Wrap Text
Provisional results and dividend announcement
for the year ended 31 December 2017
Standard Bank Group Limited
Registration number 1969/017128/06
Incorporated in the Republic of South Africa
JSE share code: SBK
ISIN: ZAE000109815
NSX share code: SNB ZAE000109815
Provisional results and dividend announcement
for the year ended 31 December 2017
The Standard Bank Group Limited's (group) summary consolidated financial statements for the year ended 31 December 2017
(results) are prepared in accordance with the requirements of the JSE Limited (JSE) Listings Requirements for provisional
reports, the requirements of International Financial Reporting Standards (IFRS) and its interpretations as adopted 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, the presentation requirements of IAS 34 Interim Financial Reporting (IAS 34) (excluding paragraph 16 A(j)
as permitted by the JSE Listings Requirements) and the requirements of the South African Companies Act, 71 of 2008
applicable to summary financial statements.
The accounting policies applied in the preparation of these summarised consolidated financial statements from which
the 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 with the exception of changes referred to
below.
While this report is itself not audited, the consolidated annual financial statements from which the summary consolidated
annual financial statements below have been derived were audited by KPMG Inc. and PricewaterhouseCoopers Inc., who expressed
an unmodified opinion thereon. That audit report does not necessarily report on all of the information contained in this report.
Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditors'
engagement and, more specifically, the nature of the information that has been audited, they should obtain a copy of the
auditors' report together with the accompanying audited consolidated annual financial statements, both of which are available
for inspection at the company's registered office. The group's reporting suite, including the Standard Bank Group's
annual integrated report and annual financial statements will be made available during April 2018. Copies can be requested
from our registered office or downloaded from the company's website following the announcement in April 2018 on the
JSE's Stock Exchange News Service (SENS).
The directors (the board) of Standard Bank Group Limited take full responsibility for the preparation of this report
and that the selected financial information has been correctly extracted from the underlying audited consolidated annual
financial statements.
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 8 March 2018.
This report contains pro forma constant currency financial information. For further details refer to 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: ecomms@computershare.co.za or fax to +27 688 5248 or contact the call centre on +27 861 100 933. Other related
queries can be sent to electroniccommunication@standardbank.co.za.
HIGHLIGHTS
HEADLINE EARNINGS
R26 270 million up 14%
2016: R23 009 million
HEADLINE EARNINGS PER SHARE
1 640 cents up 14%
2016: 1 440 cents
DIVIDEND PER SHARE
910 cents up 17%
2016: 780 cents
RETURN ON EQUITY
17.1% up
2016: 15.3%
CREDIT LOSS RATIO
0.86% no change
2016: 0.86%
JAWS
1.0% up
2016: 0.3%
COST-TO-INCOME RATIO
55.7% down
2016: 56.3%
COMMON EQUITY TIER 1 RATIO
13.5% down
2016: 13.9%
Overview of financial results
Group results
Standard Bank Group's financial performance for the year ended 31 December 2017 was strong. The group delivered a 14%
growth in headline earnings to R26.3 billion and ROE improved to 17.1% from 15.3% in 2016. The group's capital position
remained robust, with a common equity tier 1 (CET1) ratio of 13.5%. Accordingly, a final dividend of 510 cents per share
has been declared, resulting in a total dividend of 910 cents per share, an increase of 17% on the prior year.
Banking revenue growth remained subdued, credit impairment charges were broadly flat and costs were well managed to
deliver positive jaws of 1.0%. Banking activities headline earnings grew 10% to R24.3 billion and ROE improved to 18.0%
from 16.8% in 2016. Group headline earnings growth was boosted by an improved contribution from ICBC Standard Bank Plc
(ICBCS) and Liberty.
Although less marked than in the first half of the year, currency movements continued to adversely impact the group's
reported results, reducing group and banking headline earnings growth by four percentage points year on year. On a
constant currency basis, group headline earnings grew by 18%. Despite the dilution impact from a strengthening Rand, Africa
Regions still increased its contribution to banking headline earnings to 28% from 26% in 2016, and contributed positively
to group headline earnings per share growth and ROE. The top five contributors to Africa Regions' headline earnings
were Angola, Ghana, Mozambique, Nigeria and Uganda.
Operating environment
Global macroeconomic conditions were positive during 2017, supporting increased trade volumes and underpinning global
growth of 3.7% for the year. A benign inflation environment and low wage growth across most advanced economies resulted
in slower than expected monetary policy tightening. Continued capital flows to emerging markets supported emerging
market funding costs and currencies.
Economic growth in sub-Saharan Africa rebounded from 1.4% in 2016 to 2.7% in 2017, underpinned by improving commodity
prices and trade. Across many of our key countries inflation began to ease, stemming interest rate hikes and, in certain
countries, provided scope for rate cuts in the second half of the year. Although exchange rates largely stabilised in
the second half, many were weaker year on year against the strengthening Rand.
The recovery in the West Africa region was supported by higher oil prices and production volumes, together with higher
business and consumer confidence levels. Foreign currency liquidity constraints in Nigeria eased, following the
introduction of the NAFEX rate in the second quarter of the year.
East Africa started to emerge from the drought conditions. In Kenya specifically, higher food price inflation,
political uncertainty as a result of the disputed electoral process, and the impact of the regulatory caps and floors
introduced in September 2016, resulted in a slow-down in economic activity and credit growth.
The South & Central Africa region was supported by improved commodity prices, however those surrounding South Africa
continued to feel the effects of low South African demand. In Mozambique, some sectors of the economy improved during
2017, mainly on account of higher coal prices. Monetary policy tightening helped rebalance the foreign exchange market
and resulted in the Metical appreciating in the second half of the year, but was 16% weaker on average against the Rand
compared to 2016. Inflation declined, despite a large increase in fuel prices.
Growth in South Africa remained weak at 1.3%, continuing its deviation from the global trend. During the year, consumer
and business confidence remained low as a result of the poor macro environment and heightened political and policy
uncertainties. This was exacerbated by successive downgrades by the three credit rating agencies. As a consequence, demand
for credit remained lacklustre, moderating from the already subdued levels in 2016. Despite local sentiment, South Africa
emerged from a technical recession in the second quarter and inflation re-entered the 3 - 6% target range, providing
scope for a 25 basis point (bps) interest rate cut in July. The Rand, although volatile, was on average stronger against
the major currencies, as well as those of our key countries in Africa Regions.
Revenue
Our banking activities achieved revenue growth of 3%. This growth rate was 9% in constant currency, which is a testament
to our solid client franchises.
Net interest income (NII) increased 6%, assisted by margin expansion of 26 bps to 474 bps. Average interest earning
assets were flat on the prior year. The yield on the client lending book expanded mainly as a result of higher average
interest rates in Angola, Mozambique and Nigeria, partly offset by an increase in the yield on the client funding portfolio
in these countries. In South Africa, the combination of an improved yield on the mortgage lending portfolio and enhanced
risk-based pricing of new loans in the personal unsecured and business lending portfolios also provided a benefit. A small
positive endowment impact on capital and transactional balances in Africa Regions was achieved.
