To view the PDF file, sign up for a MySharenet subscription.

STANDARD BANK GROUP LIMITED - Results announcement for the six months ended 30 June 2020

Release Date: 20/08/2020 07:30
Code(s): SBK SBKP SBPP     PDF:  
Wrap Text
Results announcement for the six months ended 30 June 2020

Standard Bank Group Limited
Registration number 1969/017128/06
Incorporated in the Republic of South Africa

Share codes
JSE share code: SBK ISIN: ZAE000109815
NSX share code: SNB ZAE000109815
A2X share code: SBK
SBKP ZAE000038881 (first preference shares)
SBPP ZAE000056339 (second preference shares)

Standard Bank Group

for the six months ended 30 June 2020

for the six months ended 30 June 2020

                                                                                              Change (%)         1H20        1H19        FY19

 Financial indicator (Rm)
 Headline earnings                                                                                    (44 )      7 541     13 361       28 207
 Banking activities headline earnings                                                                 (40 )      7 740     12 806       27 216
 Operating income/Pre-provision profit - Banking activities                                             4      24 295      23 336       48 126
 Cents per ordinary share
 Basic earnings per ordinary share                                                                    (71 )      236.7       827.0     1 593.5
 Headline earnings per ordinary share                                                                 (43 )      473.8       837.4     1 766.7
 Dividend per ordinary share                                                                         (100 )         —          454         994
 Net asset value per ordinary share                                                                     7      11 265      10 511       10 742
 Financial performance
 ROE (%)                                                                                                           8.5        16.2        16.8
 Credit loss ratio on banking activities (bps)                                                                     169          76          68
 Cost-to-income ratio on banking activities (%)                                                                   56.4        57.0        56.4

                                                                                                                1H20        1H19        FY19
                                                                                 CCY (%)      Change (%)          Rm          Rm          Rm

Net interest income                                                                    (2 )           —       31 204      31 194       62 919
Non-interest revenue                                                                    4             6       24 580      23 083       47 542
Total income                                                                            1              3      55 784      54 277      110 461
Operating expenses                                                                     —               2      (31 489 )   (30 941 )   (62 335 )
Operating income/Pre-provision profit                                                   1              4      24 295      23 336       48 126
Credit impairment charges                                                        over 100       over 100      (11 291 )    (4 247 )    (7 964 )
Taxation                                                                              (42 )          (43 )     (2 673 )    (4 685 )    (9 894 )
Other                                                                           (over 100)     (over 100)        (644 )       109         349
Attributable to non-controlling interests and other equity instrument holders          12             14       (1 947 )    (1 707 )    (3 401 )
Banking activities headline earnings                                                  (41 )          (40 )      7 740     12 806       27 216
Banking activities ROE (%)                                                                                        9.5        17.5        18.1
                                                                                                                                                          1H20       1H191      FY191
                                                                                                                    CCY (%)        Change (%)                  Rm       Rm         Rm

Personal & Business Banking                                                                                                (61 )            (60 )         2 876       7 261     16 493
Corporate & Investment Banking                                                                                             (10 )             (7 )         5 715       6 138     11 581
Central and other                                                                                                          54                44            (851 )      (593 )     (858 )
Banking activities headline earnings                                                                                       (41 )            (40 )         7 740      12 806     27 216
Other banking interests                                                                                           (over 100)        (over 100)                 508     (320 )     (864 )
Liberty headline earnings                                                                                         (over 100)        (over 100)             (707 )      875       1 855
Group headline earnings                                                                                                    (44 )            (44 )         7 541      13 361     28 207

    Where responsibility for individual cost centres and divisions within business units change, the comparative figures have been reclassified accordingly.

“Globally, 1H20 has been dominated by the Covid-19 pandemic and the distressing human and economic cost thereof. During this time, we have
remained steadfast in support of our clients, our employees and the communities in the countries we operate in.” - Sim Tshabalala, Group Chief Executive

Group results
Standard Bank Group’s (SBG or the group) results for the six months ended 30 June 2020 (1H20) reflect that of a resilient, well diversified underlying
franchise, negatively impacted by a very difficult environment, particularly in South Africa. The group’s Africa Regions business and Corporate and
Investment Banking business, most notably Global Markets, delivered strong top line growth. The group’s strong capital and liquidity positions going into
this crisis, have allowed us to provide significant temporary relief to clients without constraining our ability to lend to existing and new clients or support
new projects.

