
1H17 FY16
Unaudited Audited
Rm Rm
Loans and advances 182 246
Other assets 629 656
Deposits and debt funding (6 583)
The group recognised losses in respect of certain commodity reverse repurchase agreements with third parties prior to
the date of conclusion of the disposal of a controlling interest in SB Plc to ICBC. As a consequence of the disposal of
SB Plc, the group has a right, by means of a post-disposal adjustment, to 60% of insurance and other recoveries, net of
costs, relating to claims by SB Plc for those recognised losses prior to the date of conclusion of the transaction.
Settlement of these amounts will occur based on audited information on pre-agreed anniversaries of the completion of the
transaction and the full and final settlement of all claims in respect of losses incurred. As at 30 June 2017, a balance
of USD48 million (R629 million) (FY16: USD48 million; R656 million) is receivable from ICBC in respect of this arrangement.
Mutual funds
The group invests in various mutual funds that are managed by Liberty. Where the group has assessed that it has control
(as defined by IFRS) over these mutual funds, it accounts for these mutual funds as subsidiaries. Where the group has
assessed that it does not have control over these mutual funds, but has significant influence, it accounts for them as
associates.
The following significant balances and transactions were entered into between the group and the mutual funds which the
group does not control:
1H17 FY16
Unaudited Unaudited1
Rm Rm
Trading liabilities (380) (397)
Deposits and debt funding (12 774) (14 105)
Provisions and other liabilities (3 095) (1 595)
Trading (losses)/gains (55) 51
Interest expense (713) (1 017)
1 While this level of disclosure was not included in the FY16 audited group
financial statements, disclosure of the assets held by mutual funds in group
companies was provided only for those mutual funds which were material to
the group.
Change in group directorate
The following changes in directorate took place during the six months ended 30 June 2017:
APPOINTMENTS
Dr H Hu As joint deputy chairman 1 June 2017
L Wang As non-executive director 1 June 2017
RESIGNATIONS
Dr S Gu As joint deputy chairman 1 June 2017
Dr W Wang As non-executive director 1 June 2017
RETIREMENTS
EM Woods As non-executive director 26 May 2017
Offsetting and other similar arrangements
Financial instruments subject to offsetting, enforceable master netting arrangements or similar agreements
IFRS requires a financial asset and a financial liability 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 the required disclosures of financial assets and
financial liabilities that are subject to enforceable master netting arrangements, or similar agreements,
irrespective of whether they have been offset in accordance with IFRS. 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.
Financial Net amounts of
liabilities set off financial assets
Gross amount in the statement presented in the
of recognised of financial statement of Collateral
financial assets1 position2 financial position3 recieved4 Net amount
Rm Rm Rm Rm Rm
Assets
30 June 2017 (unaudited)
Derivative assets 44 536 (11) 44 525 (38 101) 6 424
Trading assets 23 378 23 378 (18 687) 4 691
Loans and advances5 85 882 (30 424) 55 458 (54 304) 1 154
Total 153 796 (30 435) 123 361 (111 092) 12 269
31 December 2016 (audited)
Derivative assets 45 972 (38) 45 934 (41 316) 4 618
Trading assets 48 153 48 153 (45 370) 2 783
Loans and advances5 111 072 (33 190) 77 882 (76 589) 1 293
Total 205 197 (33 228) 171 969 (163 275) 8 694
Net amounts of
financial
Financial assets liabilities
Gross amount set off in the presented in the
of recognised statement of statement of
financial financial financial Collateral
liabilities1 position2 position3 pledged6 Net amount
Rm Rm Rm Rm Rm
Liabilities
30 June 2017 (unaudited)
Derivative liabilities 47 613 (11) 47 602 (40 309) 7 293
Trading liabilities 18 323 18 323 (18 323)
Deposits and debt funding5 36 034 (30 424) 5 610 5 610
Total 101 970 (30 435) 71 535 (58 632) 12 903
31 December 2016 (audited)
Derivative liabilities 53 915 (38) 53 877 (46 424) 7 453
Trading liabilities 31 147 31 147 (31 147)
Deposits and debt funding5 39 374 (33 190) 6 184 6 184
Total 124 436 (33 228) 91 208 (77 571) 13 637
1 Gross amounts are disclosed for recognised financial assets and financial liabilities that are either offset in the statement
of financial position or are subject to a master netting arrangement or a similar agreement, irrespective of whether the
offsetting criteria is met.
