Wrap Text
Unaudited condensed consolidated interim results and dividend announcement for the six months ended 30 June 2018
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 ISIN: ZAE000109815
JSE bond code: SBKI
Unaudited condensed consolidated interim results and dividend announcement
for the six months ended 30 June 2018
The Standard Bank Group Limited's (the group) condensed consolidated interim results, including the statement of
financial position, income statement, statement of other comprehensive income, statement of changes in equity and
statement of cash flows, for the six months ended 30 June 2018 (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, 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 Listing Requirements) and the
requirements of the South African Companies Act, 71 of 2008 applicable to condensed 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. 1H18 refers to the first half year results for 2018. 1H17 refers to the first
half year results for 2017. FY17 refers to the full year results for 2017. Change % reflects 1H18 change on 1H17. All
amounts relate to the group's results, unless otherwise specified.
The 1H18 results, including comparatives for 1H17, where applicable, have not been audited or independently reviewed
by the group's external auditors. The group's FY17 financial information has been correctly extracted from the underlying
audited consolidated annual financial statements for the year ended 31 December 2017, unless otherwise specified. Refer
to the restatements section for restatements to financial information disclosed for 1H17 and FY17 as applicable.
The accounting policies applied in the preparation of these unaudited condensed consolidated interim results are in
terms of IFRS, including IFRS 9 Financial Instruments (IFRS 9), which is effective for the group from 1 January 2018.
These accounting policies 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 in the accounting policy elections
section.
The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. Therefore
comparability will not be achieved by the fact that the comparative financial information has been prepared on an
IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) basis. The group did however align certain
disclosures within these results to provide comparable data. The impact of adopting IFRS 9 has been applied
retrospectively with an adjustment to the group's opening 1 January 2018 reserves. The application of IAS 39 for the
group's 2017 financial year was unaffected by the application of IFRS 9. Refer to the IFRS 9 Financial Instruments
section and the group's IFRS 9 transition report (transition report), available at www.standardbank.com/reporting,
for more details on IFRS 9.
The board of directors (the board) 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 16 August 2018.
This report contains pro forma constant currency financial information. Refer to the pro forma constant currency
financial information section for further detail.
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 (SBSA), 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 11 688 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 up 5% to R12 663 million
1H17: R12 111 million
- Headline earnings per share up 5% to 794 cents
1H17: 756 cents
- Dividend per share up 8% to 430 cents
1H17: 400 cents
- Return on equity (ROE) up to 16.8%
1H17: 16.1%
- Credit loss ratio down to 0.70%
1H17: 0.96%1
- Jaws down to (1.8%)
1H17: 1.0%2
- Cost-to-income ratio up to 57.1%
1H17: 56.1%2
- Common equity tier 1 ratio3 up to 13.8%
1H17: 13.7%
1 Based on IAS 39.
2 Refer to the restatements section for details on the restatements affecting these ratios.
3 The 1H18 ratio is reported after applying the IFRS 9 phase-in transition adjustment allowed by the South African
Reserve Bank (the SARB). For further details regarding the ratio assuming the no phase-in provision (fully
loaded ratio) refer to the other reportable items section for more detail.
Overview of financial results
Group results
For the period ended 30 June 2018 (1H18) group delivered headline earnings of R12.7 billion, up 5% on the prior period
(1H17), and return on equity improved to 16.8% from 16.1% in 1H17. The group's capital position remained strong, with a
common equity tier 1 (CET1) ratio of 13.8%. Accordingly, an interim dividend of 430 cents per share has been declared,
an increase of 8% on the prior period.
Banking activities headline earnings grew 6% to R11.7 billion driven by strong growth in non-interest revenue (NIR)
and lower credit impairment charges, in Africa Regions in particular. Banking activities ROE improved to 17.5% from
16.8% in 1H17.
The stronger South African Rand, on average, adversely impacted the group's reported results. On a constant currency
basis, group headline earnings increased by 8% boosted by Africa Regions which grew earnings by 32%. Africa Regions'
contribution to banking headline earnings increased to 32% from 29% in 1H17. The top five contributors to Africa
Regions' headline earnings were Angola, Ghana, Mozambique, Nigeria and Uganda.
Operating environment
Global growth has been less synchronised than previously expected. Key drivers were escalating trade tensions, rising
oil prices and higher US yields. Global risk aversion led to increased volatility and emerging market (EM) currency
pressures.
In many of the sub-Saharan African countries in which we operate, inflation continued to ease, interest rates declined
and exchange rates were relatively stable. One exception was Angola, where the managed devaluation of the currency
resulted in a 23% decline in average AOA/USD period on period.
In South Africa (SA), on average, the Rand was stronger, rates lower and inflation surprised on the downside. Consumer
and business confidence improved but have not necessarily translated into higher spending or fixed investment. The VAT
increase, tax bracket creep and higher fuel prices have all negatively impacted discretionary spending capacity.
IFRS 9 became effective on 1 January 2018 and the group provided a transition report with its first quarter results
for 2018. The day one impact of implementing IFRS 9's expected credit loss impairment requirements included a 31%
increase in balance sheet impairments from R22.4 billion to R29.4 billion, a R6.6 billion decline in group reserves
and a 70 bps decline in the group's CET1 ratio on a fully loaded basis. The CET1 impact will be phased in over
three years.
Revenue
Banking activities achieved revenue growth of 4%, with strong NIR growth dampened by slower net interest income (NII).
NII was broadly flat driven by low loan growth and declining net interest margin (NIM). NIM declined from 460 bps to
450 bps as the impact of declines in interest rates in SA and various African countries and pressure on pricing was
partially offset by retail deposits growing faster than wholesale, the Africa Regions' portfolio growing faster than
SA and lower funding costs. In addition, the impact of the earlier suspension of interest in accordance with IFRS 9
was negative 4 bps on NIM and approximately R280 million on NII. On a like-for-like basis, adjusting for the impact
of interest in suspense (IIS), NII would have grown 2% compared to reported growth of 1%.
NIR was up 8% on 1H17, with the largest component, net fee and commission revenue, up 6%. Trading revenue recovered to
grow at 12% and other revenue by 9%.
Growth in net fee and commission revenue was the result of volume-driven increases in card-based commissions,
electronic banking fees and foreign currency service fees. Customers are increasingly adopting and transacting on our
digital platforms as well as our non-cash, digital products, e.g. Instant Money and SnapScan. Strong growth in revenue
was dampened by higher card merchant fees and UCount reward programme costs.
Reported trading revenue grew 12%, while trading revenue on a constant currency basis grew 17%. On a constant currency
basis fixed income and currency trading revenue grew 8%, driven by strong client activity. Equities revenue increased
by R475 million, of which approximately 50% was trade related and 50% relates to the elimination, in terms of IFRS, of
the impact of Standard Bank shares held by the group to facilitate client trading activities.
Credit impairment charges
Credit impairment charges were 22% lower than in the prior period, which combined with low growth in loans led to a
group credit loss ratio of 70 bps, down from 96 bps in 1H17. In Personal & Business Banking (PBB), impairment charges
declined 14% largely due to the earlier suspension of interest in accordance with IFRS 9 in SA and lower charges in
Africa Regions. In SA, excluding the impact of IFRS 9, the credit charge would have been broadly flat period on period.
Corporate & Investment Banking's (CIB) impairment charges declined 70%, driven by Africa Regions recoveries. CIB charges
are likely to normalise in the second half of 2018 (2H18).
Operating expenses
Operating expenses grew 6% period on period. The cost-to-income ratio for the period was 57.1%, an increase on 56.1%
in the prior period.
Staff costs were up 6%, driven by annual salary increases and higher deferred incentive charges (linked to the higher
Standard Bank share price). Headcount declined overall, with decreases in PBB and CIB partially offset by additional
heads in IT, Compliance, Marketing and Risk Management functions.
Other operating expenses increased by 5%. IT costs increased 13% on the back of higher licensing fees, infrastructure
spend and security costs. IT amortisation only grew 3% period on period; this is expected to accelerate in 2H18 as key
projects completed in 1H18 start to be amortised. Tight cost control across various operational areas, for example
premises, communication and stationary, provided the group with scope to invest in our core customer value proposition.
During the period the group incurred additional spend in SA on professional fees related to the PBB customer journey
project and on marketing to build on brand awareness both in SA and across Africa Regions. Both projects started in
the second half of 2017 and therefore the impact is expected to be less marked over the full year.
Loans and advances
Gross loans and advances to customers grew 4% period on period, of which PBB's advances to customers grew 6% and CIB's
by 1%.
Within PBB, mortgage lending grew 3%. In SA, new applications received were down 4% reflective of the low level of
activity in the SA housing market. Despite the subdued environment, PBB SA's new business disbursements totalled
R19.1 billion in the period. Vehicle and asset finance (VAF) lending grew 5%, driven primarily by strong new business
volumes in SA. A 31% increase in new accounts, albeit at lower average values, led to a 22% increase in disbursements
to R18.4 billion. The increases are a validation of the investments made in people, processes and structures to deliver
a better customer experience. Credit card balances outstanding increased by 4% as customers utilised limits and
transacted more. Other personal unsecured lending grew by 4%. Business lending grew by 16%, with PBB Africa Regions
showing particularly strong growth at 21% on a constant currency basis.
In CIB loans and advances supporting client activities showed growth in both Investment Banking of 6% and
Transactional Products and Services of 12%. The overall growth rate of customer loans is masked by reduced short-term
lending balances in Global Markets where surplus liquidity is placed mostly with non-bank financial institutions.
Increased client lending requirements during the period therefore led to a switch in our utilisation of liquidity
from Global Markets placements to client lending in Investment Banking and Transactional Products and Services.
Funding and liquidity
The group's liquidity position remained strong with a second quarter average Basel III liquidity coverage ratio (LCR)
of 121.3%, exceeding the minimum phased-in Basel III LCR requirement of 90%. The group's net stable funding ratio was
123.1% in excess of the minimum Basel III requirement of 100%.
The group successfully increased its longer term funding during 1H18, raising R13.9 billion through a combination of
negotiable certificates of deposit, senior debt and syndicated loans.
Deposits and debt funding from customers grew 4% period on period. The group's retail deposits from PBB customers
increased 9%. In South Africa, retail-priced deposits grew 9%, in Africa Regions 16% and in International 12%.
CIB's SA deposits declined 2%, whilst in Africa Regions customer deposits grew by 5% (9% in constant currency).
Capital management
The group allocates available capital pursuant to our strategic objectives and subject to appropriate return hurdles.
In 1H18 the group completed the acquisition of an additional 11% in Stanbic IBTC Holdings in Nigeria, increasing the
group's shareholding to 64% and negatively impacting the group CET1 ratio by approximately 20 bps. In early July 2018,
the group completed the acquisition of an additional 8% in Stanbic Holdings in Kenya, increasing the group's shareholding
to 68%. The impact of the transaction in Kenya on group CET1 in 2H18 will be negligible. Including the impact of the
Nigeria transaction, the group maintained strong capital adequacy ratios. On an IFRS 9 phased-in basis, the CET1 ratio
was 13.8% (1H17: 13.7%) and the total capital adequacy ratio was 16.2% (1H17: 16.2%).
Gross loans and advances to customers1
CCY2 Change 1H18 1H17 FY17
% % Rm Rm Rm
Personal & Business Banking 5 6 632 088 598 422 605 187
Mortgage loans 3 3 353 357 342 128 346 518
Vehicle and asset finance 5 5 85 327 80 889 81 640
Card debtors 4 4 33 336 32 119 32 268
Other loans and advances 11 12 160 068 143 286 144 761
Corporate & Investment Banking 1 1 364 148 359 486 352 025
Global markets (48) (48) 17 653 33 843 21 648
Investment banking 5 6 308 526 291 621 299 357
Transactional products and services 11 12 37 955 33 840 30 859
Real estate and PIM (92) (92) 14 182 161
Central and other (6) (9) (3 379) (3 730) (4 676)
Gross loans and advances to customers 4 4 992 857 954 178 952 536
1 The above loans and advances disclosures have been presented at a segment level for customers only, whereas the
other loans and advances disclosures within these results are disclosed on a group consolidated view, unless stated
otherwise.