Non-interest revenue was flat on 2016, with the largest component, net fee and commission revenue, remaining at the
same level as the prior year. Trading revenue declined 2% and other revenue grew by 7%.
On a constant currency basis, net fee and commission revenue grew 7%. This was the result of healthy volume-based
increases in both card-based commissions and electronic banking fees as well as higher documentation and administration
fees. Our Africa Regions showed strong growth of 20%.
Trading revenue grew 8% in constant currency off the back of a strong performance in Africa Regions, which contributed
45% of the group's trading revenues. Fixed income and currencies (FIC) trading revenue grew 15% in constant currency,
with strong growth in fixed income driven by increased client activity. Foreign exchange trading was impacted by liquidity
shortages and regulatory constraints in some key markets in Africa Regions. Equity trading revenue experienced lower trading
volumes, and was negatively impacted by the elimination, in terms of IFRS, of gains on SBK shares held by the group to
facilitate client trading activities, following a significantly higher SBK share price and long client positions.
Credit impairment charges
Credit impairment charges of R9.4 billion were 1% lower than the prior year, while gross average loans and advances
fell by 2%. This resulted in the group credit loss ratio remaining flat at 86 bps.
In Personal & Business Banking (PBB), impairment charges declined 3% year on year, mainly as a result of a lower
portfolio impairment charge. This was driven by a decline in early arrears from continued improvements in early stage
collections and payment methods. Impairment charges for vehicle and asset finance (VAF) and mortgage loans in South Africa
declined as the quality of the books continued to improve, with a concomitant decline in credit loss ratios for these
portfolios. Higher specific impairment charges were raised mainly against business lending, both in South Africa, following
the migration of a few larger exposures to NPLs, as well as in Africa Regions, driven predominantly by increased charges
in Nigeria, following an accelerated write-off of NPLs, and a single counterparty write-off in Malawi. Overall, coverage
levels were maintained.
Corporate & Investment Banking's (CIB) impairment charges rose 1% on the prior year. Combined with a flat gross
average customer loan book, the credit loss ratio to customers was 44 bps (2016: 44 bps). Specific impairment provision
adequacy increased from 56% in the prior year to 60%, to account for stress in the Power & Infrastructure and Oil & Gas
sectors in Kenya and Nigeria. A decline in portfolio impairments in Africa Regions from elevated levels recorded in the prior
year was largely offset by an increase in South Africa.
Operating expenses
Operating expenses grew 2% year on year, and in constant currency were up 8%. This reflects inflationary growth in
South Africa of 5%, while in Africa Regions, costs were up 18% in constant currency due to higher inflation and continued
investment. The cost-to-income ratio for the year was 55.7%, an improvement on the 56.3% in the prior year.
Staff costs were up 8% in constant currency. Following a year of disciplined focus on headcount, the overall staff
complement remained at a similar level to 2016, declining 1% in South Africa with a marginal increase in Africa Regions to
support business growth.
Other operating expenses grew 9% on a constant currency basis despite an 18% higher amortisation charge relating to IT
intangible assets. After many years of double digit growth, the total IT function spend was well contained, growing 5%
in Rand. A higher marketing cost was incurred, mainly for the "What's your next" and Shyft campaigns in South Africa.
The growth rate was assisted by the non-recurrence of an operational loss of R300 million in the prior year related to the
Japan fraud incident.
Loans and advances
Gross loans and advances to customers grew by 1% year on year, of which PBB's advances to customers grew by 3% and
CIB's declined by 2%.
Within PBB, mortgage lending grew 3%. New business disbursements of R42.4 billion were made in South Africa during the
year despite the number of registrations falling 14% compared to 2016. During the year, PBB continued to write the
largest proportion of new mortgage business in South Africa and maintained its leading market share at the end of 2017.
VAF lending showed a modest 1% growth, as new business disbursements only slightly exceeded the run off in this book in
South Africa, while the book in Africa Regions contracted. Credit card balances rose 3% while other personal unsecured
lending fell by 2%. Business lending grew by 7%, with PBB Africa Regions showing good growth on a constant currency basis.
In CIB, term loans extended to clients to support their growth ambitions grew by a muted 2%, as new business was
offset by maturities and early repayments by clients. Loans granted under resale agreements, used primarily for liquidity
management purposes, declined as other high quality liquid assets increased to meet higher regulatory liquidity
requirements.
Funding and liquidity
The group's liquidity position remained strong and within approved risk appetite and tolerance limits. The group's
fourth quarter average Basel III LCR amounted to 135%, exceeding the minimum phased-in Basel III LCR requirement of 80%.
The group successfully achieved compliance with the minimum Basel III net stable funding ratio requirements with effect
1 January 2018.
Despite the downgrades of the SA sovereign credit ratings during the year, the market cost of liquidity widened only
marginally. A number of key debt capital market and term loan funding transactions were executed, taking advantage of
pockets of relatively well-priced liquidity as investor appetite for capital markets' issuances remained robust. The group
successfully increased its longer term funding during 2017, raising R32.4 billion through a combination of senior debt
and syndicated loans. An additional R24.6 billion was raised through negotiable certificates of deposit with tenors in
excess of 12 months.
Deposits from customers grew 5% year on year. The group's most stable source of funding, retail deposits from PBB
customers, increased 6% in Rand and 9% in constant currency. The bank maintained its leading retail deposit market share in
South Africa, growing retail-priced deposits by 8%, and continued to grow its franchise in Africa Regions, where
retail-priced deposits grew 4% (15% in constant currency). The group's offshore operations in the Isle of Man and Jersey
continue to be an important source of USD and GBP funding, growing 4% in Rand and 6% on a constant currency basis. CIB's focus
on transactional banking clients assisted growth in current accounts and cash management deposits of 2% in Rand and 5%
in constant currency.
Capital management
The group maintained strong capital adequacy ratios, with a CET1 ratio of 13.5% (2016: 13.9%) and a total capital
adequacy ratio of 16.0% (2016: 16.6%). In line with the group's objective to optimise its capital stack, SBG successfully
executed two Basel III compliant Additional Tier 1 (AT1) bond issues in March and September 2017, raising R3.5 billion,
the proceeds of which have been invested in The Standard Bank of South Africa (SBSA).
In December 2017, the Basel Committee on Banking Supervision published the finalised Basel III reforms, which aim to
reduce excessive variability of risk-weighted assets and improve the comparability of banks' capital ratios. The
regulations will be implemented on 1 January 2022 with a transitional arrangement for phasing in the aggregate output floor
until 2027. Going forward we will plan and manage the business with the new requirements and deadlines in mind.
IFRS 9 became effective on 1 January 2018. The group will provide a transition report with its first quarter results
for 2018. The day one impact of implementing IFRS 9's expected credit loss impairment requirements, which comprise the
most material impact, is expected to reduce the group's CET 1 ratio by approximately 70 bps, which will be phased in over
three years. We expect an increase of approximately R8.7 billion in balance sheet impairments; an increase of 32% on IAS
39's balance sheet impairments (including interest in suspense).