2 Gross amounts of recognised financial assets or financial liabilities that qualify for offset in accordance with the criteria
per IFRS.
3 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.
4 In most cases the group is allowed to sell or 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 the current
accounts of multiple legal entities within a group of companies. It allows for cash balances of the different legal entities
to be offset against each other to arrive at a net balance for the whole group. In addition, it should be noted that all
repurchase agreements and reverse repurchase agreements, subject to a master netting arrangement (or similar agreement),
have been included.
6 In most instances, the counterparty may not sell or repledge collateral pledged by the group.
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 either a master netting arrangement or similar agreement.
FINANCIAL ASSET/LIABILITY NATURE OF AGREEMENT RELATED RIGHTS TO OFFSET
Derivative assets and liabilities International swaps and derivatives associations The agreement allows for offset
in the event of default.
Trading assets and trading liabilities Global master repurchase agreements The agreement allows for offset
in the event of default.
Loans and advances Customer agreement and Banks Act In the event of liquidation or
bankruptcy, offset shall be
enforceable subject to Banks Act
requirements being met.
Deposits and debt funding Customer agreement and Banks Act In the event of liquidation or
bankruptcy, offset shall be
enforceable subject to Banks Act
requirements being met.
Other reportable items
Equity securities
During the period, the group allotted 1 239 731 shares (FY16: 2 646 456 shares) in terms of the group's share
incentive schemes and repurchased 1 448 961 shares (FY16: 2 477 472 shares).
The total equity securities held as treasury shares at the end of the period was 9 713 295 shares (FY16: 16 086 916
shares). These treasury shares exclude group shares that are held by certain structured entities (SEs) relating to the
group's Tutuwa initiative (refer to the related party transaction note for more detail) since those SEs hold the voting
rights on such shares and are accordingly not treasury shares as defined by the JSE Listings Requirements.
Foreign currency translation reserve (FCTR)
During the six months ended 30 June 2017 the group's share of FCTR decreased by R1.9 billion (1H16: decrease of
R7.1 billion). This decrease was partly attributable to the weakening of the Nigerian naira (22%), US dollar (4%),
and Kenyan shilling (5%) against the South African rand which resulted in an FCTR loss of R833 million, R540 million
and R220 million respectively.
Included in the FCTR loss of R833 million for the period relating to the Nigerian naira was a loss of R698 million as
a result of the establishment of the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) by the Central Bank of Nigeria
(CBN) in April 2017. The CBN introduced the NAFEX to improve foreign exchange liquidity.
IFRS 9 financial instruments (IFRS 9)
Background
IAS 39 Financial Instruments: Recognition and Measurement (IAS 39), the existing standard dealing with the accounting
treatment for financial instruments will be replaced by IFRS 9 for the group's 2018 financial year. The following areas
represent the major changes from that of IAS 39:
- Revised requirements for the classification and measurement of financial assets and consequential changes in the
classification and measurement of financial liabilities.
- Recognition of changes in fair value due to changes in own credit risk on fair value designated financial
liabilities in OCI as opposed to the income statement.
- Revised requirements and simplifications for hedge accounting.
- An expected credit loss (ECL) impairment model.
Comparative financial results and elections
The group has elected not to restate comparative financial results in line with the IFRS 9 transitional requirements.
The difference between the previous (IAS 39) and new (IFRS 9) carrying values (including any tax impact) will be
recognised in the group's opening retained earnings on 1 January 2018.
The group's date of adoption of the IFRS 9 revised hedge accounting requirements will be based on further IFRS
developments with respect to the IASB's macro hedge accounting project or on the group deeming it opportune to
adopt the revised requirements. In the interim the group will continue to utilise the accounting policy choice
to continue hedge accounting in terms of IAS 39.
Parallel run
From January 2017, the group commenced a process by which the group's IFRS 9 results are computed alongside that
of the existing IAS 39 financial results (referred to as the group's parallel run). This parallel run aims to:
- Provide results that will be utilised to finalise and, where applicable, update impairment methodologies.