2 Constant currency change.
Deposits from customers
CCY Change 1H18 1H17 FY17
% % Rm Rm Rm
Personal & Business Banking 9 11 563 592 509 276 535 461
Retail priced deposits 7 9 448 553 412 022 426 484
Wholesale priced deposits 18 18 115 039 97 254 108 977
Corporate & Investment Banking (1) (1) 615 986 624 283 635 775
Central and other - - (4 935) (4 945) (4 671)
Deposits from customers 4 4 1 174 643 1 128 614 1 166 565
Retailed priced deposits 7 9 448 553 412 022 426 484
Wholesale priced deposits 2 1 726 090 716 592 740 081
Headline earnings by business unit
CCY Change 1H18 1H17 FY17
% % Rm Rm Rm
Personal & Business Banking 8 8 6 641 6 133 14 058
Corporate & Investment Banking 13 8 5 709 5 310 11 438
Central and other 43 59 (676) (426) (1 228)
Banking activities 9 6 11 674 11 017 24 268
Other banking interests (19) (38) 132 212 567
Liberty (3) (3) 857 882 1 435
Standard Bank Group 8 5 12 663 12 111 26 270
Overview of business unit performance
Personal & Business Banking
PBB's headline earnings of R6.6 billion were 8% higher than the prior year, driven by customer-led growth in income,
responsible cost management and lower credit impairment charges, most notably in Africa Regions. An ROE of 19.4% was
achieved, a marked improvement on the 17.8% recorded in the prior period.
PBB SA delivered a resilient performance in a sluggish operating environment, with headline earnings of R6.0 billion
up 5%. PBB SA's focus remains on delivering a consistently excellent customer experience, seamlessly across all touch
points, with products relevant to their individual needs. This has necessitated continued investment in upskilling and
empowering our customer facing staff and radically redesigning and digitising processes. Ensuring the safety of customers'
assets in a digital era is also an integral part of the overall customer experience, and investments made in digital
fraud prevention yielded a pleasing 81% reduction in the number of digital fraud cases reported. Together, these investments
have resulted in an overall increase in customer satisfaction scores and the number of active customers was maintained
from FY17 at 8.1 million customers. This was supported by particularly pleasing growth in the larger middle market
segment. Customers continued to indicate their preference for digital, rather than physical channels, with the number
of active mobile banking users growing by 7%, and the number of transactions performed on this channel growing strongly
by 58%.
Total income grew by 4%, supported by increases in target customer segments. Despite increased spending on marketing
campaigns and projects to develop solutions, which better service our customers, operating expense growth was contained
at 6%. Credit impairment charges declined by 8% leading to a lower credit loss ratio of 122 bps (1H17: 137 bps). This
was mainly attributable to IFRS 9 as discussed previously.
PBB Africa Regions was impacted by the stronger Rand on average in 1H18 compared to 1H17. To reflect the underlying
trends in this business, the commentary that follows refers to the constant currency growth rates of PBB Africa Regions.
Headline earnings from PBB Africa Regions improved to R201 million from R91 million in the prior period. Gross
customer loans expanded 15%, particularly in personal unsecured and business lending, and deposits from customers grew
15%, with pleasing balance growth of 18% in current and savings accounts. PBB Africa Regions' result was underpinned by
customer acquisition in key markets, with a focus on delivering digital solutions, and strong trade-related revenue in the
Business Banking segment. In 1H18 the total number of active customers grew 4% to 5 million customers, driven by strong
growth in Kenya, Ghana, Mozambique, Nigeria, Swaziland and Zimbabwe. Mobile and internet banking are available in all 14
countries in which PBB operates in Africa Regions. The number of transactions performed by customers on digital platforms
far outstripped the number performed in physical channels. Approximately 24 million transactions were performed on mobile
banking, up from approximately 11 million in 1H17. On the other hand, transactions performed in physical channels
declined by 8%.
NII grew 9%, benefiting from balance growth and improved pricing, despite the negative endowment impact of lower
average interest rates in Nigeria, Mozambique, Malawi and Uganda. NIR grew 19%, driven by higher transactional volumes
and the increase in the account base, coupled with strong trade-related revenue growth. PBB Africa Regions contributes
approximately 47% of the Africa Regions legal entities' total income. The credit loss ratio decreased to 145 bps from
264 bps in the prior year, driven predominantly by lower charges in Nigeria and Malawi. Assets under management in the
Wealth business in Nigeria grew over the period, and we continued to focus on diversifying and growing the wealth
business in Africa Regions, specifically the short-term and long-term brokerage businesses.
Wealth International grew headline earnings by 31%. USD, GBP and EUR denominated customer deposit balances in our
operations in the Isle of Man and Jersey grew to GBP5.1 billion (1H17: GBP4.9 billion). Margins expanded following
interest rate increases in the US and UK.
Corporate & Investment Banking
CIB's headline earnings of R5.7 billion were up 8% on the prior period, and 13% on a constant currency basis. CIB's
strategic focus on developing proactive client partnerships that deliver relevant solutions, across sectors, regions and
products, to drive Africa's growth delivers diverse revenue streams and supports the sustainability of the franchise.
Client revenues grew 9% (14% on a constant currency basis), demonstrating a strong and diversified franchise. CIB recorded
strong performances from multinational corporates and large domestic clients in the Financial Institutions, Industrials
and Consumer sectors, with an encouraging turn around in the Power & Infrastructure, Oil & Gas and Mining & Metals
sectors. Reported revenue growth was slower at 4%, mainly as a result of the non-recurrence of trading revenues associated
with the revaluation of the Nigeria Naira in the prior year. While cost growth was relatively well contained at 5%, when
combined with low revenue growth it resulted in negative jaws of 1.5%. The credit loss ratio to customers improved
materially to 3 bps due to recoveries of previously impaired loans. CIB delivered an ROE of 20.7%, slightly lower than
the 21.3% recorded in 1H17.
Due to the impact of currency on CIB's results, the commentary that follows refers to the constant currency growth
rates. Revenues in the CIB SA franchise grew by 8%, and in the Africa Regions franchise by 10%. The West Africa franchise
grew revenues by more than 29%, reflecting growth in client deposits and transactional accounts. South & Central Africa
continued to be a steady performer, delivering revenue growth of 9%. Following focused attention on client acquisition in
East Africa, this region delivered strong revenue growth of 17%.
Transactional Products and Services delivered a subdued set of results, with headline earnings down 2% on the prior
period. Revenue growth of 6% was muted, dampened by margin compression in Nigeria and Angola. Credit impairments
increased significantly following the recognition of impairments in the Construction sector in South Africa, to
take account of economic strain.
Global Markets delivered a stronger performance compared to 1H17, growing headline earnings by 8% to R2.1 billion.
Equity and forex trading volumes in South Africa were low. However, fixed income trading improved as a result of lower
interest rates and improved market sentiment. The more flexible forex regime in Nigeria continued to assist forex flows
in Nigeria, and the managed devaluation of the Kwanza benefited forex trading in Angola.
Investment Banking revenues were up 9%, reflecting fees earned on a number of landmark transactions and client
activity in the Energy and Infrastructure sectors. Competition for high quality clients continued to place pressure on
pricing and led to margin compression. As a result, NII was lower than the prior period. Credit impairments improved
significantly following the recovery of previously impaired loans in the Africa Regions, despite recognising impairments
to take account of stress in the Consumer sector in South Africa.
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. Capital not allocated to the business units is held at the centre and a
return is generated on that capital. The day one IFRS 9 reserve adjustment resulted in a R6.6 billion decline in that
capital and a concomitant decline in the returns earned on that capital. In 1H18, the segment recorded a loss of
R676 million. Excluding the IFRS 9 impact, the loss would have been R516 million.
Other banking interests
Other banking interests recorded headline earnings of R132 million, lower than the R212 million recorded in 1H17.
The decline was driven by a disappointing performance in ICBC Standard Bank Plc (ICBCS).
ICBCS's revenue was negatively impacted by lower client flows and margins, which when combined with its fixed cost
base, resulted in a loss for the period. The group's 40% share thereof equated to a loss of R70 million. ICBCS will
require additional capital to grow its balance sheet and become profitable on a sustainable basis. The group's 40%
contribution will equate to approximately $84 million and is expected to be provided in late 2018 or early 2019.
The headline earnings contribution from the group's 20% stake in ICBC Argentina grew 23% to R202 million, off a low
base in 1H17. The Peso devaluation diluted a particularly strong local currency performance. On a constant currency basis,
earnings were up 74%.
Liberty
The financial results reported are the consolidated results of the group's 55.6% 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 period improved by 5% to R1.3 billion, supported by higher earnings
from SA retail insurance and asset management. 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,
declined 1% to R1.5 billion. Investors are referred to the full Liberty announcement dated 2 August 2018 for further
detail.
Headline earnings attributable to the group, adjusted up by R12 million for the impact of the deemed treasury shares,
were R857 million, 3% lower than in 1H17.
Prospects
Whilst the global growth outlook for 2018 and 2019 is unchanged at 3.9%, the underlying growth is expected to be less
even. Relative to expectations earlier in the year, the International Monetary Fund is expecting the US to grow slightly
faster and UK, Europe and EM slightly slower. The broadly supportive EM capital inflows seen in recent periods could
reverse if US monetary tightening is faster than expected. This would negatively impact EM currencies and capital markets.
Sub-Saharan Africa's recovery is expected to continue on the back of higher commodity prices. Growth is estimated to
increase from 2.8% in 2017 to 3.4% in 2018 and rise further to 3.8% in 2019. Within our portfolio, we expect the macros
in the West region to continue to improve, supported by higher average oil prices and the East region to continue to
deliver GDP growth of 5 to 6%. More specifically, Kenya's credit growth could experience a recovery if the regulatory
caps and floors, imposed in 2016, are amended or lifted. The South & Central region performance will be impacted by
SA growth in 2H18.
In South Africa, while consumer confidence has improved, delays in resolving key policy issues remain an obstacle to
business confidence, fixed investment and growth. Inflation is expected to remain inside the 3% to 6% target range,
supporting a flat interest rate outlook for the rest of the year. The group has appetite to grow lending judiciously
in South Africa. There is no doubt competitive pressures will continue to increase, however, we will fiercely protect
our existing customer franchise and grow by partnering with third parties to build new, innovative offerings and
revenue streams.
Our strategy is unchanged and actions being taken are positioning us to deliver contextually-relevant offerings to our
customers, to compete effectively against both incumbents and new entrants and to grow our franchise in partnership
with our clients, employees and business partners, in a sustainable way.
With revenue pressures expected to continue, operating expenses will be a focus area for 2H18 to ensure better full
year jaws. More broadly, we will continue to balance growth, resilience and returns to deliver on our medium-term
objectives of sustainable growth in earnings and delivering an ROE in our 18% to 20% target range.
The 1H18 results, including comparatives for 1H17, where applicable, together with any forward looking information
have not been audited or independently reviewed by the group's external auditors.
Sim Tshabalala
Group chief executive
Thulani Gcabashe
Chairman
15 August 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 has resolved to declare an interim gross cash dividend No. 98 of
430 cents per ordinary share (the cash dividend) to ordinary shareholders recorded in the register of the company
at the close of business on Friday, 14 September 2018. The last day to trade to participate in the dividend is
Tuesday, 11 September 2018. Ordinary shares will commence trading ex dividend from Wednesday, 12 September 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, 12 September 2018,
and Friday, 14 September 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, 17 September 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 interim dividends:
- 6.5% first cumulative preference shares (first preference shares) dividend No. 98 of 3.25 cents (gross) per first
preference share, payable on Monday, 10 September 2018, to holders of first preference shares recorded in the books
of the company at the close of business on the record date, Friday, 7 September 2018. The last day to trade to
participate in the dividend is Tuesday, 4 September 2018. First preference shares will commence trading ex
dividend from Wednesday, 5 September 2018.