Headline earnings by business unit
CCY Change 2017 2016
% % Rm Rm
Personal & Business Banking 12 10 14 008 12 724
Corporate & Investment Banking 17 11 11 506 10 339
Central and other 22 24 (1 246) (1 001)
Banking activities 14 10 24 268 22 062
Other banking interests >100 >100 567 (8)
Liberty 50 50 1 435 955
Standard Bank Group 18 14 26 270 23 009
Overview of business unit performance
Personal & Business Banking
PBB's headline earnings of R14.0 billion were 10% higher than the prior year, driven by growth in pre-provision
operating profit and lower credit impairment charges as a result of improved collections strategies. An ROE of 20.0% was
achieved, an improvement on the 18.8% recorded in the prior year.
PBB in South Africa delivered a strong performance with headline earnings of R13.2 billion up 11%. Total income grew
by 6%, supported by good volume-based increases in target customer segments. Operating expenses were 6% higher, despite
incurring an extra R289 million amortisation charge on strategic IT investments such as core banking, and increased
spending on marketing campaigns. PBB SA delivered positive jaws of 0.4%. Credit impairment charges declined by 4% leading
to a lower credit loss ratio of 119 bps (2016: 129 bps). An improved performance in both secured and personal unsecured
lending (including card debtors) was partially offset by a higher impairment charge for business lending. Impairment
charges for mortgages were R355 million lower than the prior year. This was driven by an improvement across the mortgage
portfolio in South Africa, particularly in the older vintages. Within South Africa, mortgages written post 2008, which have
a lower average credit loss ratio and better margin, now represent approximately 70% of the book (2016: 64%).
As our journey to digitise the group and deliver an always-on experience to customers continues to progress, PBB SA's
staff complement declined by 1%, while the total square meterage of the branch network declined by a further 3% to 375
000 square metres. This footprint has been reduced by more than 15% since 2010, without a material change in the number
of branches. PBB SA now has almost 2.2 million unique customers actively using digital channels as their preference, with
more of these choosing to use our mobile banking offering than internet banking. Mobile banking transactions processed
were 32% higher than in 2016. By contrast, teller and enquiry volumes in branches declined by 14% and 13% respectively.
Results from PBB Africa Regions and Wealth International were impacted by the strengthening Rand on average in 2017
compared to 2016. To reflect the underlying trends in these businesses, the commentary that follows refers to the constant
currency changes of PBB Africa Regions and Wealth International.
Headline earnings from PBB Africa Regions improved by 9% to R202 million. Customer loans expanded by 11%, mainly in
Kenya and Namibia, and deposits from customers grew by 15%, with particularly pleasing growth in Nigeria, Kenya and
Uganda. PBB Africa Regions' result was underpinned by customer acquisition in key markets, with a focus on delivering
digital solutions. The number of active customers grew by more than 20% in Nigeria, Kenya, Tanzania, and Zambia.
Customers in PBB Africa Regions performed more than 27 million transactions on mobile banking, up from approximately
10 million in 2016.
Net interest income grew by 9%, benefiting from balance growth, and the positive endowment impact of higher average
interest rates in Mozambique and Nigeria. Non-interest revenue grew by 13%, underpinned by higher transaction volumes
and an increase in the account base. PBB Africa Regions comprises almost half of the Africa Regions legal entities'
total income. The credit loss ratio increased to 253 bps from 228 bps in the prior year, driven predominantly by
increased charges in Nigeria and Malawi. Excluding these, the credit loss ratio for PBB Africa Regions declined to
152 bps.
Wealth International grew headline earnings by 32%, supported by growth in USD, GBP and EUR denominated client deposit
balances to GBP5.1 billion (2016: GBP4.8 billion) in our operations in the Isle of Man and Jersey during the year and
margin expansion following interest rate increases in the US and UK.
Corporate & Investment Banking
CIB's headline earnings of R11.5 billion were up 11% on the prior year, and 17% on a constant currency basis. Continued
cost discipline and improvements in productivity and efficiency metrics resulted in positive jaws of 4.6%. The credit
loss ratio to customers of 44 bps was within CIB's target range of 40 to 60 bps. Higher headline earnings, together with
disciplined capital utilisation, delivered an ROE of 22.2%, an improvement from 19.5% in 2016.
Due to the impact of currency on CIB's results, the commentary that follows refers to the constant currency changes.
CIB delivered strong revenue growth of 13%, with sectoral, geographic and product diversity supporting the performance.
This reflects our focus on strengthening our capabilities and improving co-ordination to better serve our clients across
Africa. CIB recorded strong performances from multinational corporates and large domestic clients in the Financial
Institutions, Industrials, Telecoms & Media and Oil & Gas sectors. Revenues in the CIB SA franchise were up 4%. The West
Africa franchise delivered a resounding turn around, with revenues up by more than 30%. South & Central Africa continued
to be a steady performer, delivering revenue growth of 13%. Following focused attention on East Africa, this region
delivered strong revenue growth of 14%.
Transactional Products and Services (TPS) was the outstanding performer, with headline earnings up 32%. TPS plays a
core role across the wider CIB franchise, being critical to the wholesale client franchise across the African continent.
Revenues grew by 18%, with NII well ahead of the prior year. Africa Regions delivered a strong performance, underpinned
by increased client activity, good deposit growth and supported by the positive endowment effect from higher interest
rates. Continued investment in key electronic platform capability resulted in a higher amortisation charge. Credit
impairment charges declined from elevated levels in the prior year.
Global Markets delivered a resilient performance, growing headline earnings by 13% to R4.6 billion. In South Africa,
foreign exchange and equities trading slowed, with equities impacted by the low market volatility experienced in most
global markets. Liquidity shortages and regulatory constraints negatively impacted trading activity in Africa Regions,
particularly in Angola and Mozambique. The introduction of the new, more flexible forex regime in Nigeria assisted forex
flows in the second half.
Investment Banking revenues were up 6%, reflecting fees earned on a number of landmark transactions and client activity
in both debt and equity capital markets. Loans in the Investment Banking portfolio grew a subdued 4% on average and 2%
on year-end balances. Competition for high quality clients caused margin compression. As a result, NII remained at a
similar level to the prior year. Credit impairments increased as a result of a small number of impairments in stressed
sectors in the Africa Regions, as well as higher portfolio provisions following the downgrade of the South African
sovereign risk.
Central and other
This segment includes costs associated with corporate functions, as well as the group's treasury and capital requirements,
and central hedging activities. In 2017, the segment recorded a loss of R1 246 million, 24% higher than the prior year.
The primary driver of the increased loss was the elimination, in terms of IFRS, of gains on SBK shares referred to
earlier.
Other banking interests
Other banking interests recorded headline earnings of R567 million, compared to a loss of R8 million in 2016.
