Standard Bank Group continues steady growth on the African continent
5 March 2015
Results for the year ended 31 December 2014 at a glance
- Headline earnings: R17 323-million, up 1%
- Headline earnings from continuing operations: R21 068-million, up 20%
- Headline earnings per share (HEPS): 1 070 cents, up 1%
- Total dividend per ordinary share: 598 cents per share, up 12% from FY13
- Tier 1 capital adequacy ratio: 12.9% (FY13: 13.2%)
- Net asset value (NAV) per share: Increased by 7%
- Return on equity (ROE): Decreased to 12.9% from 14.1%
- Cost to income ratio: 54.5% from 56.8%
- Credit loss ratio: 1.00% from 1.12% in FY13.
Headline earnings from continuing operations increased 20% to R21 068-million. However, headline earnings, which were affected by the performance of the discontinued global markets outside Africa business, increased by only 1% to R17 323-million.
Total income grew by 15% and expenses were 11% higher than 2013, while credit impairments were 2% lower. Net income before taxation grew by 31% and profit from continuing operations was 32% higher. The group concluded the sale of 60% of the group's interest in the global markets business outside Africa, the completion of which was announced on 2 February 2015.
Ben Kruger, Chief Executive, Standard Bank Group, says: "This transaction delivers the final major piece in the repositioning of capital allocation to focus on our customers and clients in Africa and marks a new chapter in the partnership between Standard Bank and ICBC.
" The headline loss from this discontinued operation was R3 745-million. As disclosed by the group during the course of 2014, legal proceedings have been instituted against several parties with respect to the group's rights to physical aluminium held in bonded warehouses in China.
Standard Bank Group believes that the financing arrangements were impacted by fraudulent activities in respect of the physical aluminium. The impact of this on the group's income statement has been estimated at R1 624-million within the discontinued operation. In addition, the discontinued operation suffered losses from trading operations amounting to R1 674-million.
This was due mainly to the high volatility and dislocation displayed in international markets in the final quarter of 2014. The poor operating performance was exacerbated by R447-million of mainly systems costs required to separate and prepare for sale a global markets business that was highly integrated within the group.
The recovery in the United States was stronger than expected, while economic performance in other developed economies remained weak, specifically in Europe and Japan. South African GDP growth of approximately 1.5% in 2014 was affected by lost output from strike action in the mining sector in the first quarter of 2014 and slowing growth in personal consumption expenditure.
Sub-Saharan Africa GDP growth of approximately 5% through 2014 matched that of the previous year, supported by infrastructure spending, good agricultural output and stronger services sectors. There was broad-based output expansion across all the sub-Saharan countries in which the group is invested.
Results out of our business units
Personal & Business Banking (PBB)
PBB achieved headline earnings of R9 834 million, 17% higher than 2013. Robust revenue growth in NII and NIR of 15% and 13% respectively was offset by higher credit impairments of 5%. PBB's cost-to-income ratio was stable at 59.8% as operating costs grew by 14%. ROE declined marginally to 18.2% from 18.6% in the prior period. PBB South Africa headline earnings grew by 10% in a difficult operating environment and PBB rest of Africa recorded headline earnings of R105 million from a loss of R366 million in 2013.
Corporate & Investment Banking (CIB)
- Transactional products grew headline earnings by 13% to R3 037 million.
- Mortgage lending grew earnings by 14% to R1 935 million.
- Instalment sale and finance leases' headline earnings fell by 50% to R165 million. Card product headline earnings grew by 15% to R1 420 million.
- Lending products' headline earnings almost doubled to R1 247 million.
- Bancassurance and wealth delivered headline earnings of R2 030 million, a 12% improvement on 2013.
CIB's headline earnings of R4 983-million declined by 23% in 2014 due to a combination of a headline loss of R3 745-million incurred in the discontinued operation in which a 60% share has been sold to ICBC and headline earnings of R8 728-million achieved by CIB's continuing operations.
The continuing operations headline earnings growth of 26% represents a pleasing underlying performance across the continuing CIB franchise. Total income increased by 14% with NII up by 18% and NIR growing by 11%. Credit impairments declined by 40% due to reduced specific credit impairments. Costs were well controlled, with staff costs flat on 2013 due to lower incentive payments, and 12% increase in other operating costs.
- Transactional products and services recorded another successful year, growing revenue by 18% and earnings by 21% to R2 692-million.
- Global markets operated in an extremely volatile environment during the year but performed well in increasing revenue by 13% and headline earnings by 19% to R3 268-million.
- Investment banking increased headline earnings by 22% to R2 534-million in spite of a moderate overall 6% growth in revenue that recovered well in the second half of the year.
- Real estate and principal investment management (PIM) achieved headline earnings of R234-million.
Liberty's headline earnings for the year to 31 December 2014 decreased by 3% to R3 968-million of which R2 158 million was attributable to the group. Headline earnings from the group's South African retail operations were R1 689 million (2013: R1 467 million) reflecting an earnings increase of 15%.
The global growth profile is expected to continue to be unbalanced with the United States the only major economy for which growth expectations have recently been raised.
South Africa continues to face both structural and cyclical headwinds in 2015 exacerbated by an under-supplied electricity market although some relief is likely from the fall in the price of oil. While sub-Saharan Africa's outlook is influenced by lower commodity prices, the overall growth profile remains robust.
Sim Tshabalala, Chief Executive, Standard Bank Group, says: "The group's brand and positioning has never been stronger following a steady realignment of the group's resources to focus on our customers on the African continent. The group's medium-term return on equity target of between 15% and 18% remains in place and reflects our confidence in the ability of our people to deliver the necessary consistent growth to achieve the target.
" More details of Standard Bank Group's results can be found at www.standardbank.com/reporting