- Non-redeemable, non-cumulative, non-participating preference shares (second preference shares) dividend No. 28 of
386.43 cents (gross) per second preference share, payable on Monday, 10 September 2018, to holders of second
preference shares recorded in the books of the company at the close of business on the record date,
Friday, 7 September 2018. The last day to trade to participate in the dividend is Tuesday, 4 September 2018.
Second preference shares will commence trading ex dividend from Wednesday, 5 September 2018.
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,
5 September 2018, and Friday, 7 September 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, 10 September 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
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 98 98 28
Dividend per share (cents) 430 3.25 386.43
Last day to trade in order to be
eligible for the cash dividend Tuesday, Tuesday, Tuesday,
11 September 2018 4 September 2018 4 September 2018
Shares trade ex the cash dividend Wednesday, Wednesday, Wednesday,
12 September 2018 5 September 2018 5 September 2018
Record date in respect of
the cash dividend Friday, Friday, Friday,
14 September 2018 7 September 2018 7 September 2018
Dividend cheques posted and CSDP/broker
account credited/updated (payment date) Monday, Monday, Monday,
17 September 2018 10 September 2018 10 September 2018
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 344 cents per ordinary share, 2.60 cents per first preference share and 309.144 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:
- 1 618 059 594 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 2018
1H17 FY17
1H18 Unaudited Audited
Unaudited Restated Restated
Number of ordinary shares in issue, net
of deemed treasury shares (000's)
End of period 1 595 280 1 602 748 1 597 371
Weighted average 1 594 993 1 603 040 1 601 855
Diluted weighted average 1 615 112 1 622 574 1 621 921
Cents per ordinary share
Basic earnings 796.6 769.8 1 637.8
Diluted earnings 786.7 760.5 1 617.5
Headline earnings 793.9 755.5 1 640.0
Diluted headline earnings 784.0 746.4 1 619.7
Dividend 430 400 910
Net asset value 9 768 9 554 9 830
Financial performance (%)
ROE 16.8 16.1 17.1
Net interest margin on banking activities 4.50 4.60 4.74
Credit loss ratio on banking activities 0.70 0.96 0.86
Cost-to-income ratio on banking activities1 57.1 56.1 55.5
Jaws on banking activities1 (1.8) 1.0 1.1
Capital adequacy ratios (%)2
CET1 capital adequacy ratio 13.8 13.7 13.5
Tier 1 capital adequacy ratio 14.4 14.2 14.2
Total capital adequacy ratio 16.2 16.2 16.0
1 Refer to the restatements section for details on the restatements affecting this ratio.
2 The 1H18 ratios are reported after applying the IFRS 9 phase-in transition adjustment allowed by the SARB, for
further details regarding the ratio assuming the no phase-in provision (fully loaded ratio) please refer to the
other reportable items section.
Condensed consolidated statement of financial position
as at 30 June 2018
1H17
1H18 Unaudited FY17
Unaudited Restated Audited
Rm Rm Rm
Assets
Cash and balances with central banks 72 104 70 949 75 310
Derivative assets1 71 205 51 252 75 610
Trading assets 165 230 126 565 160 894
Pledged assets 22 371 17 447 20 785
Financial investments 531 883 519 084 533 314
Current and deferred tax assets 4 572 2 264 2 109
Loans and advances 1 064 680 1 043 398 1 048 027
Policyholders' assets 7 159 7 689 7 484
Other assets 25 274 30 547 22 996
Interest in associates and joint ventures 9 961 9 712 9 665
Investment property 32 185 31 508 32 226
Property and equipment 16 354 15 852 16 179
Goodwill and other intangible assets 23 954 23 814 23 329
Total assets 2 046 932 1 950 081 2 027 928
Equity and liabilities
Equity 189 078 183 817 190 017
Equity attributable to ordinary shareholders 155 834 153 132 157 020
Equity attributable to other equity instruments holders 9 047 7 247 9 047
Equity attributable to non-controlling interests 24 197 23 438 23 950
Liabilities 1 857 854 1 766 264 1 837 911
Derivative liabilities1 73 217 57 423 76 896
Trading liabilities 61 744 45 758 62 855
Current and deferred tax liabilities 8 556 7 970 8 614
Deposits and debt funding 1 266 584 1 212 115 1 243 911
Policyholders' liabilities 319 280 309 200 322 918
Subordinated debt 23 187 24 954 24 289
Provisions and other liabilities 105 286 108 844 98 428
Total equity and liabilities 2 046 932 1 950 081 2 027 928
1 Refer to the restatements section for details on the restatement to derivative assets and derivative liabilities.
Condensed consolidated income statement
for the six months ended 30 June 2018
1H17 FY17
1H18 Unaudited Audited
Unaudited Restated Restated
Rm Rm Rm
Income from banking activities 51 180 49 120 102 699
Net interest income1 29 150 28 770 60 125
Non-interest revenue2 22 030 20 350 42 574
Income from investment management and
life insurance activities 11 360 12 097 24 394
Total income 62 540 61 217 127 093
Credit impairment charges (3 999) (5 155) (9 410)
Net income before operating expenses 58 541 56 062 117 683
Operating expenses from banking activities2 (29 205) (27 553) (57 049)
Operating expenses from investment management
and life insurance activities (8 691) (8 822) (17 800)
Net income before capital items and
equity accounted earnings 20 645 19 687 42 834
Non-trading and capital related items 46 214 (261)
Share of post tax profit from associates
and joint ventures 360 412 1 102
Net income before indirect taxation 21 051 20 313 43 675
Indirect taxation (1 208) (1 154) (2 481)
Profit before direct taxation 19 843 19 159 41 194
Direct taxation (4 510) (4 526) (10 479)
Profit for the period 15 333 14 633 30 715
Attributable to ordinary shareholders 12 706 12 340 26 235
Attributable to other equity instrument holders 371 257 594
Attributable to non-controlling interests 2 256 2 036 3 886
Earnings per share (cents)
Basic earnings per ordinary share 796.6 769.8 1 637.8
Diluted earnings per ordinary share 786.7 760.5 1 617.5
1 Refer to the IFRS 9 Financial Instruments section for details for the group's IFRS 9 accounting treatment
of previously suspended contractual interest that was earned.
2 Refer to the restatements section for details about the restatement to non-interest revenue and operating expenses
from banking activities.
Condensed consolidated statement of other comprehensive income
for the six months ended 30 June 2018
1H18 1H17 FY17
Unaudited Unaudited Audited
Rm Rm Rm
Profit for the period 15 333 14 633 30 715
Other comprehensive income/(loss) after tax for the period 4 352 (2 473) (5 940)
Items that may be subsequently reclassified to profit and loss 4 247 (2 368) (5 607)
Exchange differences on translating foreign operations 4 225 (2 697) (6 180)
Movement in the cash flow hedging reserve and foreign
currency hedge reserves (25) 25 111
Movement in the available-for-sale revaluation reserve1 304 462
Movement in debt investments measured at fair value
through other comprehensive income (OCI)1 47
Items that may not be subsequently reclassified to profit and loss 105 (105) (333)
Defined benefit fund 16 (113) (219)
Change in own credit risk recognised on financial
liabilities designated at fair value through profit and loss1 78
Other gains/(losses) 11 8 (114)
Total comprehensive income for the period 19 685 12 160 24 775
Attributable to ordinary shareholders 16 354 10 547 21 514
Attributable to other equity instrument holders 371 257 594
Attributable to non-controlling interests 2 960 1 356 2 667
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. Therefore
comparability will not be achieved by the fact that the comparative financial information has been prepared on an
IAS 39 basis. Refer to the IFRS 9 Financial Instruments section for more detail on the adoption of IFRS 9.
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2018
Equity
attributable
Ordinary to other Non-
shareholders' equity controlling Total
equity holders interest equity
Rm Rm Rm Rm
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 and non-controlling
interests recorded directly in equity (8 172) 1 487 (905) (7 590)
Equity-settled share-based payment transactions1 (348) 7 (341)
Deferred tax on share-based payment transactions (45) (45)
Transactions with non-controlling interests 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
Balance at 1 July 2017 (unaudited) 153 132 7 247 23 438 183 817
Total comprehensive income for the period 10 967 337 1 311 12 615
Transactions with owners and non-controlling
interests recorded directly in equity (7 079) 1 463 (760) (6 376)
Equity-settled share-based payment transactions1 (537) 22 (515)
Deferred tax on share-based payment transactions 321 321
Transactions with non-controlling interests (135) 227 92
Net dividends paid (6 452) (337) (550) (7 339)
Other equity movements (276) 1 800 (459) 1 065
Unincorporated property partnerships' capital
reductions and distributions (39) (39)
Balance at 31 December 2017 (audited) 157 020 9 047 23 950 190 017
Balance at 1 January 2018 (unaudited) (IFRS 9) 150 759 9 047 23 574 183 380
IFRS 9 transition2 (6 261) (376) (6 637)
Balance at 1 January 2018 (audited) (IAS 39) 157 020 9 047 23 950 190 017
Total comprehensive income for the period 16 354 371 2 960 19 685
Transactions with owners and non-controlling
interests recorded directly in equity (11 279) (371) (2 337) (13 987)
Equity-settled share-based payment transactions1 (1 253) 4 (1 249)
Deferred tax on share-based payment transactions 58 58
Transactions with non-controlling interests3 (1 477) (879) (2 356)
Net dividends paid (8 214) (371) (1 029) (9 614)
Other equity movements (393) (433) (826)
Balance at 30 June 2018 (unaudited) 155 834 9 047 24 197 189 078
1 Includes hedges of the group's equity settled share incentive schemes.
2 Refer to the IFRS 9 Financial Instruments section for detail on the IFRS 9 transition adjustments.
3 Refer to the other reportable items section for detail on significant transactions with non-controlling interests.
Condensed consolidated statement of cash flows
for the six months ended 30 June 2018
1H18 1H17 FY17
Unaudited Unaudited Audited
Rm Rm Rm
Net cash flows from operating activities 10 510 17 401 24 137
Direct taxation paid (6 856) (5 187) (10 078)
Other operating activities 17 366 22 588 34 215
Net cash flows generated from/(used in) investing activities 2 661 (10 382) (8 415)
Capital expenditure (1 652) (2 185) (5 451)
Other investing activities 4 313 (8 197) (2 964)
Net cash flows used in financing activities (12 959) (5 944) (12 674)
Dividends paid1 (9 676) (8 171) (15 574)
Equity transactions with non-controlling interests2 (2 356) 1 674 1 173
Issuance of other equity instruments 1 744 3 544
Issuance of subordinated debt 3 100 257 2 246
Redemption of subordinated debt (4 550) (1 400) (4 180)
Other financing activities 523 (48) 117
Effect of exchange rate changes on cash and cash equivalents (3 418) (7 600) (5 212)
Net decrease in cash and cash equivalents (3 206) (6 525) (2 164)
Cash and cash equivalents at the beginning of the period 75 310 77 474 77 474
Cash and cash equivalents at the end of the period 72 104 70 949 75 310
Cash and balances with central banks 72 104 70 949 75 310
1 Refer to the other reportable items section for detail on the dividends paid to Additional Tier 1 (AT1)
equity holders.
2 Refer to the other reportable items section for detail on significant transactions with non-controlling
interests.