The group's 40% stake in ICBCS contributed R152 million, a significant improvement on the R591 million loss recorded
in the prior year. The FIC and equities businesses delivered a strong result and higher commodity prices assisted the
commodities business. Of the R152 million contribution, approximately R100 million relates to a UK consortium tax relief
credit. Adjusted for this, ICBCS effectively broke even at an operational level in the second half of the year.
ICBC Argentina delivered growth in revenues on an improving macro-economic environment, particularly in the second
half, to report earnings after tax that were marginally lower than 2016. The headline earnings contribution from the
group's 20% stake in ICBC Argentina declined 29% to R415 million off a high base set in 2016. On a constant currency basis,
earnings were down 11%.
Liberty
The financial results reported are the consolidated results of the group's 55.5% investment in Liberty, adjusted for
SBK shares held by Liberty for the benefit of Liberty policyholders which are deemed to be treasury shares in the group's
consolidated accounts.
Liberty's normalised headline earnings for the year improved by 8% to R2.7 billion, supported by improving SA retail
insurance earnings and higher returns from investment markets. Liberty's capital position remains strong. Liberty's IFRS
headline earnings, after the adjustments for the impact of the BEE preference share income and the Liberty Two Degrees
listed Real Estate Investment Trust accounting mismatch, rose to R3.3 billion from R2.2 billion in the prior year.
Investors are referred to the full Liberty announcement dated 2 March 2018 for further detail.
Headline earnings attributable to the Standard Bank Group, adjusted by R369 million for the impact of the deemed
treasury shares, were R1.4 billion, 50% higher than in the prior year.
Prospects
The global growth outlook remains positive and relatively synchronised, with recent momentum in advanced economies
expected to continue. China's growth is expected to remain robust. Although upside inflationary pressures are emerging,
particularly in the US, monetary policies in the advanced economies are expected to maintain a moderate pace of tightening,
which should help sustain capital flows to emerging markets. From a 22-year low in 2016, growth in sub-Saharan Africa
is expected to accelerate to 3.3% in 2018, supported by a world-wide economic upswing, and slightly rising commodity
prices. In general, economic prospects across our network of countries are expected to improve, providing a favourable
backdrop for our business.
We are also optimistic about the prospects in our home market of South Africa. We believe that the positive steps
taken already by the ruling party subsequent to its leadership conference will improve business and consumer confidence.
This positive sentiment, as well as pent-up demand, should begin to reflect in key economic indicators.
In the face of fast-growing competition from established banks and new competitors, we have a relentless focus on
three immediate priorities - to transform into a client-centred, digitally enabled, and integrated universal financial
services organisation.
We are in the final stages of our core banking journey and, by the end of the first quarter of 2018, 93% of our transactional
accounts in South Africa will have been migrated onto our core banking platform. With this modernised platform in place, we
will increasingly focus on front-end solutions and innovations, the benefit of which will be experienced directly by our
customers.
We support faster, more inclusive and more sustainable economic growth and human development in South Africa and throughout
the continent we are proud to call our home. At the same time, we are focused on improving the returns we deliver to our
shareholders. Accordingly, we have lifted our medium-term ROE target range from 15% - 18% to 18% - 20%. We will continue to
focus on the levers available to deliver on our targets, including positive jaws, efficient capital allocation and improving
returns from PBB Africa Regions. We stand ready to serve our customers with consistent excellence, wherever they are and
whatever financial services they require, online or in person.
Stakeholders should note that any forward-looking information in this announcement has not been reviewed and reported
on by the group's external auditors.
Sim Tshabalala Thulani Gcabashe
Group chief executive Chairman
7 March 2018
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 has resolved to declare a final gross cash dividend No.
97 of 510 cents (gross) per ordinary share (the cash dividend) to ordinary shareholders recorded in the register of the
company at the close of business on Friday, 13 April 2018. The last day to trade to participate in the dividend is
Tuesday, 10 April 2018. Ordinary shares will commence trading ex dividend from Wednesday, 11 April 2018.
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, 11 April 2018 and Friday,
13 April 2018, 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, 16 April 2018.
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 dividends:
- 6.5% first cumulative preference shares (first preference shares) dividend No. 97 of 3.25 cents (gross) per first
preference share, payable on Monday, 9 April 2018, to holders of first preference shares recorded in the books of the
company at the close of business on the record date, Friday, 6 April 2018. The last day to trade to participate in the
dividend is Tuesday, 3 April 2018. First preference shares will commence trading ex dividend from Wednesday, 4 April 2018.
- Non-redeemable, non-cumulative, non-participating preference shares (second preference shares) dividend No. 27 of
398.92 cents (gross) per second preference share, payable on Monday, 9 April 2018, to holders of second preference shares
recorded in the books of the company at the close of business on the record date, Friday, 6 April 2018. The last day to
trade to participate in the dividend is Tuesday, 3 April 2018. Second preference shares will commence trading ex
dividend from Wednesday, 4 April 2018.
The salient dates and times for the preference share dividends are set out in the table that follows.
Preference share certificates (first and second) may not be dematerialised or rematerialised between Wednesday, 4 April 2018
and Friday,6 April 2018, both days inclusive. Preference shareholders (first and second) who hold dematerialised shares will
have their accounts at their CSDP or broker credited on Monday, 9 April 2018.
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
preference shares preference shares
Ordinary (First preference (Second preference
shares shares) shares)
JSE Limited
Share code SBK SBKP SBPP
ISIN ZAE000109815 ZAE000038881 ZAE000056339
Namibian Stock Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Dividend number 97 97 27
Gross dividend per share (cents) 510 3.25 398.92
Last day to trade in order to
be eligible for the cash dividend Tuesday, 10 April 2018 Tuesday, 3 April 2018 Tuesday, 3 April 2018
Shares trade ex the cash dividend Wednesday, 11 April 2018 Wednesday, 4 April 2018 Wednesday, 4 April 2018
Record date in respect of the
cash dividend Friday, 13 April 2018 Friday, 6 April 2018 Friday, 6 April 2018
Dividend cheques posted and CSDP/broker
account credited/updated (payment date) Monday, 16 April 2018 Monday, 9 April 2018 Monday, 9 April 2018
The above dates are subject to change. Any changes will be released on the 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 408 cents per ordinary share,
2.6 cents per first preference share and 319.136 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 day before declaration, is as follows:
- 1 619 268 169 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 its registration number is 1969/017128/06.