The group’s banking operations’ earnings were supported by strong balance sheet growth, robust trading revenues and well contained costs. Positive jaws
of 100 bps supported pre-provision operating profit, which grew 4% period on period to R24.3 billion. Credit impairment charges increased to R11.3 billion,
2.7 times those reported in the prior period (1H19) and reflective of the tough environment and outlook. Consequently, banking operations reported
headline earnings of R7.7 billion, down 40% on 1H19, and a return on equity (ROE) of 9.5%.

Group headline earnings were R7.5 billion, a decline of 44% on 1H19, and ROE was 8.5%. The group’s capital position remained robust, with a common
equity tier 1 capital adequacy (CET1) ratio as at 30 June 2020 of 12.6%. Profit attributable to ordinary shareholders declined 71% to R3.8 billion. The
difference between headline earnings and profit attributable can be ascribed to a R1.4 billion post-tax gain on the sale of the 20% stake in Industrial and
Commercial Bank of China (Argentina) S.A. and its affiliates (ICBCA), the associated R3.4 billion negative impact of the foreign currency translation
reserve (FCTR) release on sale and R1.9 billion related to the impairment of certain IT intangible assets. The gain on sale of the group's stake in ICBCA
and the reserve impact are both outside of headline earnings and therefore did not impact group headline earnings. The release of the FCTR balance to
earnings was a movement between reserves and therefore did not impact the net asset value of the group.

Operating environment
Covid-19 has led to the worst economic shock in living memory. In March 2020, the World Health Organization declared Covid-19 a pandemic and
countries responded with widespread lockdowns. Supply chains were disrupted, and demand declined. An oil price war and oversupply drove a swift and
significant decline in the oil price. Fear and uncertainty drove a precipitous fall in the markets and a liquidity squeeze in 1Q20. This was quickly followed by
extraordinary fiscal and monetary actions and fiscal stimulus (in particular, in developed markets) and a variety of regulatory actions. These bold actions,
combined with flattening infection curves, calmed markets somewhat and drove a recovery in 2Q20.

The considerable uncertainty in 1H20 drove an Emerging Market risk-off stance for foreign investors. Sub-Saharan Africa experienced record capital
outflows and financial conditions tightened. Trade and foreign exchange inflows dried up and oil-exporters were negatively impacted by the lower oil price.
Covid-19 related regulatory actions included wide-spread interest rate cuts, easing of capital and liquidity requirements and fee waivers and restrictions.
West Africa was impacted by the lower oil prices, East Africa, by lower trade and a halting of travel and the South and Central economies remained
closely coupled with South Africa.

In South Africa, the interrupted power supply extended the 4Q19 recession into 1Q20. Strict lockdowns brought the economy to a near-standstill.
Prospects of a modest economic recovery in 2020 were replaced with expectations for a large decline (Standard Bank Research: South Africa’s real GDP
is forecast to decline 8.5% in 2020 followed by a 4.5% recovery in 2021). The poor economic outlook and declining inflation trend paved the way for
cumulative interest rate cuts equating to 275 bps in the period. In addition, the South African government implemented a sizeable stimulus package to
support those most vulnerable. Whilst necessary, the additional spending poses a material risk to the public debt trajectory. Fiscal diligence and urgent
structural reforms are more important than ever.

Personal & Business Banking
PBB revenues declined 1% to R35.1 billion. Negative endowment, and related margin compression, more than offset the revenue increases related to
balance sheet growth. NIM declined 42 bps to 559 bps. NIR declined 5% as increased digital transactional volumes and modest annual price increases
were insufficient to offset the significant lockdown-related decline in physical channel volumes, turnover reductions, a drop in trade activity and regulatory
restrictions introduced on certain fees in Africa Regions. Credit impairment charges increased to R8.6 billion (1H19: R3.7 billion), 2.3 times 1H19 charges.
Lockdowns disrupted businesses and impacted client incomes and encouraged customers to transition to our digital channels leading to digital transaction
volumes increasing.

Corporate & Investment Banking
CIB revenues grew 11% to R21.4 billion. During this period of significant volatility and disruption, CIB continued to proactively engage with clients to
provide tailored funding, liquidity and risk management solutions. CIB’s capabilities and reach remains attractive to domestic clients and multi-national
corporates already operating, seeking to operate or seeking to expand on the continent. The business continued to benefit from diversification across
clients, sectors and regions. Africa Regions delivered a strong performance. Significant margin pressure offset strong balance sheet growth to deliver flat
NII. Cost growth was contained at 5%, delivering positive jaws of 639 bps and an improved cost-to-income ratio of 49.6%. Pre-provision operating profit
grew 19% period on period.