Notes
Financial investments
as at 30 June 2018
FY17
1H18 Unaudited
Unaudited Restated1
Rm Rm
Corporate and sovereign 258 893 240 703
Bank 41 522 46 278
Mutual funds and unit-linked investments 106 329 98 169
Listed equities 101 893 122 545
Unlisted equities 4 065 5 554
Interests in associates and joint ventures held at fair value 13 862 15 197
Other instruments 5 319 4 868
Total financial investments 531 883 533 314
Net financial investments measured at amortised cost 135 213
Gross financial investments measured at amortised cost 135 415
Expected credit loss for financial investments measured at amortised cost2 (202)
Financial investments measured at fair value through profit or loss 363 222
Debt financial investments measured at fair value through OCI3 32 224
Equity financial investments measured at fair value through OCI 1 224
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. The group has
aligned its categories for financial investments disclosed in FY17 to those disclosed for 1H18. This did not result
in a restatement to the group's statement of financial position as at 31 December 2017.
2 The group recognised an expected credit loss (ECL) of R97 million on debt financial investments measured at
amortised cost upon the transition to IFRS 9 on 1 January 2018. Refer to the credit impairment charges note for the
1H18 credit impairment charge on financial investments.
3 The group recognised an ECL of R175 million on debt financial investments measured at fair value through OCI upon
the transition to IFRS 9 on 1 January 2018. At 30 June 2018, the ECL for debt financial investments measured at fair
value through OCI was R162 million. Refer to the credit impairment charges note for the 1H18 credit
impairment charge on financial investments.
Loans and advances
as at 30 June 2018
FY17
1H18 Unaudited
Unaudited Restated1
Rm Rm
Loans and advances measured at fair value through profit or loss 1 834 110
Net loans and advances measured at amortised cost 1 062 846 1 047 917
Gross loans and advances measured at amortised cost 1 099 896 1 070 361
Mortgage loans 353 357 346 508
Vehicle and asset finance 86 522 83 136
Card debtors 33 336 32 253
Corporate and sovereign 362 314 352 025
Bank 108 873 117 935
Other loans and advances 155 494 138 504
Interest in suspense2 (6 128)
Credit impairments for loans and advances (IAS 39) (22 444)
Expected credit loss for loans and advances measured at amortised cost (IFRS 9) (30 922)
Total loans and advances 1 064 680 1 048 027
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. Therefore
comparability will not be achieved by the fact that the comparative financial information has been prepared on an
IAS 39 basis. The group has, however, aligned its categories for loans and advances disclosed in FY17 to those
disclosed for 1H18. This did not result in a restatement to the group's statement of financial position as at
31 December 2017.
2 For details on the group's accounting policy on interest in suspense, refer to the IFRS 9 Financial Instruments section.
Reconciliation of expected credit loss for loans and advances at amortised cost (unaudited)
Total Net Closing
Opening ECL transfers impairments Impaired Exchange ECL
1 January between raised/ accounts and other 30 June
20181 stages (released)2 written-off movements 2018
Rm Rm Rm Rm Rm Rm
Mortgage loans 7 619 961 (438) 33 8 175
Stage 1 1 126 179 (225) (6) 1 074
Stage 2 2 014 (10) 208 13 2 225
Stage 3 4 479 (169) 978 (438) 26 4 876
Vehicle and asset finance 3 021 591 (369) 59 3 302
Stage 1 766 157 (248) 6 681
Stage 2 994 (291) 310 15 1 028
Stage 3 1 261 134 529 (369) 38 1 593
Card debtors 2 955 654 (585) (2) 3 022
Stage 1 698 137 (130) 705
Stage 2 821 (173) 259 907
Stage 3 1 436 36 525 (585) (2) 1 410
Other loans and advances 9 661 1 823 (1 356) 268 10 396
Stage 1 2 289 44 (148) 157 2 342
Stage 2 2 454 (502) 398 (24) 2 326
Stage 3 4 918 458 1 573 (1 356) 135 5 728
Corporate &
Investment Banking 6 115 102 (494) 304 6 027
Stage 1 910 132 (144) 65 963
Stage 2 1 992 (600) (309) 85 1 168
Stage 3 3 213 468 555 (494) 154 3 896
Total 29 371 4 131 (3 242) 662 30 922
Stage 1 5 789 649 (895) 222 5 765
Stage 2 8 275 (1 576) 866 89 7 654
Stage 3 15 307 927 4 160 (3 242) 351 17 503
1 IFRS 9 resulted in a transitional increase in ECL of R2 563 million for mortgage loans; R1 001 million for vehicles
and asset finance; R694 million for card debtors; R561 million for Corporate & Investment Banking; and R2 108 million
for other loans and advances. The opening ECL as at 1 January 2018 incorporates these IFRS 9 transition adjustments.
Refer to the IFRS 9 Financial Instruments section for more details on IFRS 9.
2 Net impairments raised/(released) less recoveries of amounts written off in previous years equals income statement
impairment charge (refer to credit impairment charges note).
Reconciliation of credit impairments for loans and advances (IAS 39)
Vehicle and
Mortgage asset Card Other loans Corporate
loans finance debtors and advances lending Total
Rm Rm Rm Rm Rm Rm
FY17 (restated)1
Specific impairments
Balance at beginning of the year 3 640 1 410 1 598 5 121 2 890 14 659
Net impairments raised/(released)2 1 826 1 261 1 415 4 371 1 024 9 897
Impaired accounts written off (1 159) (1 146) (1 383) (3 861) (245) (7 794)
Discount element recognised in
interest income (317) (120) (26) (345) (102) (910)
Exchange and other movements (11) (38) (8) (283) (242) (582)
Balance at end of the year 3 979 1 367 1 596 5 003 3 325 15 270
Portfolio impairments
Balance at beginning of the year 1 137 801 651 2 749 1 796 7 134
Net impairments raised/(released)2 (55) (141) 61 (159) 649 355
Exchange and other movements (5) (7) (47) (40) (216) (315)
Balance at end of the year 1 077 653 665 2 550 2 229 7 174
Total specific and portfolio
impairments 5 056 2 020 2 261 7 553 5 554 22 444
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. The group
has aligned its categories for loans and advances disclosed in FY17 to those disclosed for 1H18. This did not
result in a restatement to the group's statement of financial position as at 31 December 2017.
2 Net impairments raised/(released) less recoveries of amounts written off in previous years, as well as credit
recovery on off-balance sheet exposure, equals income statement impairment charges.
Loans and advances at amortised cost performance
Performing loans
Gross loans Total Total
and performing non-performing
advances Stage 1 Stage 2 loans loans
Rm Rm Rm Rm Rm
1H18 (unaudited)1
Personal & Business Banking 683 361 588 072 60 087 648 159 35 202
Mortgage loans 353 357 301 615 33 452 335 067 18 290
Vehicle and asset finance 85 327 73 760 7 938 81 698 3 629
Card debtors 33 336 27 111 4 156 31 267 2 069
Other loans and advances 211 341 185 586 14 541 200 127 11 214
Corporate & Investment Banking 469 039 435 953 24 459 460 412 8 627
Corporate and sovereign 363 126 330 040 24 459 354 499 8 627
Bank 105 913 105 913 105 913
Central and other (52 504) (52 504) (52 504)
Gross loans and advances at
amortised cost2 1 099 896 971 521 84 546 1 056 067 43 829
Percentage of total book (%) 100.0 88.3 7.7 96.0 4.0
1 The loans and advances performance disclosures have been presented at a segment level, where as the other loans and
advances disclosures within these results are disclosed on group consolidated view, unless stated otherwise.
2 The above table includes loans and advances within the scope of the impairment requirements in IFRS 9.
Loans and advances at amortised cost performance (continued)
Non-performing loans
Stage 3
Securities and
expected Non-
recoveries Balance sheet performing
on non- impairments for loans Non-
performing Interest non-performing impairment performing
loans in suspense loans coverage loans
Rm Rm Rm % %
1H18 (unaudited)1
Personal & Business Banking 17 274 4 321 13 607 51 5.2
Mortgage loans 11 544 1 870 4 876 37 5.2
Vehicle and asset finance 1 818 218 1 593 50 4.3
Card debtors 461 198 1 410 78 6.2
Other loans and advances 3 451 2 035 5 728 69 5.3
Corporate & Investment Banking 2 924 1 807 3 896 66 1.8
Corporate and sovereign 2 924 1 807 3 896 66 2.4
Bank
Central and other
Gross loans and advances at
amortised cost2 20 198 6 128 17 503 54 4.0
Percentage of total book (%) 1.8 0.6 1.6
1 The loans and advances performance disclosures have been presented at a segment level, where as the other loans and
advances disclosures within these results are disclosed on group consolidated view, unless stated otherwise.
2 The above table includes loans and advances within the scope of the impairment requirements in IFRS 9.
Loans and advances performance
Total Net after
specifically Securities and securities and
impaired expected expected
Gross non- recoveries on recoveries on
loans and Performing performing specifically specifically
advances loans loans impaired loans impaired loans
Rm Rm Rm Rm Rm
FY17 (restated)1,2
Personal & Business Banking 645 868 616 949 28 919 16 976 11 943
Mortgage loans 346 518 331 014 15 504 11 525 3 979
Vehicle and asset finance 81 640 78 514 3 126 1 759 1 367
Card debtors 32 268 30 148 2 120 524 1 596
Other loans and advances 185 442 177 273 8 169 3 168 5 001
Personal unsecured lending 52 016 47 827 4 189 1 002 3 187
Business lending and other 133 426 129 446 3 980 2 166 1 814
Corporate & Investment Banking 472 437 466 862 5 575 2 250 3 325
Central and other (47 834) (47 836) 2 2
Gross loans and advances 1 070 471 1 035 975 34 496 19 226 15 270
Percentage of total book (%) 100.0 96.8 3.2 1.8 1.4
1 The loans and advances performance disclosures have been presented at a segment level, where as the other loans and
advances disclosures within these results are disclosed on group consolidated view, unless stated otherwise.
2 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. The group has
aligned its performance for loans and advances disclosed in FY17 to those disclosed for 1H18. This did not result
in a restatement to the group's statement of financial position as at 31 December 2017.
Loans and advances performance (continued)
Balance sheet
impairments for Total
non-performing Specific gross non- Non-
specifically impairment performing performing
impaired loans coverage loans loans
Rm % Rm %
FY17 (restated)1,2
Personal & Business Banking 11 943 41 28 919 4.5
Mortgage loans 3 979 26 15 504 4.5
Vehicle and asset finance 1 367 44 3 126 3.8
Card debtors 1 596 75 2 120 6.6
Other loans and advances 5 001 61 8 169 4.4
Personal unsecured lending 3 187 76 4 189 8.1
Business lending and other 1 814 46 3 980 3.0
Corporate & Investment Banking 3 325 60 5 600 1.2
Central and other 2 2
Gross loans and advances 15 270 44 34 521 3.2
Percentage of total book (%) 1.4
1 The loans and advances performance disclosures have been presented at a segment level, where as the other loans and
advances disclosures within these results are disclosed on group consolidated view, unless stated otherwise.
2 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. The group has
aligned its performance for loans and advances disclosed in FY17 to those disclosed for 1H18. This did not result
in a restatement to the group's statement of financial position as at 31 December 2017.
Contingent liabilities and commitments
as at 30 June 2018
1H18 FY17
Unaudited Audited
Rm Rm
Letters of credit and bankers' acceptances 13 798 13 413
Guarantees 78 505 63 761
Contingent liabilities 92 303 77 174
Investment property 540 385
Property and equipment 566 94
Other intangible assets 265 299
Commitments 1 371 778
Loan commitments of R68 384 million (FY17: R62 347 million) are either irrevocable over the life of the facility or
revocable only in response to material adverse changes.