PROVISIONAL RESULTS
Financial statistics
for the year ended 31 December 2017
Change
% 2017 2016
Number of ordinary shares in issue (000's)
End of year 1 597 371 1 596 583
Weighted average 1 601 855 1 597 739
Diluted weighted average 1 621 921 1 619 444
Cents per ordinary share
Basic earnings 18 1 637.8 1 389.8
Diluted earnings 18 1 617.5 1 371.2
Headline earnings 14 1 640.0 1 440.1
Diluted headline earnings 14 1 619.7 1 420.8
Dividend 17 910 780
Net asset value 4 9 830 9 442
Financial performance (%)
ROE 17.1 15.3
Net interest margin on banking activities1 4.74 4.48
Credit loss ratio on banking activities 0.86 0.86
Cost-to-income ratio on banking activities 55.7 56.3
Jaws on banking activities 1.0 0.3
Capital adequacy ratios (%)
Common equity tier 1 capital adequacy ratio 13.5 13.9
Tier 1 capital adequacy ratio 14.2 14.3
Total capital adequacy ratio 16.0 16.6
1 The comparative has been updated in line with changes in methodology.
Condensed consolidated statement of financial position
as at 31 December 2017
2017 20161 20151
Rm Rm Rm
Assets
Cash and balances with central banks 75 310 77 474 75 112
Derivative assets 75 610 66 304 107 189
Trading assets 160 894 129 845 86 219
Pledged assets 20 785 18 777 34 429
Financial investments 533 314 483 774 486 704
Current and deferred tax assets 2 109 2 467 2 415
Loans and advances 1 048 027 1 065 405 1 076 917
Policyholders' assets 7 484 7 314 7 579
Other assets 22 996 21 547 24 552
Interest in associates and joint ventures 9 665 8 196 9 703
Investment property 32 226 31 155 30 508
Property and equipment 16 179 16 041 17 670
Goodwill and other intangible assets 23 329 23 675 24 031
Total assets 2 027 928 1 951 974 1 983 028
Equity and liabilities
Equity 190 017 179 359 178 908
Equity attributable to ordinary shareholders 157 020 150 757 151 069
Equity attributable to other equity instrument holders2 9 047 5 503 5 503
Equity attributable to non-controlling interests 23 950 23 099 22 336
Liabilities 1 837 911 1 772 615 1 804 120
Derivative liabilities 76 896 72 767 130 058
Trading liabilities 62 855 47 867 43 304
Current and deferred tax liabilities 8 614 8 317 9 398
Deposits and debt funding 1 243 911 1 213 621 1 186 514
Policyholders' liabilities 322 918 307 230 305 194
Subordinated debt 24 289 25 997 27 141
Provisions and other liabilities 98 428 96 816 102 511
Total equity and liabilities 2 027 928 1 951 974 1 983 028
1 Refer to the accounting policy elections for details of the restatement to derivative assets and derivative
liabilities.
2 Other equity instruments comprise: preference share capital of R5 503 million (2016: R5 503 million) and AT1 capital
of R3 544 million (2016: Rnil). Refer to the AT1 capital paragraph within other reportable items for further details.
Condensed consolidated income statement
for the year ended 31 December 2017
2017 2016
Rm Rm
Income from banking activities 103 162 99 857
Net interest income 60 125 56 892
Non-interest revenue 43 037 42 965
Income from investment management and life insurance activities 24 394 21 365
Total income 127 556 121 222
Credit impairment charges (9 410) (9 533)
Net income before operating expenses 118 146 111 689
Operating expenses in banking activities (57 512) (56 235)
Operating expenses in investment management and life insurance activities (17 800) (17 374)
Net income before capital items and equity accounted earnings 42 834 38 080
Non-trading and capital related items (261) (1 123)
Share of post tax profit from associates and joint ventures 1 102 187
Net income before indirect taxation 43 675 37 144
Indirect taxation (2 481) (2 418)
Profit before direct taxation 41 194 34 726
Direct taxation (10 479) (8 932)
Profit for the year 30 715 25 794
Attributable to ordinary shareholders 26 235 22 206
Attributable to other equity instrument holders 594 406
Attributable to non-controlling interests 3 886 3 182
Earnings per share (cents)
Basic earnings per ordinary share 1 637.8 1 389.8
Diluted earnings per ordinary share 1 617.5 1 371.2
Condensed consolidated statement of other comprehensive income
for the year ended 31 December 2017
2017 2016
Rm Rm
Profit for the year 30 715 25 794
Other comprehensive loss after tax for the year (5 940) (14 647)
Items that may be subsequently reclassified to profit and loss (5 607) (14 773)
Exchange differences on translating foreign operations (6 180) (14 680)
Movement in the cash flow and net investment hedging reserve 111 30
Net change in fair value of cash flow hedges and net investment in
foreign operations' hedges 111 (1 319)
Realised fair value adjustments of cash flow hedges transferred to
profit or loss 1 349
Movements in the available-for-sale revaluation reserve 462 (123)
Items that may not be reclassified to profit and loss
Defined benefit fund remeasurements and other remeasurements (333) 126
Total comprehensive income for the year 24 775 11 147
Attributable to ordinary shareholders 21 514 10 882
Attributable to other equity instrument holders 594 406
Attributable to non-controlling interests 2 667 (141)
Condensed consolidated statement of changes in equity
for the year ended 31 December 2017
Ordinary Other equity Non-
shareholders' instrument controlling
equity holders interest Total equity
Rm Rm Rm Rm
Balance at 1 January 2016 151 069 5 503 22 336 178 908
Total comprehensive income for the year 10 882 406 (141) 11 147
Transactions with shareholders and non-controlling
interest recorded directly in equity (11 194) (406) 1 123 (10 477)
Equity-settled share-based payment transactions 126 48 174
Deferred tax on share-based payment transactions 207 207
Transactions with non-controlling shareholders (648) 2 105 1 457
Net dividends paid (11 463) (406) (1 098) (12 967)
Net decrease in treasury shares 741 68 809
Other equity movements (157) (157)
Unincorporated property partnerships' capital
reductions and distributions (219) (219)
Balance at 31 December 2016 150 757 5 503 23 099 179 359
Balance at 1 January 2017 150 757 5 503 23 099 179 359
Total comprehensive income for the year 21 514 594 2 667 24 775
Transactions with shareholders and non-controlling
interest recorded directly in equity (15 251) 2 950 (1 665) (13 966)
Equity-settled share-based payment transactions (885) 29 (856)
Deferred tax on share-based payment transactions 276 276
Transactions with non-controlling shareholders (54) 160 106
Net dividends paid (13 552) (594) (1 364) (15 510)
Net increase in treasury shares (1 153) (490) (1 643)
Other equity movements 117 3 544 3 661
Unincorporated property partnerships' capital
reductions and distributions (151) (151)
Balance at 31 December 2017 157 020 9 047 23 950 190 017
Condensed consolidated statement of cash flows
for the year ended 31 December 2017
2017 2016
Rm Rm
Net cash flows from operating activities 24 137 40 255
Direct taxation paid (10 078) (9 232)
Cash inflows from other operating activities 34 215 49 487
Net cash flows used in investing activities (8 415) (13 377)
Cash outflow from capital expenditure (5 451) (7 537)
Cash outflow from other investing activities (2 964) (5 840)
Net cash flows used in financing activities (12 674) (12 030)
Cash inflow from equity transactions with non-controlling interests 1 173 1 575
Cash outflow from subordinated debt instruments redeemed (4 180) (3 175)
Cash inflow from subordinated debt instruments issued 2 246 2 694
Issuance of other equity instruments1 3 544
Cash outflow from dividends paid2 (15 574) (12 967)
Cash inflow/(outflow) from other financing activities 117 (157)
Effect of exchange rate changes on cash and cash equivalents (5 212) (12 486)
Net (decrease)/increase in cash and cash equivalents (2 164) 2 362
Cash and cash equivalents at the beginning of the year 77 474 75 112
Cash and cash equivalents at the end of the year 75 310 77 474
Comprising:
Cash and balances with central banks 75 310 77 474
1 Refer to AT1 capital paragraph within other reportable items for further details.
2 During 2017, coupons to the value of R229 million were paid to AT1 capital bond holders. Current tax of R64 million
relating to the AT1 capital bonds was recognised directly in equity resulting in an aggregate net equity impact of R165
million.