- Refine and approve the ECL impairment and business models for the classification and measurement of financial
assets.
- Assist in the audit of the group's transition to IFRS 9.
Impact - qualitative assessment
The impact of the IFRS 9 revised classification and measurement requirements for financial assets is not expected
to be material. This conclusion is however dependent on the nature of and carrying value of financial assets in
place on 1 January 2018.
The IFRS 9 ECL impairment model requirements are expected to increase the level of balance sheet impairments that
are currently held in terms of IAS 39. The impact of the IFRS 9 ECL requirements can only be reliably determined
on the date of transition to IFRS 9. This impact is primarily dependent on the finalisation of the group's impairment
methodologies, conclusion of audit procedures by the group's external auditors as well as the credit quality and
extent of the group's exposures and determination of forward-looking economic expectations at that date.
The following table summarises IFRS 9's key drivers as compared to that of IAS 39:
IFRS 9 driver Reason
Stage one PBB's existing emergence period is between three to six months and for CIB
(12-month is 12 months. The change to a 12 month expected loss requirement is expected
expected loss) to impact PBB with minimal impact to CIB.
Stage two IFRS 9 will require a lifetime loss to be recognised for items for which
(lifetime expected loss there has been a deterioration in credit risk. It is expected that this
for items for which there is a will increase both PBB and CIB's balance sheet impairments.
significant increase in credit risk)
Stage three (lifetime expected Similar requirements to that of existing accounting requirements.
loss for credit impaired exposures)
Off-balance sheet exposures The IFRS 9 requirement for impairments for off-balance sheet facilities
results in the requirement for additional balance sheet impairments for
both PBB and CIB.
Forward-looking information The inclusion of forward-looking economic information is expected to
increase the transition adjustment on adoption of IFRS 9, but will depend
on the economic outlook at that date.
Tax implications
Within South Africa, National Treasury recently released the draft Taxation Laws Amendment Bill which contained
requirements for the deductibility of impairments in accordance with IFRS 9. National Treasury has proposed an 85%
allowance for impairment provisions for defaulted exposures and a 25% allowance for impairment provisions for all
other exposures. It is expected that this legislation will result in an increase in the deferred tax asset carrying
value for the group and a consequential further deduction of both CET1 and Tier 1 capital for the group.
Capital implications
IFRS 9 (including the related tax consequences) will affect the group's regulatory capital requirements. The expected
increase in impairment provisions, along with the increase in the group's deferred tax asset carrying value, will
reduce CET1 capital. This reduction in CET1 capital will, however, be partially reduced by the release of the existing
CET1 deduction for the excess of regulatory expected losses over IFRS impairments (currently cR2 billion). The Basel
Committee on Banking Supervision (BCBS) has provided country regulators with national discretion to consider
transitional phase-in provisions for the capital impact of IFRS 9. The SARB is considering the BCBS's proposals for
possible adoption in South Africa.
Communication of transition impact
The group will, together with our 1Q18 SENS announcement regarding the group's statement of changes in equity, release
a transitional report which will outline the impact of the transition to IFRS 9 on the group's financial results.
Legal proceedings
In the ordinary course of business, the group is involved as a defendant in litigation, lawsuits and other
proceedings. Management recognises the inherent difficulty of predicting the outcome of defended legal proceedings.
Nevertheless, based on management's knowledge from investigation, analysis and after consulting with legal counsel,
management believes that there are no individual legal proceedings that are currently assessed as being 'likely to
succeed and material' or 'unlikely to succeed but material should they succeed'. The group is also the defendant in
some legal cases for which the group is fully indemnified by external third parties, none of which are individually
material. Management is accordingly satisfied that the legal proceedings currently pending against the group should
not have a material adverse effect on the group's consolidated financial position and the directors are satisfied
that the group has adequate insurance programmes and, where required in terms of IFRS for claims that are probable,
provisions in place to meet claims that may succeed.