Day one profit or loss
The table below sets out the aggregate net day one profit 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 at 1 January 2017 (audited) 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 at 31 December 2017 (audited) 160 642 802
Balance at 1 January 2018 (audited) 160 642 802
Additional net profit on new transactions during the period 132 132
Recognised in trading revenue during the period (195) (261) (456)
Balance at 30 June 2018 (unaudited) 97 381 478
Headline earnings
for the six months ended 30 June 2018
1H18 1H17 FY17
Unaudited Unaudited Audited
Rm Rm Rm
Profit for the period 12 706 12 340 26 235
Headline adjustable items (reversed)/added (46) (230) 187
IAS 16 - (Gain)/loss on sale of property and equipment (11) (18) 10
IAS 21 - Realised foreign currency profit on foreign operations (214) (214)
IAS 27/IAS 28 - (Gains)/losses on disposal of businesses (35) 18 18
IAS 36 - Impairment of intangible assets 447
IAS 39 - Realised gains on available-for-sale assets1 (16) (74)
Taxation on headline earnings adjustable items 1 (1) (94)
Non-controlling interests' share of headline
earnings adjustable items 2 2 (58)
Standard Bank Group headline earnings 12 663 12 111 26 270
Headline earnings per ordinary share (cents)
Headline earnings per ordinary share 793.9 755.5 1 640.0
Diluted headline earnings per ordinary share 784.0 746.4 1 619.7
1 Headline Earnings Circular 4/2018 specifies that realised gains or losses on debt instruments measured at fair
value through OCI, in terms of IFRS 9, are not excluded from headline earnings, therefore, from 1 January 2018
IAS 39 realised gains or losses on available-for-sale assets is not applicable.
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 30 June 2018
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.
1H18 FY17
Unaudited Audited
Rm Rm
Cost 48 48
Carrying value 593 546
Fair value 593 546
Attributable income before impairment 47 159
Non-interest revenue
for the six months ended 30 June 2018
1H17 FY17
1H18 Unaudited Audited
Unaudited Restated Restated
Rm Rm Rm
Net fee and commission revenue1 14 813 13 969 28 670
Fee and commission revenue 17 763 16 661 34 290
Accounting transaction fees 5 599 5 604 11 488
Card-based commission 3 263 3 086 6 535
Documentation and administration fees 1 097 1 090 2 197
Electronic banking 1 848 1 676 3 446
Foreign currency service fees 1 036 903 1 879
Insurance - fees and commission 964 919 1 945
Knowledge-based fees and commission 1 236 1 140 2 278
Other 2 720 2 243 4 522
Fee and commission expense1 (2 950) (2 692) (5 620)
Trading revenue 5 570 4 953 10 731
Other revenue and gains and losses on financial instruments2 1 647 1 428 3 173
Total non-interest revenue 22 030 20 350 42 574
1 Refer to the restatements section for details about the restatement to net fee and commission revenue.
2 Refer to the IFRS 9 Financial Instruments section for detail on the group's accounting policy on presentation
of gains and losses on financial instruments changes due to the adoption of IFRS 9.
3 For more detail on the split of each non-interest revenue category per key business unit, please refer to the
group's analysis of financial results available at www.standardbank.com/reporting.
Credit impairment charges
for the six months ended 30 June 2018
1H18 1H17 FY17
Unaudited Unaudited Audited
Rm Rm Rm
Credit impairments (IAS 39)1 5 556 10 252
Portfolio impairments 378 355
Specific impairments 5 178 9 897
Expected credit loss (IFRS 9)1 4 316
Financial investments2 72
Loans and advances 4 131
Letters of credit and guarantees 113
Recoveries on loans and advances previously written off (317) (401) (842)
Total credit impairment charge 3 999 5 155 9 410
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. Therefore
comparability will not be achieved by the fact that the comparative financial information has been prepared
on an IAS 39 basis.
2 Included in the ECL for financial investments is a R85 million charge relating to financial investments measured
at amortised cost and a R13 million release from financial investments measured at fair value through OCI.
Related party balances and 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. The number of shares in issue that is financed by the group as at 30 June 2018 is 4 133 979
(FY17: 5 750 291). The weighted number of these shares for the period ended 30 June 2018 equated to 4 877 391
(FY17: 5 750 291).
Post-employment benefit plans
The group manages R11 149 million (FY17: R11 864 million) of the group's post-employment benefit plans' assets.
Other significant balances between the group and the group's post-employment benefit plans are listed below:
FY17
1H18 Audited
Unaudited Restated
Rm Rm
Investments held in bonds and money market instruments 1 012 1 089
Value of ordinary group shares held1 709 749
1 The comparative disclosure for the value of ordinary group shares held by the group's post-employment benefit
plans has been restated as it was erroneously disclosed as R2 157 million in FY17. The restatement has no impact
on the income statement and statement of financial position.
Balances and transactions with ICBCS
The following significant balances and transactions were entered into between the group and ICBCS, an associate
of the group.
1H18 FY17
Unaudited Audited
Amounts included in the group's statement of financial position Rm Rm
Derivative assets 2 432 2 227
Trading assets 7 7
Loans and advances 28 658 31 413
Other assets 830 590
Derivative liabilities (2 532) (2 340)
Deposits and debt funding (831) (1 050)
Provisions and other liabilities (755) (759)
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). In terms of these arrangements,
services are delivered to and received from ICBCS for the account of each respective party. As at 30 June 2018 the
expense recognised in respect of these arrangements amounted to R229 million (FY17: R277 million).
Balances and transactions with the Industrial and Commercial Bank of China Limited (ICBC)
The group, in the ordinary course of business, receives term funding from, and provides loans and advances to,
ICBC for strategic purposes. These monies are renegotiated and settled on an ongoing basis on market-related terms.
The following balances and transactions were entered into between the group and ICBC, a 20.1% shareholder of the
group, excluding those with ICBCS.
1H18 FY17
Unaudited Audited
Amounts included in the group's statement of financial position Rm Rm
Loans and advances 8 218 2 939
Other assets 690 611
Deposits and debt funding (4 374) (91)
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 2018, a balance of USD50 million (R690 million) (FY17: USD50 million; R611 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:
1H18 FY17
Amounts included in the group's statement of financial position Unaudited Audited
and income statement Rm Rm
Trading liabilities (262) (275)
Deposits and debt funding (18 658) (15 706)
Trading losses (9) (101)
Interest expense (502) (695)
Change in group directorate
The following changes in directorate took place during the six months ended 30 June 2018:
Retirements
RMW Dunne As non-executive director 30 May 2018
Condensed segment report
for the six months ended 30 June 2018
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).
1H18 1H17 FY17
Unaudited Unaudited1 Audited1
Rm Rm Rm
Net interest income contribution by business unit
Personal & Business Banking 20 379 19 706 40 963
Corporate & Investment Banking 9 402 9 451 20 434
Central and other (631) (387) (1 272)
Standard Bank Group 29 150 28 770 60 125
Non-interest revenue and income from investment management
and life insurance activities contribution by business unit
Personal & Business Banking2 13 636 12 823 26 745
Corporate & Investment Banking 8 559 7 833 16 335
Central and other (165) (306) (506)
Banking activities2 22 030 20 350 42 574
Liberty 11 360 12 097 24 394
Standard Bank Group2 33 390 32 447 66 968
Revenue contribution by business unit
Personal & Business Banking2 34 015 32 529 67 708
Corporate & Investment Banking 17 961 17 284 36 769
Central and other (796) (693) (1 778)
Banking activities2 51 180 49 120 102 699
Liberty 11 360 12 097 24 394
Standard Bank Group2 62 540 61 217 127 093
Profit or loss attributable to ordinary shareholders
Personal & Business Banking 6 680 6 148 13 978
Corporate & Investment Banking 5 709 5 289 11 409
Central and other (672) (219) (1 113)
Banking activities 11 717 11 218 24 274
Other banking interests 132 240 600
Liberty 857 882 1 361
Standard Bank Group 12 706 12 340 26 235
Total assets by business unit
Personal & Business Banking 739 433 696 189 705 232
Corporate & Investment Banking 912 934 858 127 905 138
Central and other (34 798) (22 312) (12 402)
Banking activities 1 617 569 1 532 004 1 597 968
Other banking interests 7 598 7 811 7 493
Liberty2 421 765 410 266 422 467
Standard Bank Group2 2 046 932 1 950 081 2 027 928
Total liabilities by business unit
Personal & Business Banking 663 011 622 077 630 796
Corporate & Investment Banking 854 934 800 774 841 785
Central and other (54 492) (38 852) (29 846)
Banking activities 1 463 453 1 383 999 1 442 735
Liberty2 394 401 382 265 395 176
Standard Bank Group2 1 857 854 1 766 264 1 837 911
1 Where responsibility for individual cost centres and divisions within business units change, the comparative
figures have been reclassified accordingly.
2 Refer to the restatements section for restatements that affected these disclosures.
Other reportable items
Additional Tier 1 capital
The group did not issue Basel III compliant AT1 capital bonds that qualify as Tier 1 capital during the period
(FY17: R3.5 billion nominal value). During the period, coupons to the value of R222 million (FY17: R229 million)
were paid to AT1 capital bond holders. Current tax of R62 million (FY17: R64 million) relating to the AT1 capital
bonds was recognised directly in equity resulting in an aggregate net equity impact of R160 million
(FY17: R165 million). The AT1 capital bonds have been recognised within other equity instruments in the
statement of financial position.
Capital management
The group manages its capital levels to support business, growth, maintain depositor and creditors' confidence, create
value for its shareholders and ensure regulatory compliance. The main regulatory requirements to be complied with are
those specified in the Banks Act No.94 of 1990 and related regulations, which are aligned with Basel III. Regulatory
capital adequacy is measured through the CET1, Tier 1 and total capital adequacy.
The group has elected the three year phase-in as outlined in the SARB's Directive 5/2017. This phase-in results in the
IFRS 9 impact being amortised on a straight-line basis, from 25% in 2018 to reach 100% by 2021. The group's capital
adequacy ratios based on a phased-in and fully loaded basis are shown in the table below:
Phased-in (IFRS 9) Fully loaded (IFRS 9)
1H18 1 January 2018 1H18 1 January 2018
Unaudited Unaudited Unaudited Unaudited
Capital ratio % % % %
CET1 13.8 13.3 13.3 12.8
Tier 1 14.4 13.9 13.9 13.4
Total capital adequacy 16.2 15.9 16.0 15.7
Equity securities
During the period, the group allotted 1 124 399 shares (FY17: 2 877 827 shares) in terms of the group's share
incentive schemes and repurchased 2 332 974 shares (FY17: 2 030 824 shares).
The total equity securities held as treasury shares at the end of the period was 18 646 358 shares (FY17: 16 213 766
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 balances and transactions 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.
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
On 15 February 2017 South Africa's Competition Commission lodged five complaints with the Competition Tribunal against
18 institutions, including one against SBSA and two against a former subsidiary of the group, Standard New York
Securities Inc. (SNYS), in which it alleges unlawful collusion between those institutions in the trading of USD/ZAR.
The group has, with the help of external counsel, conducted its own internal investigations and found no evidence
that supports the complaints. Both SBSA and SNYS have, together with 12 of the other respondents, applied to the
Competition Tribunal for dismissal of the complaint referral on various legal grounds. Judgement in these
applications has been reserved. In separate proceedings SBSA has applied to the Competition Appeal Court for an
order that the Competition Commission's decision to lodge its complaint against SBSA be reviewed and set aside
on the conditional ground that it was irrational. 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, 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 in
November 2018 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 period, the group issued R3.0 billion (FY17: Rnil) Basel lll 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.
R3.5 billion (FY17: R3.0 billion) Basel III compliant Tier 2 subordinated debt instruments were redeemed during the
year.
R0.1 billion (FY17: R0.3 billion) of Basel II compliant Tier 2 subordinated debt instruments were issued during the
year and R0.1 billion (FY17: 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 period, the group did not issue subordinated debt that qualifies as regulatory insurance capital
(FY17: R2.0 billion) and R1.0 billion (FY17: R1.0 billion) was redeemed.
Transactions with non-controlling interests
Change in shareholding of subsidiaries
1H18
Unaudited
Rm
Net carrying amount of non-controlling interests acquired 879
Net consideration paid to non-controlling interests (2 356)
Net decrease in equity attributable to ordinary shareholders (1 477)
Stanbic Africa Holdings Limited
In June 2018, Stanbic Africa Holdings Limited (SAHL), a wholly-owned subsidiary of SBG, increased its shareholdings in
its listed Nigerian and Kenyan subsidiaries through acquisitions of additional shares from non-controlling interests
(NCI). Increases in the group's interest in a subsidiary, when the group already has control, are accounted for as
transactions with equity holders of the group. The difference between the purchase consideration and the group's
proportionate share of the subsidiary's additional net asset value acquired is accounted for directly in equity.
