Standard Bank Group has refined its strategy and reallocated responsibilities between its three deputy group chief executives, Ben Kruger, Sim Tshabalala and Peter Wharton-Hood. Details were outlined today by Standard Bank Group Chief Executive Jacko Maree at the group's annual results presentation for the 2010 year.
Standard Bank Group announced headline earnings of R11 283 million (US$1 541 million), down 4% and headline earnings per share (HEPS) of 715.9 cents, down 5%. A return on equity (ROE) of 12.5% (FY09: 13.6%) was recorded.
Banking activities revenues were lower compared to the prior year: net interest income fell by 8% as a result of a flat loan book and compressed margins and non-interest revenue declined 4%, dragged down by a 21% drop in trading revenue. Credit impairment charges reduced substantially and the credit loss ratio improved to 1.04% (FY09: 1.60%).
Continued investment in people, premises and systems, as well as once-off restructuring expenses, resulted in total operating expenses increasing 12% on FY09. These impacts resulted in a decline in banking activities headline earnings of 15%.
Significant operational improvements in the insurance business and positive investment markets resulted in Liberty recording good growth in earnings.
Speaking at the presentation, Mr Maree said: "Standard Bank Group, overall, is in good health. We are well capitalised, profitable and have a clear growth path, despite an uncomfortable cost-to-income ratio of 61.7% and an ROE of 12.5%. We have therefore, over and above the necessary action taken on costs, looked very carefully at our business strategy and refined our strategy to align it to changes in the group's operating environments. After extensive debate, we believe that a fundamental revision of the strategy is unwarranted, but that some refinement and tightening of strategic focus is required."
Key features of refined strategy
Africa is at our core. Standard Bank will continue to build first-class, on-the-ground banking franchises in chosen markets in Africa, investing in people, branch networks and systems. "Our rapid pace of investment in those countries has not been vindicated by recent revenue trends. Nevertheless, we are confident that future revenue flows will justify these investments in infrastructure. As we create stronger annuity revenue streams and customer relationships in our domestic operations, these will provide greater opportunity to leverage our cross-border investment banking and global markets capabilities," said Mr Maree.
Standard Bank no longer has ambitions to buy or build additional domestic businesses in markets outside of Africa. However, it will connect other selected emerging markets to Africa and to each other, applying its sector expertise, particularly in natural resources, globally.
Standard Bank's long standing natural resources franchise will retain its importance and remains a key focus area. It will continue to improve its sector coverage, expand its activities across the entire commodity value chain and put more of its people closer to its clients in the countries in which they operate.
China continues to be critical to Standard Bank's strategy. It will continue building robust banking systems for Chinese clients in Africa and positioning the group to service the growing trade and investment flows between China and other emerging markets.
"In the context of our refocused strategic ambitions, tight capital management is fundamental. Now that we have more clarity on the proposed Basel 3 requirements, we have a clearer framework for optimising the deployment of capital across the group. This will be addressed from 2011 and over time will result in lower amounts of capital being allocated outside Africa," said Mr Maree.
Changes in responsibilities of deputy group chief executives
Mr Maree announced the reallocation of certain senior responsibilities to ensure execution of the refined strategy.
Ben Kruger will assume responsibility for both major banking business lines, Corporate & Investment Banking and Personal & Business Banking. Mr Kruger will be responsible for optimising client relationships and revenue generation across the banking group.
Sim Tshabalala will continue as the Chief Executive of The Standard Bank of South Africa (SBSA), the group's largest banking operation. Standard Bank's South African base remains the springboard for its expansion and Mr Tshabalala will continue to ensure that the requisite level of attention is paid to preserving and growing the franchise in Standard Bank's home market.
Peter Wharton-Hood will maintain his accountability for Operations and IT across the banking group. In addition, he will be assuming responsibility for the effective and efficient operation of all banks outside South Africa.
The three deputy chief executives will continue to report to Mr Maree.
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