Competition Commission - trading of foreign currency
In April 2015, the South African Competition Commission announced that it had initiated a complaint against Standard
New York Securities Inc. (SNYS) and 21 other institutions concerning possible contravention of the Competition Act in
relation to USD/ZAR trading between 2007 and 2013. No mention was made of SBSA. On 15 February 2017 the Competition
Commission lodged five complaints with the Competition Tribunal against 18 institutions, including one against SBSA and
two against SNYS, in which it alleges unlawful collusion between those institutions in the trading of USD/ZAR. The group
only learned of the complaints at this time. SBSA has made an application to the Competition Tribunal for an order directing
the Competition Commission to deliver a copy of the documents and other evidence that it relied upon when deciding to
refer its complaint to the Tribunal, the application being necessary due to the Competition Commission's failure to comply
with the applicable rules in this regard. Both SBSA and SNYS have, together with 12 of the other respondents, applied
for dismissal of the complaint referral on various legal grounds. A date for the hearing of those applications has yet to
be set. The group considers these allegations in an extremely serious light and remains committed to maintaining the
highest levels of control and compliance with all relevant regulations. The allegations, against SBSA, are confined to
USD/ZAR trading activities within SBSA and do not relate to the conduct of the group more broadly.
Indemnities granted following disposal of SB Plc
Under the terms of the disposal of SB Plc on 1 February 2015, the group provided ICBC with certain indemnities to be
paid in cash to ICBC or, at ICBC's direction, to any SB Plc (now ICBCS) group company, a sum equal to the amount of
losses suffered or incurred by ICBC arising from certain circumstances. Where an indemnity payment is required to be made
by the group to the ICBCS group, such payment would be grossed up from ICBC's shareholding at the time in ICBCS to 100%.
These payments may, inter alia, arise as a result of an enforcement action, the cause of which occurred prior to the date
of disposal. Enforcement actions include actions taken by regulatory or governmental authorities to enforce the relevant
laws in any jurisdiction. While there have been no material claims relating to these indemnification provisions during
2017, the indemnities provided are uncapped and of unlimited duration as they reflect that the pre-completion regulatory
risks attaching to the disposed-of business remain with the group post completion. The indemnification provisions
covered the Deferred Prosecution Agreement (DPA) that ICBCS entered into with the United Kingdom Serious Fraud Office (SFO)
(as more fully set out in the announcement made to shareholders via the JSE's SENS on 30 November 2015). In terms of the
DPA, prosecution has been suspended and will be withdrawn after three years provided that ICBCS has complied with its
obligations under the DPA. Any claims that may arise for SNYS with respect to the Competition Commission matter are also
likely to fall within the scope of this indemnity as the conduct, which is the subject of the referral, pre-dates SB
Plc's acquisition of SNYS as part of the disposal of SB Plc.
Subordinated debt instruments
During the period, the group did not issue (FY16: R2.7 billion) Basel III compliant Tier 2 subordinated debt
instruments. R0.3 billion (FY16: Rnil) of Basel II compliant Tier 2 subordinated debt instruments were issued during the
period in jurisdictions that have not yet adopted the Basel III framework. The group redeemed R1.4 billion (FY16: R3.2 billion)
Basel II compliant Tier 2 subordinated debt instruments during the period.
The group issued its debut Basel III compliant AT1 capital bond that qualifies as Tier 1 capital on 30 March 2017
amounting to R1.7 billion. The capital notes are perpetual, non-cumulative with an issuer call option after a minimum
period of five years and one day and on every coupon payment date thereafter.
The terms of the Basel III compliant AT1 capital bond and Tier 2 bonds include a regulatory requirement which provides
for the write-off, in whole or in part, on the earlier of a decision by the relevant regulator (the SARB) that a
write-off without which the issuer would have become non-viable is necessary, or a decision to make a public sector
injection of capital or equivalent support, without which the issuer would have become non-viable.
All of the above-mentioned subordinated debt instruments have been recognised within the subordinated debt in the
statement of financial position with the exception of the AT1 capital bonds that have been recognised within other
equity instruments in the statement of financial position.
Accounting policy elections and restatement
Adoption of amended standards effective for the current financial period
The accounting policies are consistent with those reported in the previous year except as required in terms
of the adoption of the following amendments effective for the current period:
- Annual improvements 2014 - 2016 clarification to IFRS 12 Disclosure of Interests in Other Entities.
Early adoption of revised standards:
- Amendment to IFRS 2 Classification and Measurement of Share-based Payment Transactions
- Annual improvements 2014 - 2016 clarification to IFRS 1 First-time Adoption of International Financial Reporting
Standards (IFRS 1) and IAS 28 Investments in Associates and Joint Ventures.
