Standard Bank’s core businesses performed well in a difficult
environment and are showing good momentum as the group continues to
improve its market position in Africa across many of its key products,
segments and geographies.
The results of the first half of 2012 support Standard Bank’s
strategic refinement to strengthen its focus on Africa. A highlight of
the results was the good growth trajectory being maintained in the
group’s on-the-ground banks in the rest of sub-Saharan Africa.
Says Jacko Maree, Standard Bank Group Chief Executive: “Amidst the
uncertainty in the world economy and the continuous upheavals in
global banking, our broad financial product base and our financial
strength have served us well.”
Results at a glance
• Total income grew by 15%
• Credit impairments increased 35%
• Costs up by 17%
• Resulted in headline earnings growth of 11%
Key statistics
• Return on equity (ROE): 14,5% (HY11: 14,5%)
• Tier I capital adequacy ratio of 11,0% (HY11: 12,4%)
• Dividend per ordinary share: 212 cents (HY11: 141 cents)
• Cost-to-income ratio: 59,1% (HY11: 58,0%)
• Credit loss ratio: 0,98% (HY11: 0,81%)
“Following a reasonable start to the year, the challenges that
hampered the global economy in 2011 intensified in the second quarter,
much of this centered on the Eurozone. It has become clear that 2012
has developed into another difficult year for the global economy.
Investor confidence remains fragile and financial markets are
volatile. This makes for a very challenging operating environment for
all banks,” said Mr Maree.
Personal & Business Banking (PBB) reported headline earnings of R3 194
million for the six months under review, 33% higher than the prior
year. The primary contributors to the increased headline earnings were
income growth in excess of cost growth and well-priced loan
origination. This result reflects the combination of an excellent
result achieved in PBB SA which generated headline earnings of R3 250
million, with improving momentum in the Rest of Africa, which
reflected a smaller loss than the same period in the prior year as
Standard Bank expands its customer network.
The mortgage business continues to perform well with revenues up by
14% as a result of steady book growth over the last 18 months and a
continued improvement in credit experience. NPLs reduced by a further
R1 billion in the period from December 2011.
Transaction and lending products achieved good growth in income and
earnings. Retail deposits grew 13% in the period, and, together with
increased activity levels, provided good impetus to growth in fee and
commission revenue, absorbing the impact of the price reductions
announced in April in certain segments in South Africa. Strong growth
was evidenced in personal term loans, overdrafts and revolving credit
facilities in line with expectations given Standard Bank’s focused
approach to customer acquisition. The credit impairment charge for
this grouping of unsecured loans more than doubled and the credit loss
ratio was 2,64% for the period, well within pricing assumptions.
Corporate & Investment Banking (CIB) experienced a much more difficult
operating environment in the second quarter which put pressure on both
revenues and earnings. Headline earnings of R2.9 billion were 7% below
the prior period.
The Transactional Products and Services (TPS) business was the
strongest performer in the period in CIB, with revenues for the first
half of the year up 36% on the prior year comparative. This is a
significant result given the core role TPS plays across the wider CIB
franchise. The TPS business in the Rest of Africa is now the same size
(in revenue terms) as the long-standing TPS business in South Africa.
The South African business made a positive contribution with cash
management benefiting from growth in average balances and the trade
business experiencing an increase in exposures with Asian banks.
The Global Markets business saw revenues reduce 5% compared to the
prior period as unfavourable market conditions, driven by the ongoing
issues within the Eurozone, led to a subdued second quarter for the
Outside Africa operation. The second quarter was severely impacted by
subdued client activity and tighter margins; which contributed to
revenues being well below the prior period. A positive trading result
was achieved in the Rest of Africa due to higher flow business in
foreign exchange at improved margins.
Investment Banking reported half year income up 19% on the prior
period. In particular net interest income has risen significantly
following the focus on loan book growth seen towards the end of 2011.
Rest of Africa revenues grew off a low base as a result of increased
activity in the period; particularly within Mozambique and Kenya. At a
headline earnings level, the positive revenue performance has been
somewhat offset by increased credit provisions.
Liberty’s headline earnings for the six months to 30 June 2012 were up
41% to R1 797 million. Of these headline earnings, R905 million was
attributable to Standard Bank Group. The first half of 2012 reflected
the significant operational improvements made across the Liberty
group. Retail SA, which successfully remedied the policyholder lapse
issues over the last few years, has now demonstrated capability to
deliver innovative products and is achieving significant growth in new
business and margin. Liberty’s ROE for the period was 23,4%.
Dividends
In order to achieve a better balance between interim and final
dividend, the board has declared an interim distribution of 212 cents,
which represents half of the prior year total. The dividend has been
declared as a cash distribution but with an opportunity to elect
capitalisation shares to provide flexibility for shareholders, given
recent changes to dividend tax in South Africa.
Prospects
Macroeconomic uncertainties are expected to continue to weigh on
investor sentiment and client activity in the second half of 2012 and
the group therefore expects revenue growth to be subdued in CIB in the
second half. The second half of 2012 is also expected to be a more
difficult environment for revenue generation for PBB, given the
anticipated endowment impact of the recently announced rate cut and
the full year impact of price cuts in South Africa. The upward
pressure placed on costs as a result of being on an accelerated growth
path in certain of the group’s operations, having to overhaul legacy
IT systems and increasing regulatory and compliance pressures, will
remain challenging.
“Our group is in good health and our core businesses have good
momentum. We have maintained a strong liquidity and funding profile,
asset quality is good and our strict capital and risk discipline means
we are on track to comply with Basel III next year. We are mindful of
the
external challenges but believe that our healthy foundation and our
broad product and client base will stand us in good stead,” said Mr
Maree.
ENDS