Central and other
This segment includes costs associated with corporate functions and the group’s treasury and capital requirements that have not been otherwise allocated
to the business units. The segment costs, including the R500 million (pre-tax) central provision amounted to R851 million (1H19: R593 million). We
continue to proactively manage the costs recorded in the centre.

Other banking interests
ICBC Standard Bank (ICBCS) recorded a profit of USD70 million in 1H20 (1H19: loss of USD130 million). The group’s 40% share of ICBCS’ earnings
equated to R508 million.

In August 2019, the group exercised its option to sell its 20% stake in ICBCA to the Industrial Commercial Bank of China (ICBC). The sale was completed
on 29 June 2020, post receipt of the necessary regulatory approvals.

In 1H20, Liberty’s performance was negatively impacted by higher morbidity and mortality claims, new business strain and the creation of a R2.2 billion
post-tax pandemic provision to cover future costs related Covid-19 which are still expected to arise. The Shareholder Investment Portfolio performance
reflected negative investment market returns, particularly in respect of foreign and local equities. Liberty reported a headline loss of R2.3 billion (1H19:
earnings of R2.0 billion). After adjusting for treasury shares, the group’s share of the loss amounted to R0.7 billion (1H19: earnings of R0.9 billion).

In the month of July, customer activity and business turnover levels continued to recover. While this should be supportive for NIR growth into 2H20,
ongoing uncertainty is expected to constrain balance sheet growth. Lower interest rates are expected to persist throughout 2H20, which will put pressure
on NII. Trading revenues are expected to be below 1H20 levels. PBB provision levels, while deemed sufficient, are sensitive to macro-economic
developments as well as client behaviour. Where appropriate, PBB has agreed to extend payment holidays and other relief measures. Client behaviour
post the expiry thereof will be key. Forecast risk remains high and should the outcome be worse than expected, additional provisions will be required.
While current CIB provision levels are deemed appropriate, CIB exposures, by their nature, are lumpy and additional provisions may be required if ratings
deteriorate further and/or individual clients experience difficulties. The Board will take into account the SARB’s guidance and group’s capital position and
the outlook before deciding whether to declare a final dividend. We are unable to provide revised medium-term targets at this time.

Covid-19 has already had a profound impact globally and there remains much uncertainty as to the ultimate human and economic toll. In addition,
US/China tensions remain a risk. In contrast, lockdowns will be rolled back, and economies will reopen. The International Monetary Fund is forecasting
global real GDP to contract by 4.9%, sub-Saharan Africa by 3.2% and South Africa by 8.0% in 2020, followed by a recovery of 5.4%, 3.4% and 3.5%
respectively, in 2021. Accordingly, we shift our focus to recovery. Leveraging the group’s strong capital position, we will continue to work with our
individual, business and corporate clients, in a responsible manner, to find suitable solutions to enable them to participate and support the much-needed
transition to the recovery phase.

The world changed fundamentally and, to some extent, permanently, in a matter of weeks. While the pandemic has created distress and anxiety for many
people, it has also created new opportunities, specifically the opportunity to accelerate change. As a group operating across the continent, with operations
and clients across the globe, we need to adapt to remain relevant. As we re-imagine the future, we remain of the view that our future-ready strategy
remains valid. However, we recognise the need to accelerate our digital delivery and, in parallel, drive operational efficiency. We remain committed to
delivering a positive societal, economic and environmental impact. Combined, this will ensure we remain relevant to our customers, attractive to our
employees and enable us to deliver value to all stakeholders. And, in doing so, we will also deliver on our purpose of driving Africa’s growth.
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 (share code SBK on the JSE; ISIN: ZAE000109815 and share code SBN on the Namibian Stock Exchange; ISIN: ZAE000109815)
are advised that, in line with the South African Reserve Bank’s guidance, the board has not declared an interim dividend (1H19: 454 cents, decrease of

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. 102 of 3.25 cents (gross) per first preference share, payable on Monday,
  14 September 2020, to holders of first preference shares recorded in the books of the company at the close of business on the record date, Friday, 11
  September 2020. The last day to trade to participate in the dividend is Tuesday, 8 September 2020. First preference shares will commence trading ex
  dividend from Wednesday, 9 September 2020.
• Non-redeemable, non-cumulative, non-participating preference shares (second preference shares) dividend No. 32 of 333.00 cents (gross) per second
  preference share, payable on Monday, 14 September 2020, to holders of second preference shares recorded in the books of the company at the close
  of business on the record date, Friday, 11 September 2020. The last day to trade to participate in the dividend is Tuesday, 8 September 2020. Second
  preference shares will commence trading ex dividend from Wednesday, 9 September 2020.