Nigeria
In Nigeria, SAHL's shareholding in Stanbic IBTC Holdings PLC (SIBTC) increased by 11.3% from 53.1% to 64.4% through
an announced off market trade on the Nigerian Stock Exchange for a total consideration of R2 354 million. The group
recognised a decrease in NCI of R902 million and a decrease in retained earnings and equity attributable to ordinary
shareholders of R1 452 million because of changes in the group's ownership interest in SIBTC.
Kenya
In Kenya, SAHL's shareholding in Stanbic Holdings Plc (SH Plc) increased by 5.9% from 60.0% to 65.9% for a total
consideration of R307 million following the first close of a two-stage tender offer. The group recognised a decrease
in NCI of R348 million and an increase in retained earnings and equity attributable to ordinary shareholders of
R40 million because of changes in the group's ownership interest in SH Plc.
In July 2018, the second and final close of the tender offer saw a further increase in SAHL's shareholding in SH Plc
by 2.1% to 68.0%. The second close does not impact the group results for the period ended 30 June 2018 as it occurred
after that date.
Liberty Group Limited
During the period, Liberty Group Limited's (Liberty) shareholding in Liberty Two Degrees (L2D) decreased by
5.2% from 63.1% to 57.9% for a total consideration of R370 million. Liberty recognised an increase in NCI of
R465 million and a decrease in retained earnings and equity attributable to ordinary shareholders of R95 million
because of changes in Liberty's ownership interest in L2D.
Accounting policy elections
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 standards and amendments effective for the current period:
- IFRS 4 Insurance Contracts (amendment) (IFRS 4), the amendment to applying IFRS 9 Financial Instruments with
IFRS 4 introduced two approaches: an overlay approach and a deferral approach. The amended standard will provide
all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than
profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard
is issued; and provide companies whose activities are predominantly connected with insurance an optional temporary
exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply
the existing financial instruments standard IAS 39. The amendments to IFRS 4 supplement existing options in the
standard that can already be used to address the temporary volatility.
- IFRS 15 Revenue from Contracts with Customers (IFRS 15), with effect from 1 January 2018, replaces the existing
revenue standards and the related interpretations. The standard sets out the requirements for recognising revenue
that applies to all contracts with customers (except for contracts that are within the scope of the standards on
leases, insurance contracts or financial instruments). The core principle of the standard is that revenue recognised
reflects the consideration to which the company expects to be entitled in exchange for the transfer of promised goods
or services to the customer. The standard incorporates a five step analysis to determine the amount and timing of
revenue recognition. The group adopted IFRS 15 on 1 January 2018 and, as permitted by IFRS 15, did not restate its
comparative financial results. The standard does not apply to revenue associated with financial instruments, and
therefore does not impact the majority of the group's revenue.
- IFRIC 22 Foreign Currency Transactions and Advance Consideration provides guidance on how to determine the date of
the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset,
expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability arising
from the payment or receipt of advance consideration in a foreign currency.
The above mentioned standards and interpretation to the IFRS standards, adopted on 1 January 2018, did not effect the
group's previously reported financial results or disclosures and did not impact the group's results upon transition
or the group's accounting policies.
- IFRS 9 Financial Instruments with effect from 1 January 2018, replaced IAS 39. IFRS 9 introduced new requirements
which included an ECL impairment model and new requirements for the classification and measurement of financial
assets, refer to the IFRS 9 Financial Instruments section for more detail.
IFRS 9, adopted on 1 January 2018, impacted the group's results upon transition and materially impacted the group's
accounting policies, refer to the IFRS 9 Financial Instruments section for more detail.
IFRS 9 Financial Instruments
Background
With effect from 1 January 2018, IFRS 9 replaced IAS 39. IFRS 9 introduced new requirements which included an ECL
impairment model and new requirements for the classification and measurement of financial assets as follows:
ECL impairment IFRS 9's ECL impairment model's requirements represented the most material IFRS 9
requirements transition impact for the group.
The ECL model applies to financial assets measured at either amortised cost or at
fair value through other comprehensive income (FVOCI), loan commitments when there
is a present commitment to extend credit (unless these are measured at fair value
through profit or loss (FVTPL)) and financial guarantees.
ECL is, at a minimum, required to be measured through a loss allowance at an amount equal
to the lower of 12-month or full lifetime ECL (where the lifetime is less than 12 months)
of the financial asset. A loss allowance for full lifetime ECL is required for a financial
asset if the credit risk of that financial instrument has increased significantly since
initial recognition.
Classification IFRS 9 requires all financial assets to be classified and measured on the basis of the
and measurement entity's business model for managing the financial assets and the contractual cash flow
characteristics of the financial assets.
The accounting for financial assets differs in various other areas to existing requirements
such as embedded derivatives and the recognition of fair value adjustments in OCI.
All changes in the fair value of financial liabilities that are designated at FVTPL due to
changes in own credit risk are required to be recognised within OCI.
Adoption of IFRS 9
The group retrospectively adopted IFRS 9 on 1 January 2018 with an adjustment to the group's opening 1 January 2018
reserves and, as permitted by IFRS 9, did not restate its comparative financial results. Accordingly, the group's
previously reported financial results up to 31 December 2017 are presented in accordance with the requirements of
IAS 39 and for 2018, and future reporting periods, are presented in terms of IFRS 9. However, the group has elected
to continue to apply the hedge accounting requirements of IAS 39. The group prepared a IFRS 9 transition report on
which a reasonable assurance audit opinion, included in the report, was provided by the group's external auditors
that outlined the impact of the transition to IFRS 9. For further information, regarding the transition impact,
refer to the transition report, available at www.standardbank.com/reporting.
IFRS 9's ECL requirements
The most material IFRS 9 transition impact for the group is that of IFRS 9's new ECL requirements which results in the
earlier recognition of credit impairment provisions primarily as a result of the drivers outlined below. This impact
was solely as a result of the adoption of IFRS 9 and is not as a result of changes in the credit quality of the
group's loan exposures.
12-month ECL for IFRS 9 contains a minimum 12-month ECL for exposures for which there has not been a
performing loans significant increase in credit risk (SICR), whereas IAS 39 required credit impairments to
(stage 1) be recognised only following the identification of objective evidence of impairment.
Significant increase A lifetime ECL is recognised for all exposures for which there has been a SICR, being a material
in credit risk (SICR) change in the probability of default, since origination.
(stage 2)
Off-balance sheet IFRS 9's scope includes off-balance sheet exposures, such as unutilised loan commitments,
exposures guarantees and letters of credit.
Lifetime model In terms of determining ECL for stage 1 and 2 exposures where there is a probability of
work out requirement default, the potential loss from a lifetime perspective is considered, which would include
the probability of recovery post default and subsequent re-default.
For stage 3 exposures, being exposures that are either in default or where default is imminent,
this would include consideration of cures and subsequent re-default.
Forward looking IFRS 9 requires an adjustment for forward looking economic expectations in the determination
economic expectations of SICR and in the measurement of the ECL.
IFRS 9 key financial impacts
Table 1: Impact on the group's summarised statement of financial position on 1 January 2018
IFRS 9 transition adjustment at
1 January 2018
Group IAS 39 IFRS 9 Group IFRS 9
at classification at
31 December and 1 January
2017 IFRS 9 ECL measurements Total 2018
Rm Rm Rm Rm Rm
Assets
Financial investments 533 314 (272) 32 (240) 533 074
Loans and advances 1 048 027 (7 839) (83) (7 922) 1 040 105
Interest in associates and joint ventures 9 665 (53) (3) (56) 9 609
Other financial and non-financial assets1 436 922 2 234 94 2 328 439 250
Total assets 2 027 928 (5 930) 40 (5 890) 2 022 038
Equity and liabilities
Equity 190 017 (6 276) (361) (6 637) 183 380
Equity attributable to
ordinary shareholders 157 020 (5 930) (331) (6 261) 150 759
Equity attributable to other
equity holders 9 047 9 047
Equity attributable to non-controlling
interests 23 950 (346) (30) (376) 23 574
Liabilities2 1 837 911 346 401 747 1 838 658
Total equity and liabilities 2 027 928 (5 930) 40 (5 890) 2 022 038
1 Materially relates to the recognition of additional deferred tax assets following the recognition of the
IFRS 9 ECL transition adjustment.
2 Materially relates to the recognition of ECL on off-balance sheet letters of credit, bankers acceptances and
guarantees.
Table 2: Impact on the group's summarised statement of changes in equity on 1 January 2018
IFRS 9
Group IAS 39 transition Group IFRS 9
at adjustment at at
31 December 1 January 1 January
2017 2018 2018
Rm Rm Rm
Ordinary share capital and share premium 18 063 18 063
Retained earnings1 144 539 (5 302) 139 237
Statutory credit risk reserve2 3 089 (948) 2 141
Other3 (8 671) (11) (8 682)
Total ordinary shareholder's equity 157 020 (6 261) 150 759
Other equity instruments 9 047 9 047
Non-controlling interests4 23 950 (376) 23 574
Total equity and liabilities 190 017 (6 637) 183 380
1 The change in the retained earnings relates to IFRS 9's classification and measurement and ECL changes and
the reversal of the statutory credit risk reserve (SCRR) as explained further below.
2 In addition to the R6 637 million impact on the group's reserves, as a result of the adoption of IFRS 9,
a debit of R948 million to the group's SCRR and a corresponding credit to the group's retained earnings has
been recognised. The SCRR has historically been maintained by means of an appropriation of retained earnings
to a non-distributable reserve, being the SCRR, by the group's operations in the Africa Regions as a result
of country regulators requiring a higher credit impairment provision than that as determined in accordance
with IAS 39. Given that IFRS 9 typically results in an impairment provision that is equivalent to or greater
than that as required by the Africa Regions' regulators, a transfer from the SCRR back to retained earnings
is required on transition to IFRS 9. The transfer has only been reflected with respect to those countries
whose regulators that, at the date of this transition report, had approved such releases. This transfer has
no impact on the group's net asset value, total reserves or capital ratios.
3 Of the R593 million in the group's available-for-sale reserve as at 31 December 2017, R582 million has been
reclassified on the adoption of IFRS 9 to the FVOCI category and R11 million relates to gains and losses on
instruments that were classified as available-for-sale and are now classified as either FVTPL or at amortised
cost.
4 The change relates to the non-controlling interests' share of the IFRS 9 impact post tax relating to IFRS 9's
classification and measurement and ECL changes.
Table 3: Impact on financial instrument classification (excluding impact of IFRS 9 ECL)
Group IFRS 9 transition adjustment at 1 January 2018 Group
IAS 39 at Designated Fair value IFRS 9 at
31 December Held-for- at fair Fair value Amortised through 1 January Transitional
2017 trading value default cost OCI 2018 adjustment
Rm Rm Rm Rm Rm Rm Rm Rm
Financial assets
Held-for-trading 241 482 241 482 241 482
Designated at fair value 409 456 368 326 2 191 38 126 408 643 (813)
Held-to-maturity 81 607 3 261 79 187 82 448 841
Loans and receivables 1 142 431 596 66 312 1 075 492 26 1 142 426 (5)
Available-for-sale 45 149 52 371 10 041 34 537 45 001 (148)
1 920 125 241 482 368 974 72 135 1 202 846 34 563 1 920 000 (125)
Financial liabilities
Held-for-trading 139 751 139 751 139 751
Designated at fair value 173 176 165 559 7 813 173 372 196
Other amortised cost 1 284 837 9 311 1 275 731 1 285 042 205
1 597 764 139 751 174 870 1 283 544 1 598 165 401
IFRS 9 accounting policies
Financial instruments
Initial measurement - financial instruments
All financial instruments are measured initially at fair value plus directly attributable transaction
costs and fees, except for those financial instruments that are subsequently measured at fair value through
profit or loss where such transaction costs and fees are immediately recognised in profit or loss. Financial
instruments are recognised (derecognised) on the date the group commits to purchase (sell) the instruments
(trade date accounting).