Notes
Condensed segment report
For the year ended 31 December 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).
2017 20161
Rm Rm
Revenue contribution by business unit
Personal & Business Banking 69 526 67 635
Corporate & Investment Banking 37 251 35 420
Central and other (3 615) (3 198)
Banking activities 103 162 99 857
Liberty 24 394 21 365
Standard Bank Group 127 556 121 222
Profit or loss attributable to ordinary shareholders
Personal & Business Banking 13 927 12 613
Corporate & Investment Banking 11 392 10 239
Central and other (1 045) (1 593)
Banking activities 24 274 21 259
Other banking interests 600 (8)
Liberty 1 361 955
Standard Bank Group 26 235 22 206
Total assets by business unit
Personal & Business Banking 705 232 689 183
Corporate & Investment Banking 905 138 897 565
Central and other (12 402) (42 990)
Banking activities 1 597 968 1 543 758
Other banking interests 7 493 6 445
Liberty2 422 467 401 771
Standard Bank Group 2 027 928 1 951 974
Total liabilities by business unit
Personal & Business Banking 630 796 618 113
Corporate & Investment Banking 841 785 842 751
Central and other (29 846) (62 425)
Banking activities 1 442 735 1 398 439
Liberty2 395 176 374 176
Standard Bank Group 1 837 911 1 772 615
1 Where responsibility for individual cost centres and divisions within business units change, the comparative
figures have been reclassified accordingly.
2 Refer to the accounting policy elections for details of the restatement.
Headline earnings
for the year ended 31 December 2017
2017 2016
Rm Rm
Profit for the year 26 235 22 206
Headline adjustable items added/(reversed) 187 989
IAS 16 - Loss on sale of property and equipment 10 50
IAS 21 - Realised foreign currency profit on foreign operations (214) (62)
IAS 27/IAS 28 - Losses/(gains) on disposal of businesses 18 (11)
IAS 28/IAS 36 - Impairment of associate 10
IAS 36 - Impairment of intangible assets 447 654
IAS 36 - Goodwill impairment 482
IAS 39 - Realised gains on available-for-sale assets (74) (134)
Taxation on headline earnings adjustable items (94) (178)
Non-controlling interests' share of headline earnings
adjustable items (58) (8)
Standard Bank Group headline earnings 26 270 23 009
Headline earnings per ordinary share (cents)
Headline earnings per ordinary share 1 640.0 1 440.1
Diluted headline earnings per ordinary share 1 619.7 1 420.8
Headline earnings is calculated in accordance with the circular titled Headline Earnings issued by SAICA,
as amended from time to time.
Private equity associates and joint ventures
as at 31 December 2017
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 the circular titled Headline Earnings issued by SAICA, and amended from time to time.
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.
2017 2016
Rm Rm
Cost 48 48
Carrying value 546 389
Fair value 546 389
Realised gains on disposal for the year included in headline earnings 45
Attributable income before impairment 159 3
Contingent liabilities and commitments
2017 2016
Rm Rm
Letters of credit and bankers' acceptances 13 413 12 607
Guarantees 63 761 64 076
Contingent liabilities 77 174 76 683
Investment property 385 633
Property and equipment 94 315
Other intangible assets 299 399
Commitments 778 1 347
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 year with a reconciliation of changes in the balances during the year.
Derivative Trading
instruments assets Total
Rm Rm Rm
Balance as at 1 January 2016 295 582 877
Additional net profit on new transactions during the year 2 137 139
Recognised in trading revenue during the year (16) (131) (147)
Exchange differences (120) (120)
Balance as at 31 December 2016 161 588 749
Balance as at 1 January 2017 161 588 749
Additional net profit on new transactions during the year 544 162 706
Recognised in trading revenue during the year (508) (108) (616)
Exchange differences (37) (37)
Balance as at 31 December 2017 160 642 802
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 2017 as well as 2016 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 years.
The weighted number of shares thus also equated to 5 750 291 for both periods.
Post-employment benefit plans
The group manages R11 864 million (2016: 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:
2017 2016
Rm Rm
Financial investments held in the group's bonds and money
market instruments 1 089 947
Value of ordinary SBG shares held 2 157 570
Balances and transactions with ICBCS
The following balances and transactions were entered into between the group and ICBCS, an associate of
the group.
2017 2016
Amounts included in the group's statement of financial position Rm Rm
Derivative assets 2 227 1 856
Trading assets 7 24
Loans and advances 31 413 30 111
Other assets 590 232
Derivative liabilities (2 340) (2 271)
Deposits and debt funding (1 050) (1 315)
Provisions and other liabilities (759) (287)
Services
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) (now ICBCS).
In terms of these arrangements, services are delivered to and received from ICBCS for the account of each
respective party. As at 31 December 2017 the expense recognised by the group in respect of these arrangements
amounted to R277 million (2016: R202 million).
Tax consortium relief
The UK's tax legislation creates UK tax groups that allow for consortium relief in terms of which UK tax losses
arising in one eligible consortium company are offset against UK tax profits arising in the same tax year in other
eligible consortium companies. ICBCS, the group's UK subsidiary Standard Advisory London Limited (SALL) and ICBC's
UK subsidiary ICBC (London) Plc are eligible companies of the same consortium group, and are therefore able to take
advantage of the consortium relief rules. During 2015 and 2016, ICBCS made taxable losses, whilst SALL and ICBC
(London) Plc made taxable profits. As such ICBCS, SALL and ICBC (London) Plc agreed to offset ICBCS's taxable
losses against SALL and ICBC (London) Plc's taxable profits. During the year ICBCS recognised a tax credit of
USD19.4 million for consortium relief, of which an amount of USD7.1 million was payable by SALL to ICBCS in 2018.
Balances and transactions with the Industrial and Commercial Bank of China (ICBC)
The following balances and transactions were entered into between the group and ICBC, a 20.1% shareholder of the
group, excluding those with ICBCS:
2017 2016
Amounts included in the group's statement of financial position Rm Rm
Loans and advances 2 939 246
Other assets1 611 656
Deposits and debt funding (91) (6 583)
1 The group recognised losses in respect of certain commodity reverse repurchase agreements with third parties
prior to 1 February 2015, being the date of conclusion of the sale and purchase agreement, relating to SB Plc
(now ICBCS) with ICBC. As a consequence of the sale and purchase agreement, the group holds the right to recover
from ICBC 60% of insurance and other recoveries, net of costs, relating to claims 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 31 December 2017, a balance of USD50 million (R611 million)
is receivable from ICBC in respect of this arrangement (2016: USD48 million; R656 million).