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, 9 September 2020, and Friday, 11
September 2020, both days inclusive. Preference shareholders (first and second) who hold dematerialised shares will have their accounts at their CSDP
or broker credited on Monday, 14 September 2020.

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.

                                                                                                                                     6.5% cumulative
                                                                                                                                   preference shares
                                                                                                                                                                         preference shares
                                                                                                                           (first preference shares)
                                                                                                                                                                (second preference shares)1
    JSE Limited
    Share code                                                                                                                                    SBKP                                      SBPP
    ISIN                                                                                                                               ZAE000038881                              ZAE000056339
    Dividend number                                                                                                                                  102                                         32
    Gross distribution/dividend per share (cents)                                                                                                    3.25                                   333.00
    Last day to trade in order to be eligible for the cash dividend                                                    Tuesday, 8 September 2020                 Tuesday, 8 September 2020
    Shares trade ex the cash dividend                                                                              Wednesday, 9 September 2020               Wednesday, 9 September 2020
    Record date in respect of the cash dividend                                                                         Friday, 11 September 2020                 Friday, 11 September 2020
    Dividend cheques posted and CSDP/broker account credited/updated (payment date)                                   Monday, 14 September 2020                 Monday, 14 September 2020

    The non-redeemable, non-cumulative, non-participating preference shares (SBPP) are entitled to a dividend of not less than 77% of the prime interest rate multiplied by the subscription price
    of R100 per share.

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 preference shares is likely to have tax implications for both resident and non-resident 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 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 2.60 cents per first
preference share and 266.400 cents per second preference share. Non-resident 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:
• 1 619 929 317 ordinary shares at a par value of 10 cents each
• 8 000 000 first preference shares at a par value of R1 each
• 52 982 248 second preference shares at a par value of 1 cent each and subscription price of R100.

The company’s tax reference number is 9800/211/71/7 and registration number is 1969/017128/06.

20 August 2020, Johannesburg

This announcement is a summary of the information contained in the full announcement and does not contain full or complete details. Any investment
decisions by investors or shareholders should be based on a consideration of the full announcement released on SENS or available at and also on the following JSE website:

The pro forma financial information and 1H20 results, including comparatives for 1H19 where applicable, and forward looking information has not been
audited or independently reviewed by the group’s external auditors. The group’s FY19 financial information has been correctly extracted from the
underlying audited consolidated annual financial statements for the year ended 31 December 2019, where applicable. Copies of the full announcement
may be requested by emailing or by phoning +27 11 636 5039.

The directors of Standard Bank Group Limited take full responsibility for the preparation of this announcement including the pro forma constant currency
financial information, and that the financial information, where applicable, has been correctly extracted from the underlying audited group financial
statements. Due to its nature, the pro forma financial information may not be a fair reflection of the group’s results of operations. Refer to the group’s full
announcement for further details regarding the computation of the group’s pro forma constant currency financial information.

Forward-looking statements contained above are not statements of fact or guarantees of future performance, results, strategies and objectives, and by
their nature, involve risk and uncertainty. 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.

Registered office: 9th floor, Standard Bank Centre, 5 Simmonds Street, Johannesburg 2001, PO Box 7725, Johannesburg 2000
Independent sponsors: South Africa: J.P. Morgan Equities South Africa Proprietary Limited, Namibia: Simonis Storm Securities (Proprietary) Limited
Joint sponsor: The Standard Bank of South Africa Limited (acting through its Corporate & Investment Banking business unit)
Directors: TS Gcabashe (chairman), A Daehnke*, MA Erasmus1, GJ Fraser-Moleketi, X Guan2 (deputy chairman), GMB Kennealy, JH Maree (deputy
chairman), NNA Matyumza, KD Moroka, NMC Nyembezi, ML Oduor-Otieno3, AC Parker, ANA Peterside CON4, MJD Ruck, SK Tshabalala* (chief
executive), JM Vice, L Wang2.

All nationalities are South African, unless otherwise specified. * Executive director 1 British 2 Chinese 3 Kenyan 4 Nigerian

Date: 20-08-2020 07:30:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story