08 March 2012
Standard Bank Group delivers strong set of 2011 results
Standard Bank Group remains the largest bank in Africa by profits and assets, with
a strong balance sheet and a recognised and trusted brand.
2011 results at a glance
- Total income increased 5%
- Credit impairments reduced 13%
- Costs flat year on year
- Resulted in headline earnings growth of 21%
- Return on equity (ROE) - 14,3% (FY10: 12,5%)
- Tier I capital adequacy ratio of 12,0% (FY10: 12,9)
- Dividend per ordinary share of 425 cents, up 10% on 2010
- Cost-to-income ratio - 58,8% (FY10: 61,4%)
- Credit loss ratio - 0,87% (FY10: 1,04%)
Jacko Maree, Standard Bank Group Chief Executive, says: "We made good progress in
the year, delivering a much improved set of results and balancing our investment
for future growth with tight management of costs."
Personal & Business Banking delivered headline earnings of R6 billion, surpassing
the record profits achieved in 2007 and 40% higher than the prior year.
The main contributors to this result were income growth that outstripped cost growth,
the continued reduction in credit impairment charges and well-priced loan growth.
Personal & Business Banking grew net interest income 9% on the back of asset growth,
improved pricing and reduced funding costs, despite a negative endowment impact
mainly due to the low interest rate environment in South Africa.
The results were supported by a 19% reduction in credit impairments from R6,7 billion
in 2010 to R5,4 billion in 2011. The cost-to-income ratio improved slightly to 61,3%
from 62,2%. An ROE of 21,6% was achieved, a strong improvement on the 16,9% recorded
in the prior year.
Corporate & Investment Banking reported headline earnings of R5,8 billion,
up 11% on the prior year. This robust result was delivered in a particularly challenging
environment. Total revenue grew 4% with excellent growth achieved in fee income
and a more subdued result in margin and trading income, given the very competitive
and uncertain environment.
Standard Bank's tightened strategic focus, while important for the long-term competitiveness
of its business, has been a constraining factor on revenue growth. Credit impairment
charges almost doubled to R1 020 million from a very low base in 2010, and the credit
loss ratio increased to 0,30%. The balance sheet remains healthy with impairments
as a percentage of total gross loan exposure down to 0,91% from 1,14% in the prior
Costs reduced 1%, mainly as a result of well-managed staff costs, and the cost-to-income
ratio improved from 62,8% to 60,4%. An ROE of 13,3% was recorded for the period.
Liberty's results reflect the group's 53,6% investment in Liberty. Liberty's
headline earnings ended at R2 663 million, 3% higher than 2010. Of these headline
earnings, R1 428 million was attributable to Standard Bank Group.
A key positive feature has been the resolution of the policyholder persistency issue
in the retail business in South Africa and the substantial improvement in the value
of in-force contracts. Normalised equity value (embedded value) improved by 10%
to more than R100 per share and return on group equity value was 15,3%.
Reflecting on 2011
- Macro and regulatory uncertainty
The group's strong performance should be seen in the context of ongoing economic
uncertainty, particularly in developed countries, and regulatory upheaval worldwide.
- Keeping costs flat, while investing for growth
In March last year Standard Bank committed to keep costs flat, which it achieved
through a disciplined approach to managing headcount and achieving additional efficiency
gains. Standard Bank's efforts to control cost growth across the group as a whole
were balanced with its strategic priority to invest for growth in markets such as
Angola, Kenya and Nigeria.
- Organic growth in the rest Africa
Standard Bank's on-the-ground operations in the rest of Africa are showing good
results with headline earnings increasing by 38%. The continued investment in infrastructure
is bearing fruit as revenues benefited from a larger transacting customer and deposit
base. While an acquisition would make sense in markets where we are not yet at scale,
we will primarily concentrate on continuing to grow our businesses organically.
- Balancing ROE and growth
Standard Bank recognises that its current ROE of 14,3% is too low and it is managing
the levers of ROE aggressively to improve the ratio. However it will not undermine
its growth plans to defend short-term returns, nor will it pursue growth at levels
of return that are too low.
From 2007 to 2010, the group's annual dividend per share was maintained at 386 cents
per share, notwithstanding headline earnings per share declining over this period.
Despite the resulting higher payout ratios, the group's capital position is strong
and will be enhanced in 2012 by releases of capital from strategic disposals. This,
together with strong headline earnings per share growth in 2011, meant it was appropriate
to consider an increase in the dividend for the 2011 year. A final cash dividend
of 284 cents per share has been declared. This declaration results in a total dividend
for the year of 425 cents, an increase of 10% and a dividend cover ratio marginally
in excess of 2,0 times.
Mr Maree says: "Our strategy is very clear and we know what is required of us to
fulfil our aim of being the leading financial services organisation in Africa. We
will continue to focus on maintaining our strong position in South Africa, and on
growing in our chosen markets in the Rest of Africa.
"We remain committed to right-sizing our operations outside of Africa in a responsible
and deliberate manner.
"We look forward to the finalisation of new banking regulations over the coming
months. This will enable us to strike the right balance between the regulatory trends
to hold more capital and liquidity, the requirements of shareholders for higher
returns and the need to facilitate economic growth in our core markets.
"We are anticipating subdued revenue growth in 2012, but intend to maintain focus
on costs and to drive further improvement in our ROE."