Financial assets
Nature
Amortised cost A debt instrument that meets both of the following conditions (other than those
designated at fair value through profit or loss):
- Held within a business model whose objective is to hold the debt instrument
(financial asset) in order to collect contractual cash flows; and
- The contractual terms of the financial asset give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal
amount outstanding.
This assessment includes determining the objective of holding the asset and whether
the contractual cash flows are consistent with a basic lending arrangement. Where the
contractual terms introduce exposure to risk or volatility that are not considered
de minimis and are inconsistent with a basic lending arrangement, the financial asset
is classified as fair value through profit or loss - default.
Fair value Includes:
through OCI - A debt instrument that meets both of the following conditions (other than those
designated at fair value through profit or loss):
- Held within a business model in which the debt instrument (financial asset) is
managed to both collect contractual cash flows and sell financial assets; and
- The contractual terms of the financial asset give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal
amount outstanding.
This assessment includes determining the objective of holding the asset and whether
the contractual cash flows are consistent with a basic lending arrangement. Where the
contractual terms introduce exposure to risk or volatility that are not considered
de minimis and are inconsistent with a basic lending arrangement, the financial asset
is classified as fair value through profit or loss - default.
- Equity financial assets which are not held for trading and are irrevocably elected
(on an instrument-by-instrument basis) to be presented at fair value through OCI.
Held for trading Those financial assets acquired principally for the purpose of selling in the near term
(including all derivative financial assets) and those that form part of a portfolio of
identified financial instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profit taking.
Included are commodities that are acquired principally for the purpose of selling in
the near future or generating a profit from fluctuations in price or broker-trader margin.
Designated at fair value Financial assets are designated to be measured at fair value to eliminate or significantly
through profit or loss reduce an accounting mismatch that would otherwise arise.
Fair value through profit Financial assets that are not classified into one of the above mentioned financial asset
or loss - default categories.
Subsequent measurement
Subsequent to initial measurement, financial assets are classified in their respective categories and measured at
either amortised cost or fair value as follows:
Amortised cost Amortised cost using the effective interest method with interest recognised in interest
income, less any expected credit impairment losses which are recognised as part of
credit impairment charges.
Directly attributable transaction costs and fees received are capitalised and amortised
through interest income as part of the effective interest rate.
Fair value through Debt instrument: Fair value, with gains and losses recognised directly in the fair value
OCI through OCI reserve. When a debt financial asset is disposed of, the cumulative fair value
adjustments, previously recognised in OCI, are reclassified to the other gains and losses
on financial instruments within non-interest revenue.
Interest income on a debt financial asset is recognised in interest income in terms of the
effective interest rate method. Dividends received are recognised in interest income
within profit or loss.
Equity instrument: Fair value, with gains and losses recognised directly in the fair value
through OCI reserve. When equity financial assets are disposed of, the cumulative fair value
adjustments in OCI are reclassified within reserves to retained income.
Dividends received on equity instruments are recognised in other revenue within non-interest
income.
Held for trading Fair value, with gains and losses arising from changes in fair value (including interest
and dividends) recognised in trading revenue.
Designated at fair Fair value gains and losses (including interest and dividends) on the financial asset are
value through profit recognised in the income statement as part of other gains and losses on financial instruments
or loss within non-interest revenue.
Fair value through Fair value gains and losses (including interest and dividends) on the financial asset are
profit or loss recognised in the income statement as part of other gains and losses on financial instruments
- default within non-interest revenue.
Impairment
ECL is recognised on debt financial assets classified as at either amortised cost or fair value through OCI, financial
guarantee contracts that are not designated at fair value through profit or loss as well as loan commitments that are
neither measured at fair value through profit or loss nor are used to provide a loan at a below market interest rate.
The measurement basis of the ECL of a financial asset includes assessing whether there has been a SICR at the
reporting date which includes forward-looking information that is available without undue cost or effort at the reporting
date about past events, current conditions and forecasts of future economic conditions. The measurement basis of the ECL,
which is set out in the table that follows, is measured as the unbiased and probability-weighted amount that is determined
by evaluating a range of possible outcomes, the time value of money and forward-looking information.
Stage 1 A 12-month ECL is calculated for financial assets which are neither credit-impaired on
origination nor for which there has been a SICR.
Stage 2 A lifetime ECL allowance is calculated for financial assets that are assessed to
have displayed a SICR since origination and are not considered low credit risk.
Stage 3 (credit A lifetime ECL is calculated for financial assets that are assessed to be credit impaired.
impaired assets) The following criteria are used in determining whether the financial asset is impaired:
- default
- significant financial difficulty of borrower and/or modification
- probability of bankruptcy or financial reorganisation
- disappearance of an active market due to financial difficulties.
The key components of the impairment methodology are described as follows:
Significant increase At each reporting date the group assesses whether the credit risk of its exposures
in credit risk has increased significantly since initial recognition by considering the change in
the risk of default occurring over the expected life of the financial asset.
Credit risk of exposures which are overdue for more than 30 days are also considered
to have increased significantly.
Low credit risk Exposures are generally considered to have a low credit risk where there is a low risk
of default, the exposure has a strong capacity to meet its contractual cash flow
obligations and adverse changes in economic and business conditions may not necessarily
reduce the exposure's ability to fulfil its contractual obligations.
Default The group's definition of default has been aligned to its internal credit risk
management definitions and approaches. A financial asset is considered to be in
default when there is objective evidence of impairment. The following criteria are
used in determining whether there is objective evidence of impairment for financial
assets or groups of financial assets:
- significant financial difficulty of borrower and/or modification (i.e. known cash
flow difficulties experienced by the borrower)
- a breach of contract, such as default or delinquency in interest and/or principal
payments
- disappearance of active market due to financial difficulties
- it becomes probable that the borrower will enter bankruptcy or other financial
reorganisation
- where the group, for economic or legal reasons relating to the borrower's financial
difficulty, grants the borrower a concession that the group would not otherwise
consider.
Exposures which are overdue for more than 90 days are also considered to be in default.
Forward-looking Forward-looking information is incorporated into the group's impairment methodology
information calculations and in the group's assessment of SICR. The group includes all forward
looking information which is reasonable and available without undue cost or effort.
The information will typically include expected macro-economic conditions and factors
that are expected to impact portfolios or individual counterparty exposures.
Write-off Financial assets are written off when there is no reasonable expectation of recovery.
Financial assets which are written off may still be subject to enforcement activities.
ECLs are recognised within the statement of financial position as follows:
Financial assets Recognised as a deduction from the gross carrying amount of the asset (group of assets).
measured at amortised Where the impairment allowance exceeds the gross carrying amount of the asset (group
cost (including loan of assets), the excess is recognised as a provision within other liabilities.
commitments)
Off-balance sheet Recognised as a provision within other liabilities.
exposures (excluding
loan commitments)
Financial assets Recognised in the fair value reserve within equity. The carrying value of the financial
measured at fair asset is recognised in the statement of financial position at fair value.
value through OCI
Financial liabilities
Nature
Held-for-trading Those financial liabilities incurred principally for the purpose of repurchasing in
the near term (including all derivative financial liabilities) and those that form part
of a portfolio of identified financial instruments that are managed together and for
which there is evidence of a recent actual pattern of short-term profit taking.
Designated at Financial liabilities are designated to be measured at fair value in the following
fair value through instances:
profit or loss - to eliminate or significantly reduce an accounting mismatch that would otherwise
arise where the financial liabilities are managed and their performance evaluated
and reported on a fair value basis
- where the financial liability contains one or more embedded derivatives that
significantly modify the financial liability's cash flows.
Amortised cost All other financial liabilities not included in the above categories.
Subsequent measurement
Subsequent to initial measurement, financial liabilities are classified in their respective categories and
measured at either amortised cost or fair value as follows:
Held-for-trading Fair value, with gains and losses arising from changes in fair value (including
interest and dividends) recognised in trading revenue.
Designated at Fair value, with gains and losses arising from changes in fair value (including
fair value through interest and dividends but excluding fair value gains and losses attributable to
profit or loss own credit risk) are recognised in the other gains and losses on financial
instruments as part of non-interest revenue.
Fair value gains and losses attributable to changes in own credit risk are
recognised within OCI, unless this would create or enlarge an accounting mismatch
in which case the own credit risk changes are recognised within trading revenue.
Amortised cost Amortised cost using the effective interest method recognised in interest expense.
Derecognition and modification of financial assets and liabilities
Financial assets and liabilities are derecognised in the following instances:
DERECOGNITION MODIFICATION
Financial assets Financial assets are derecognised when Where an existing financial asset or
the contractual rights to receive cash liability is replaced by another with
flows from the financial assets have the same counterparty on substantially
expired, or where the group has different terms, or the terms of an
transferred its contractual rights to existing financial asset or liability
receive cash flows on the financial are substantially modified, such an
asset such that it has transferred exchange or modification is treated
substantially all the risks and as a derecognition of the original
rewards of ownership of the financial asset or liability and the recognition
asset. Any interest in the transferred of a new asset or liability at fair value,
financial assets that is created or including calculating a new effective
retained by the group is recognised interest rate, with the difference in
as a separate asset or liability. the respective carrying amounts being
recognised in other gains and losses
The group enters into transactions on financial instruments within
whereby it transfers assets, non-interest revenue. The date of
recognised in its statement of recognition of a new asset is
financial position, but retains consequently considered to be the
either all or a portion of the risks date of initial recognition for
or rewards of the transferred assets. impairment calculation purposes.
If all or substantially all risks
and rewards are retained, then the If the terms are not substantially
transferred assets are not derecognised. different for financial assets or
Transfers of assets with the retention financial liabilities, the group
of all or substantially all risks and recalculates the new gross carrying
rewards include securities lending amount by discounting the modified
and repurchase agreements. cash flows of the financial asset
or financial liability using the
When assets are sold to a third party original effective interest rate.
with a concurrent total rate of return The difference between the new
swap on the transferred assets, the gross carrying amount and the
transaction is accounted for as a original gross carrying amount
secured financing transaction, similar is recognised as a modification gain
to repurchase transactions. In or loss within credit impairments
transactions where the group neither (for distressed financial asset
retains nor transfers substantially all modifications) or in other gains and
the risks and rewards of ownership of a losses on financial instruments within
financial asset, the asset is derecognised non-interest revenue (for all other
if control over the asset is lost. The modifications).
rights and obligations retained in the
transfer are recognised separately as
assets and liabilities as appropriate.
In transfers where control over the
asset is retained, the group continues
to recognise the asset to the extent of
its continuing involvement, determined
by the extent to which it is exposed to
changes in the value of the transferred
asset.
Financial liabilities Financial liabilities are derecognised
when the financial liabilities' obligation
is extinguished, that is, when the
obligation is discharged, cancelled or
expires.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the group (issuer) to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to make
payment when due in accordance with the original or modified terms of a debt instrument.
Financial guarantee contracts are initially recognised at fair value, which is generally equal to
the premium received, and then amortised over the life of the financial guarantee. Financial guarantee
contracts (that are not designated at fair value through profit or loss) are subsequently measured at
the higher of the:
- ECL calculated for the financial guarantee
- unamortised premium.