- Amendment to IAS 40 Investment Property.
The abovementioned amendments to the IFRS standards, adopted on 1 January 2017, did not have any effect on the
group's previously reported financial results or disclosures and had no material impact on the group's
accounting policies.
Change in presentation policy for policyholders' assets and liabilities
For the year ended 31 December 2016, a change in presentation was adopted to disclose portfolio level negative
policyholders' liabilities as policyholders' assets. In addition, to provide more relevant and useful information
to the user, reinsurance liabilities were also excluded from policyholders' liabilities and is now included in
provisions and other liabilities.
The financial impact of this change on the results for the six months ended 30 June 2016 is as follows:
1H16
As previously presented Revised presentation
Description Rm Rm
(Liability) Asset/(liability)
Policyholders' assets 7 661
Policyholders' liabilities (305 065) (312 111)
Provisions and other liabilities1 (95 066) (95 681)
1 Reinsurance liabilities of R615 million as at 30 June 2016 were previously disclosed within policyholders'
liabilities and are now included within the provisions and other liabilities line item.
Other information
Pro forma constant currency financial 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. The pro forma constant currency financial
information contained in this announcement has not been reviewed and reported on by the group's external auditors.
The following average exchange rates were used in the determination of the pro forma constant currency information and
were calculated using the average of the average monthly exchange rates (determined on the last day of each of the
six months in the period).
1H17 average 1H16 average
exchange rate exchange rate
US dollar 13.20 15.40
Pound sterling 16.62 22.07
Argentinian peso 0.84 1.08
Nigerian naira 0.04 0.08
Kenyan shilling 0.13 0.15
Zambian kwacha 1.39 1.44
Johannesburg, 17 August 2017
Administrative and contact details
Standard Bank Group Limited
Registration number 1969/017128/06
Incorporated in the Republic of South Africa
Website: (www.standardbank.com)
Registered office
9th Floor, Standard Bank Centre
5 Simmonds Street, Johannesburg, 2001
PO Box 7725, Johannesburg, 2000
Group secretary
Zola Stephen
Tel: +27 11 631 9106
Email: Zola.Stephen@standardbank.co.za
Head: Investor relations
Sarah Rivett-Carnac
Tel: +27 11 631 6897
Email: Sarah.Rivett-Carnac@standardbank.co.za
Group financial director
Arno Daehnke
Tel: +27 11 636 3756
Email: Arno.Daehnke@standardbank.co.za
Head office switchboard
Tel: +27 11 636 9111
Directors
TS Gcabashe (chairman), H Hu2 (deputy chairman),
JH Maree (deputy chairman), A Daehnke*, RMW Dunne1,
GJ Fraser-Moleketi, GMB Kennealy,
BJ Kruger* (chief executive), NNA Matyumza,
KD Moroka, ML Oduor-Otieno3, AC Parker,
ANA Peterside CON4 , MJD Ruck, PD Sullivan5,
BS Tshabalala, SK Tshabalala* (chief executive),
JM Vice, L Wang2
*Executive Director 1British 2Chinese 3Kenyan 4Nigerian 5Australian
All nationalities are South African, unless otherwise specified above.
Share transfer secretaries in South Africa
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank,
Johannesburg, 2196
PO Box 61051, Marshalltown, 2107
Share transfer secretaries in Namibia
Transfer Secretaries (Proprietary) Limited
4 Robert Mugabe Avenue
(entrance in Burg Street), Windhoek
PO Box 2401, Windhoek
JSE independent sponsor
Deutsche Securities (SA) Proprietary Limited
Namibian sponsor
Simonis Storm Securities (Proprietary) Limited
JSE joint sponsor
The Standard Bank of South Africa Limited
Share and bond codes
JSE share code: SBK ISIN: ZAE000109815
NSX share code: SNB ZAE000109815
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)
Please direct all customer queries and comments to:
Information@standardbank.co.za
Please direct all shareholder queries and comments to:
InvestorRelations@standardbank.co.za
Refer to www.standardbank.com/reporting for a list of definitions, acronyms and abbreviations
www.standardbank.com/reporting
Date: 17/08/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.