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:
Amounts included in the group's statement of financial 2017 2016
position and income statement Rm Rm
Trading liabilities (275) (397)
Deposits and debt funding (15 706) (15 700)
Trading (losses)/gains (101) 51
Interest expense (695) (1 017)
Changes in group directorate
The following changes in directorate took place during the 2017 financial year up to 7 March 2018:
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
BS Tshabalala As non-executive director 10 November 2017
Retirement
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 amount
Gross liabilities set of financial
amount of off in the assets
recognised statement of subject
financial financial to netting Collateral
assets1 position2 agreements3 received4 Net amount
Rm Rm Rm Rm Rm
Assets
31 December 2017
Derivative assets 46 323 (5) 46 318 (35 281) 11 037
Trading assets 21 219 21 219 (19 344) 1 875
Loans and advances5 50 545 (32 864) 17 681 (15 345) 2 336
Total 118 087 (32 869) 85 218 (69 970) 15 248
31 December 2016
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
Financial Net amount
Gross assets set of financial
amount of off in the liabilities
recognised statement of subject to
financial financial netting Collateral
liabilities1 position2 agreements3 pledged6 Net amount
Rm Rm Rm Rm Rm
Liabilities
31 December 2017
Derivative liabilities 52 418 (5) 52 413 (34 628) 17 785
Trading liabilities 32 425 32 425 (32 425)
Deposits and debt funding5 40 420 (32 864) 7 556 7 556
Total 125 263 (32 869) 92 394 (67 053) 25 341
31 December 2016
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) 13 367
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. This could include 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. 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, all repurchase agreements (for financial liabilities) and reverse repurchase agreements (for
financial assets), subject to 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 The agreement allows for offset in the
association event of default.
Trading assets and trading Global master repurchase agreements The agreement allows for offset in the
liabilities event of default.
Loans and advances Customer agreements 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 agreements and Banks Act In the event of liquidation or bankruptcy,
offset shall be enforceable subject to
Banks Act requirements being met.
Other reportable items
Additional Tier 1 capital
During the year the group issued its debut Basel III compliant AT1 capital bond that qualifies as Tier 1 capital
amounting R3.5 billion nominal value. The proceeds of the bond issuance have been invested in SBSA on the same
terms and conditions as those applicable to the AT1 notes issued by SBG. 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. During 2017, coupons to the value of R229 million were paid to AT1 capital bond
holders. Current tax of R64 million relating to the AT1 capital bonds was recognised directly in equity resulting
in an aggregate net equity impact of R165 million.
The terms of the Basel III compliant AT1 capital 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.
The AT1 capital bonds have been recognised within other equity instruments in the statement of financial position.
Equity securities
During the year, 2 877 827 (2016: 2 646 456) ordinary shares were issued in terms of the group's equity
compensation plans, notably the equity growth scheme (EGS) and group share incentive scheme (GSIS). Surplus
capital was used to purchase 2 030 824 (2016: 2 477 472) ordinary shares to counteract the dilutive impact
of the shares issued under the equity compensation plans. Effective from 2017, the group no longer issues
EGS and GSIS awards. The last awards for the GSIS were issued in 2011 and for the EGS, the last award was
made in 2016. Awards are now provided in terms of the group's other share schemes, notably the deferred
bonus scheme and the share appreciation rights plan, both of which are settled by the group to employees
with shares that the group purchases from the open market, and the cash-settled deferred bonus scheme,
which is settled in cash. At the end of the year, the group would need to issue 6 159 744 (2016: 5 306 247)
SBG ordinary shares to settle the outstanding GSIS options and EGS rights that were awarded to participants
in previous years. The shares issued to date for the EGS and GSIS together with the expected number of shares
to settle the outstanding options and rights as a percentage of the total number of shares in issue is 2.2%
(2016: 2.0%).
The total equity securities held as treasury shares at the end of the year was 16 213 766 shares (2016: 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
During the year ended 31 December 2017 the group's FCTR decreased by R4.9 billion (2016: decrease of R11.4 billion).
This decrease was partly attributable to the weakening of the US dollar (10%), Nigerian naira (21%), and Argentine
peso (23%) against the South African rand which resulted in an FCTR loss of R1.2 billion, R1.0 billion and
R0.5 billion respectively.
IFRS 9 financial instruments (IFRS 9)
Background
IFRS 9 Financial Instruments (IFRS 9) will replace IAS 39 Financial Instruments: Recognition and Measurement
(IAS 39) from 1 January 2018.
IFRS 9 consists of the following key areas which represent 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, mainly relating to the 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
- An expected credit loss (ECL) impairment model
- Revised requirements and simplifications for hedge accounting
Comparative financial results and elections
The group has elected not to restate its comparative financial statements. Accordingly, the difference between
the previous IAS 39 and new IFRS 9 carrying values will be recognised in the group's opening retained earnings
as at 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. The group has elected to continue with IAS 39's hedge accounting requirements,
but will implement IFRS 9's revised hedge accounting disclosures.
Impact - qualitative assessment
The ECL impairment requirements, which comprise IFRS 9's most material impact for the group is expected to result
in an increase of approximately R8.7 billion in balance sheet impairments; an increase of 32% on IAS 39 balance
sheet impairments (including interest in suspense). Whilst IFRS 9's classification and measurement requirements
are expected to have a negligible net impact on the group's reserves as at 1 January 2018, there were instances
in which the measurement of certain financial assets and liabilities changed from amortised cost to fair value
or vice versa due to the business model implementation within underlying business portfolios.
The following table outlines the key drivers of the estimated impact:
IFRS 9 DRIVER REASON
Minimum of a 12-month expected The existing emergence period is between three to six months for PBB exposures
credit loss for performing and 12 months for CIB exposures. The change to a 12-month expected loss
exposures requirement will result in an increase in impairments for PBB.
Lifetime credit losses for IFRS 9 requires a lifetime loss to be recognised for exposures for which
exposures that exhibit a significant there has been a significant increase in credit risk. This requirement will
increase in credit risk affect both PBB and CIB.
ECL held for unutilised client The IFRS 9 requirement for impairments for unutilised client facilities and
exposures and guarantees guarantees results in additional balance sheet impairments for both PBB and CIB.
Longer outlook period for Measurement of ECL over a longer time horizon results in the potential for
exposures that are expected higher loss outcomes which has a greater impact for PBB than CIB.
to default
Forward looking economic The inclusion of forward-looking economic information is expected to
expectations for ECL increase the level of provisions as a result of the nature and timing of both
current and forecasted economic assumptions as at 1 January 2018.
Tax implications
Within South Africa, National Treasury released a Taxation Laws Amendment Bill which contained requirements for the
deductibility of impairments in accordance with IFRS 9 being a 25% allowance for impairment provisions for all performing
exposures that have not demonstrated a significant increase in credit risk (stage 1), a 40% allowance for performing
exposures that have demonstrated a significant increase in credit risk (stage 2) and an 85% allowance for impairment
provisions for exposures that are in default (stage 3). The change in the timing of the deductibility of the impairments
for tax purposes will result in a higher deferred tax asset balance which will have a negative impact on the group's
capital ratios.