Presentation of gains and losses on financial instruments
DESCRIPTION RECOGNITION AND MEASUREMENT
Net interest income Interest income and expense (with the exception of borrowing costs that are
capitalised on qualifying assets, that is assets that necessarily take a substantial
period of time to get ready for their intended use or sale and which are not measured
at fair value) are recognised in net interest income using the effective interest
method for all interest-bearing financial instruments. In terms of the effective interest
method, interest is recognised at a rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument or, where
appropriate, a shorter period, to the net carrying amount of the financial asset or
financial liability. Direct incremental transaction costs incurred and origination fees
received, including loan commitment fees, as a result of bringing margin-yielding assets
or liabilities into the statement of financial position, are capitalised to the carrying
amount of financial instruments that are not at fair value through profit or loss and
amortised as interest income or expense over the life of the asset or liability as part
of the effective interest rate.
Where the estimates of payments or receipts on financial assets or financial liabilities
are subsequently revised, the carrying amount of the financial asset or financial liability
is adjusted to reflect actual and revised estimated cash flows. The carrying amount is
calculated by computing the present value of the adjusted cash flows at the financial asset
or financial liability's original effective interest rate. Any adjustment to the carrying
value is recognised in net interest income.
When a financial asset is classified as specifically impaired (before 1 January 2018) or
as Stage 3 impaired (after 1 January 2018), interest income is calculated on the impaired
value (gross carrying amount less specific impairment) based on the original effective
interest rate. The contractual interest income on the gross exposure is suspended and is
only recognised in interest income when the financial asset is no longer specifically
impaired (before 1 January 2018) or is reclassified out of Stage 3 (after 1 January 2018).
Before the adoption of IFRS 9 on 1 January 2018, the following additional amounts were
recognised in net interest income:
- Fair value gains and losses on debt financial assets that were designated at fair
value through profit or loss
- The gain or loss on the derecognition of a financial asset classified as
available-for-sale
- Gains and losses arising from the derecognition of financial assets and financial
liabilities classified as at amortised cost
- Fair value gains and losses on financial liabilities (including changes as a result
of own credit risk) that were designated at fair value through profit or loss.
Net fee and Fee and commission revenue, including transactional fees, account servicing fees,
commission revenue investment management fees, sales commissions and placement fees are recognised as
the related services are performed. Loan commitment fees for loans that are not expected
to be drawn down are recognised on a straight-line basis over the commitment period.
Loan syndication fees, where the group does not participate in the syndication or
participates at the same effective interest rate for comparable risk as other
participants, are recognised as revenue when the syndication has been completed.
Syndication fees that do not meet these criteria are capitalised as origination fees
and amortised to the income statement as interest income. The fair value of issued
financial guarantee contracts on initial recognition is amortised as income over the
term of the contract.
Fee and commission expenses, included in net fee and commission revenue, are mainly
transaction and service fees relating to financial instruments, which are expensed as
the services are received. Expenditure is presented as fee and commission expenses
where the expenditure is linked to the production of fee and commission revenue.
Trading revenue Trading revenue comprises all gains and losses from changes in the fair value of
trading assets and liabilities, together with related interest income, expense and
dividends.
Customer loyalty The group's banking activities operate a customer loyalty programme in terms of
programmes which it undertakes to provide goods and services to certain customers. The reward
credits are accounted for as a separately identifiable component of the fee and
commission income transactions of which they form a part. The consideration allocated
to the reward credits is measured at the fair value of the reward credit and is
recognised over the period in which the customer utilises the reward credits. Expenses
relating to the provision of the reward credits are recognised in fee and commission
expenses as and when they are incurred.
Dividend income Dividends are recognised in interest income (other revenue) for debt (equity instruments)
when the right to receipt is established. Scrip dividends are recognised as dividends
received where the dividend declaration allows for a cash alternative.
Insurance premium Insurance premium revenue includes life insurance premiums, health insurance premiums
revenue and short-term insurance premiums.
Investment income Investment income for investment management and life insurance activities comprises
mainly rental income from properties, interest, hotel operations' sales and dividends.
Dividends are recognised when the right to receive payment is established and interest
income is recognised using the effective interest method.
Hotel operation sales comprise the fair value of the sale of accommodation, food and
beverage, other guest facilities and rentals received. Revenue is shown net of VAT,
returns, rebates and discounts.
Management fees Fee income includes management fees on assets under management and administration fees.
on assets under Management fees on assets under management are recognised over the period for which the
management services are rendered, in accordance with the substance of the relevant agreements.
Administration fees received for the administration of medical schemes are recognised
when the services are rendered.
Other gains/losses After 1 January 2018, includes:
on financial - Fair value gains and losses on debt financial assets that are at fair value through
instruments profit or loss
- The gain or loss on the derecognition of a debt financial asset classified as at
fair value through OCI
- Gains and losses arising from the derecognition of financial assets and financial
liabilities classified as at amortised cost
- Gains and losses arising from the reclassification of a financial asset from amortised
cost to fair value
- Gains and losses arising from the modification of a financial asset (which is not
distressed) and financial liability as at amortised cost.
Other revenue Other revenue includes dividends on equity financial assets, underwriting profit from
the group's short-term insurance operations and related insurance activities and
re-measurement gains and losses from contingent consideration on disposals and purchases.
Before 1 January 2018, gains and losses on equity instruments designated at fair value
through profit or loss are recognised within other revenue. Gains and losses on equity
instruments classified as available-for-sale financial assets are reclassified from OCI
to other revenue on derecognition or impairment.
Short-term insurance Includes premium income, commission and policy fees earned, as well as net incurred
income claim losses and broker commission paid. Annual business income is accounted for on the
accrual basis and comprises the cash value of commission and fees earned when premiums
or fees are payable directly to the group and comprises the cash value of commission
earned when premiums are payable directly to the underwriters.
Offsetting
Income and expenses are presented on a net basis only when permitted by IFRS, or for gains and losses arising from
a group of similar transactions.
Interest in suspense
In addition to the above identified changes between IAS 39 and IFRS 9, interest in suspense (refers to
contractual interest which accrues on financial assets which are classified as non-performing) is presented
as follows:
IAS 39 accounting treatment
Up to 31 December 2017, IAS 18 Revenue required interest income to be recognised only when it was probable
that the economic benefits associated with a transaction would flow to the entity. The group, in line with these
requirements, suspended the recognition of contractual interest income on all exposures where it was determined
that future economic benefits were not probable. The accounting presentation policy for this suspended contractual
interest was to present the balance sheet interest in suspense account as part of the gross carrying amount of
the financial asset (i.e. gross carrying amount net of interest in suspense). In addition, upon the curing of the
non-performing financial asset, the group elected an accounting presentation policy to recognise this suspended
contractual interest (previously unrecognised interest) within net interest income line within the income statement.
This policy was elected on the basis that the presentation best represented the nature of the amount in terms of
IAS 1 Presentation of Financial Statements (IAS 1).
IFRS 9 accounting treatment
IFRS 9 requires that interest income for financial assets classified as Stage 3 be calculated on the net carrying
amount (after deducting credit impairments), which will result in a portion of contractual interest being suspended.
IFRS 9 requires that this suspended contractual interest be presented as part of the financial assets' gross
carrying amount. The group has applied this requirement by presenting balance sheet suspended contractual interest
as a separate reconciling item when calculating the financial assets' net carrying amount. Hence suspended
contractual interest does not impact the net carrying amount of the financial asset as presented on the statement
of financial position. However, this change in presentation has resulted in an increased gross carrying amount
of financial assets when compared to IAS 39.
The group has elected to present previously unrecognised interest earned on curing of a financial asset out of
Stage 3 within net interest income. This presentation is consistent with the group's treatment under IAS 39 and
was elected on the basis that the presentation best represented the nature of the amount in terms of IAS 1.
During the six months ended 30 June 2018, R545 million of unrecognised interest earned was recognised within
net interest income.
Restatements
All restatements noted below are unaudited.
Correction of prior period error
Consistent with the restatement to the group's statement of financial position at 31 December 2016 as
reported in the group's annual financial statements for the year ended 31 December 2017, the group determined
that certain derivative intercompany 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 Ogross basis. The group has restated its previously reported condensed consolidated statement of financial
position to incorporate the correct elimination of these intercompany derivative positions.
The restatement did not impact the group's net exposure on derivatives, nor did it affect the group's
reserves. The change to the group's condensed consolidated statement of financial position is reflected in
the table that follows:
1H17
As previously Restated
presented position
Asset/ Asset/
(liability) Restatement (liability)
Rm Rm Rm
Derivative assets 53 690 (2 438) 51 252
Derivative liabilities (59 861) 2 438 (57 423)
The following condensed primary financial statement and notes 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.
Change in accounting policy
Expenses incurred with respect to the group's customer loyalty programme (Ucount) have historically
been recorded as part of operating expenses in the income statement. During the year, the group amended
its accounting policy for these expenses to rather be presented as part of net fee and commission revenue
(within non-interest revenue). This policy aligns with the group's policy for other expenses that are
presented within net fee and commission revenue. The impact of the change in the accounting policy on the
group's financial results is as follows:
1H17 FY17
As previously As previously
presented Restated presented Restated
Income/ Income/ Income/ Income/
(expense) Restatement (expense) (expense) Restatement (expense)
Rm Rm Rm Rm Rm Rm
Non-interest revenue 20 566 (216) 20 350 43 037 (463) 42 574
Operating expenses in
banking activities (27 769) 216 (27 553) (57 512) 463 (57 049)
The following condensed primary financial statement and notes have been impacted by this restatement:
- condensed consolidated income statement
- non-interest revenue
- condensed segment report.
The above restatement had the following effect on key financial statistics:
1H17 FY17
As previously As previously
reported Restatement Restated reported Restatement Restated
JAWs 1.0% 0.0% 1.0% 1.0% 0.1% 1.1%
Cost-to-income 56.3% (0.2%) 56.1% 55.7% (0.2%) 55.5%
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).
1H18 average 1H17 average
exchange rate exchange rate
US dollar 12.30 13.20
Pound sterling 16.92 16.62
Argentinian peso 0.58 0.84
Nigerian naira 0.03 0.04
Kenyan shilling 0.12 0.13
Zambian kwacha 1.25 1.39
Mozambique metical 0.20 0.20
16 August 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
Directors
TS Gcabashe (chairman), H Hu1 (deputy chairman), JH Maree (deputy chairman), A Daehnke*,
GJ Fraser-Moleketi, GMB Kennealy, BJ Kruger*, NNA Matyumza, KD Moroka, ML Oduor-Otieno2,
AC Parker, ANA Peterside con3, MJD Ruck, PD Sullivan4, SK Tshabalala* (chief executive),
JM Vice, L Wang1
*Executive Director 1 Chinese 2 Kenyan 3 Nigerian 4 Australian
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 codes
JSE share code: SBK ISIN: ZAE000109815
NSX share code: SNB ISIN: ZAE000109815
SBKP ZAE000038881 (First preference shares)
SBPP ZAE000056339 (Second preference shares)
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
Disclaimer
This document contains certain statements that are "forward-looking" with respect to certain of the group's plans,
goals and expectations relating to its future performance, results, strategies and objectives. Words such as "may",
"could", "will", "expect", "intend", "estimate", "anticipate", "aim", "outlook", "believe", "plan", "seek", "predict" or
similar expressions typically identify forward-looking statements. These forward-looking statements are not statements
of fact or guarantees of future performance, results, strategies and objectives, and by their nature, involve risk and
uncertainty because they relate to future events and circumstances which are difficult to predict and are beyond the
group's control, including but not limited to, domestic and global economic business conditions, market-related risks
such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including
changes related to capital and solvency requirements), the impact of competition, inflation, deflation, the timing impact
and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of
changes in domestic and global legislation and regulations in the jurisdictions in which the group and its affiliates
operate. The group's actual future performance, results, strategies and objectives may differ materially from the plans,
goals and expectations expressed or implied in the forward-looking statements. The group makes no representations or
warranty, express or implied, that these forward-looking statements will be achieved and undue reliance should not be
placed on such statements. The group undertakes no obligation to update the historical information or forward-looking
statements in this document and does not assume responsibility for any loss or damage arising as a result of the
reliance by any party thereon.
Date: 16/08/2018 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
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information disseminated through SENS.