Capital implications
IFRS 9 (including the related tax consequences) will have consequential impacts on the group's regulatory capital
adequacy. The expected increase in impairment provisions, together with the increase in the group's deferred tax asset
carrying value and changes in the level of the threshold deduction for investments in financial entities, will reduce
qualifying CET1 capital. This reduction in qualifying CET1 capital will, however, be partially offset by the release
of the existing deduction against qualifying CET1 for the excess of regulatory expected losses over the IAS 39
impairments (R2.1 billion). IFRS 9's ECL requirements are expected to reduce the group's CET 1 ratio by
approximately 70 bps and will be phased in over three years.
Project governance
The group structured its IFRS 9 implementation project in such a way as to effectively enable the delivery of
the IFRS 9 requirements across the group. The IFRS 9 implementation project board provided strategic direction
to the project, monitored the project's progress, and identified required interventions and project interdependencies
with other group initiatives. In addition, an overall project steering committee and Africa Regions' country steering
committees were established. In order to ensure appropriate oversight, the IFRS 9 project board reported on its
activities, status and outcomes to the group audit committee.
Communication of transition impact
The group will, together with its Q1:2018 SENS announcement regarding the group's quarterly statement of changes in
equity, release a transition 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. The group has conducted its own internal investigations and
found no evidence that supports the complaint. Both SBSA and SNYS have, together with 12 of the other respondents,
applied for dismissal of the complaint referral on various legal grounds. These applications are due to be heard
in July 2018. 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 Standard Bank 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 alleged conduct, which is the subject of the referral, is alleged to have taken place prior to the
disposal of SB Plc.
Subordinated debt
During the year, the group did not issue Basel III compliant Tier 2 subordinated debt instruments (2016: issued
R2.7 billion). However, on 7 February 2018 the group issued R3.0 billion Basel III compliant bonds that qualified
as Tier 2 capital. 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 payment dates are quarterly with the
first call date being 13 February 2023.
R3.0 billion (2016: R3.2 billion) Basel III compliant Tier 2 subordinated debt instruments were redeemed during
the year.
R0.3 billion (2016: Rnil) of Basel II compliant Tier 2 subordinated debt instruments were issued during the year
and R0.2 billion was redeemed in jurisdictions that have not yet adopted the Basel III framework.
The terms of the Basel III compliant Tier 2 capital 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.
During the year, the group issued R2.0 billion subordinated debt that qualifies as regulatory insurance capital and
R1.0 billion was redeemed.
Accounting policy elections and restatement
Adoption of new and amended standards effective for the current financial period
The accounting policies are consistent with those reported in the previous year except for 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
(IFRS 12): amendment clarifies that an entity is not required to disclose summarised financial information
for a subsidiary, joint venture or associate when classified (or included in a disposal group that is classified)
as held for sale in terms of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (IFRS 5).
Early adoption of revised standards:
- Amendment to IFRS 2 Classification and Measurement of Share-based Payment Transactions (IFRS 2): the amendments
eliminates diversity in practice in three main areas namely, (1) effects of vesting conditions on the measurement
of a cash-settled share-based payment transaction; (2) classification of a share-based payment transaction with net
settlement features for withholding tax obligations and (3) accounting where a modification to the terms and
conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.
- 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 (IAS 28). The clarification to IAS 28
clarifies that an entity may make an election separately for each associate or joint venture, that is a venture
capital organisation, or a mutual fund, unit trust and similar entities including investment-linked insurance
funds, at initial recognition to measure that associate or joint venture at either at fair value through profit
or loss in accordance with IAS 39 or the equity method in accordance with IAS 28.
- Amendment to IAS 40 Investment Property (IAS 40): amendments clarify the requirements on transfers to, or from,
investment property when, and only when, there is a change in use. A change in use occurs when the property meets,
or ceases to meet, the definition of investment property and there is evidence of the change in use.
The above mentioned 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.
Correction of prior period error
The group determined that certain intercompany derivative positions held between the group's banking activities and
the group's investment management and life insurance activities were erroneously eliminated on a net basis as opposed
to a gross basis. The group has restated its statement of financial position's previously reported financial
information to incorporate the correct elimination of these intercompany derivative positions. The restatement
did not impact the group's net exposure to derivatives, nor did it affect the group's reserves. The change to
the group's statement of financial position is reflected in the table that follows:
2016 2015
As previously Restated As previously Restated
presented Restatement position presented Restatement position
Asset/ (Credit)/ Asset/ Asset/ (Credit)/ Asset/
(liability) debit (liability) (liability) debit (liability)
Rm Rm Rm Rm Rm Rm
Derivative assets 68 620 (2 316) 66 304 111 089 (3 900) 107 189
Derivative
liabilities (75 083) 2 316 (72 767) (133 958) 3 900 (130 058)
The following disclosures have been impacted by this restatement:
- Condensed consolidated statement of financial position
- Condensed segment report
- Accounting classifications and fair values of assets and liabilities
- Financial assets and liabilities measured at fair value.
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 year's results for the period ended 31 December 2016 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 been reviewed by the
group's external auditors and their unmodified reasonable assurance report prepared in terms of ISAE 3420 is
available for inspection at the company's registered office on weekdays from 09:00 to 16:00.
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 12 months in the year).
2017 average 2016 average
exchange rate exchange rate
US dollar 13.30 14.69
Pound sterling 17.13 19.96
Argentinian peso 0.81 1.00
Nigerian naira 0.04 0.06
Kenyan shilling 0.13 0.15
Ghanaian cedi 3.02 3.72
Mozambican metical 0.21 0.24
8 March 2018
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
Share transfer secretaries Computershare Investor Services Proprietary Limited
in South Africa Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
PO Box 61051, Marshalltown, 2107
Share transfer secretaries Transfer Secretaries (Proprietary) Limited
in Namibia 4 Robert Mugabe Avenue, (entrance in Burg Street), Windhoek, Namibia
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 codes JSE share code: SBK ISIN: ZAE000109815
NSX share code: SNB ZAE000109815
SBKP ZAE000038881 (First preference shares)
SBPP ZAE000056339 (Second preference shares)
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.
Directors
TS Gcabashe (chairman), H Hu2 (deputy chairman), JH Maree (deputy chairman), A Daehnke*, RMW Dunne1, GJ
Fraser-Moleketi, GMB Kennealy, BJ Kruger, NNA Matyumza, KD Moroka, ML Oduor-Otieno3, AC Parker, ANA Peterside CON4, MJD Ruck, PD
Sullivan5, SK Tshabalala*(chief executive), JM Vice, L Wang2
*Executive Director 1British 2Chinese 3Kenyan 4Nigerian 5Australian
All nationalities are South African, unless otherwise specified above.
standardbank.com
Date: 08/03/2018 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.
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