Standard Bank Group financial results presentation for the year ended 31 December 2015

Transcription

1 Standard Bank Group financial results presentation for the year ended 31 December 215

2 standardbank.com

3 Financial results presentation Standard Bank Group 215 Macroeconomic environment USDZAR exchange rate FY15 opening = FY15 closing = SA inflation and interest rates Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 SA CPI yoy Prime overdraft rate Commodity prices Major African countries interest rates 25 Source: IMF data Metals price index Fuel (energy) price index Jan-14 Jul-14 Jan-15 Jul-15 Kenya Nigeria Uganda Jan-16 Financial results presentation / page 2 / 1

4 RESULTS PRESENTATION Key metrics change FY15 FY14 Headline earnings (Rm) Headline earnings pro-forma continuing operations* (Rm) Headline EPS (HEPS) (cents) DPS (cents) NAV per share (cents) ROE () Credit loss ratio () Cost-to-income ratio () Tier 1 capital adequacy ratio () * Pro-forma continuing operations includes 4 of the discontinued operation given that 4 of the operation has been held by the group Financial results presentation / page 3 / Headline earnings impact of the discontinued operation Discontinued operation FY15 Share of associate Total FY14 Discontinued operation Rm Rm Rm Rm SB Plc operating loss (378) (378) (2 121) Write-down of aluminium asset (276) (276) (1 624) Partial insurance recovery for aluminium Separation costs incurred (45) (45) Deferred prosecution agreement accounted in ICBCS as a 4 associate (226) (226) ICBCS share of eleven months performance as a 4 associate (1 294) (1 294) Headline loss recognised in CIB (14) (1 173) (1 277) (3 745) Insurance proceeds for aluminium paid by group entity (54) (54) Deferred prosecution agreement amount payable to ICBC under indemnity (336) (336) Cash flow hedge release on disposal of SB Plc Headline loss recognised in SBG (9) (1 173) (1 263) (3 745) Financial results presentation / page 4 / 2 Standard Bank Group analysis of financial results 31 December 215

5 Summarised income statement change FY15 FY14 Rm Rm Net interest income Non-interest revenue Total income Operating expenses Pre-provision operating profit Credit impairment charges Headline earnings Banking activities Continuing operations Discontinued operation 98 (9) (3 745) Headline earnings Liberty SBG headline earnings Financial results presentation / page 5 / Business unit view of headline earnings change FY15 FY14 Rm Rm PBB South Africa Rest of Africa Outside Africa CIB Central and other Banking activities Liberty Liberty operating earnings LibFin Investments SIP (2) SBG More even distribution of contribution from business units FY14 57 PBB CIB Central and other Liberty 51 FY15 Financial results presentation / page 6 / 3

6 RESULTS PRESENTATION Loans and advances change FY15 FY14 Rbn Rbn PBB Mortgage loans Vehicle and asset finance Business lending and other Card debtors Personal unsecured lending CIB Corporate loans Commercial property finance Loans granted under resale agreements > Other services 5 (4) (1) Loans and advances to customers Loans and advances to banks Gross loans and advances Financial results presentation / page 7 / Deposit and current accounts from customers change FY15 FY14 Rbn Rbn Retail priced Wholesale priced Deposit and current accounts from customers Retail priced deposits 32 CAGR 28 CAGR CAGR 1 5 Rbn FY11 FY12 FY13 FY14 FY15 South Africa Rest of Africa Outside Africa Financial results presentation / page 8 / 4 Standard Bank Group analysis of financial results 31 December 215

7 Net interest income and margin analysis Net interest income Margin analysis on interest earning assets Rbn FY11 FY12 FY13 FY14 FY15 Net interest income Net interest margin bps 469 FY14 PBB loan pricing CIB loan pricing Funding cost Higher HQLA Endowment Mix 1 Other 438 FY15 Financial results presentation / page 9 / Non-interest revenue Rbn Non-interest revenue FY11 FY12 FY13 FY14 FY15 Other revenue Trading revenue Net fee and commission revenue Rates, currencies and commodities change FY15 FY14 Rm Rm Equities Trading revenue Banking and propertyrelated revenue Insurance bancassurance income change FY15 FY14 Rm Rm Other revenue Financial results presentation / page 1 / 5

8 RESULTS PRESENTATION Non-performing loans and provision adequacy NPLs Balance sheet impairments Rbn FY11 FY12 FY13 FY14 FY15 NPLs NPL ratio.5. Rbn FY11 FY12 FY13 FY14 FY15 Specific impairments Performing impairments Coverage ratio Financial results presentation / page 11 / Credit impairment charges Rbn FY11 FY12 FY13 FY14 FY15 Portfolio credit impairments Specific credit impairments Credit loss ratio FY15 FY14 PBB Mortgage loans Vehicle and asset finance Card debtors Other loans and advances CIB Corporate loans Commercial property finance.9 (.16) Credit loss ratio Financial results presentation / page 12 / 6 Standard Bank Group analysis of financial results 31 December 215

9 Operating expenses Cost-to-income ratio change FY15 FY14 Rm Rm Staff costs Other operating expenses IT Amortisation Other Total operating expenses FY11 FY12 FY13 FY14 FY15 Income growth (LHS) Cost growth (LHS) Cost-to-income ratio (RHS) change FY15 FY14 Rm Rm IT and amortisation IT staff costs Other Total IT function spend Financial results presentation / page 13 / Capital Rbn 1.7 Financial results presentation / page 14 / FY12* FY13 FY14 FY15 Closing RWA Average RWA Return on RWA FY12* FY13 FY14 FY15 Common equity Tier 1 CAR Tier 1 CAR Total CAR *FY12 shown on a pro-forma Basel 3 basis 7

10 RESULTS PRESENTATION Dividends CAGR cps FY11 FY12 FY13 FY14 FY15 times Dividend Dividend cover Dividend cover - pro-forma continuing operations* * Pro-forma continuing operations includes 4 of the discontinued operation given that 4 of the operation has been held by the group Financial results presentation / page 15 / Personal & Business Banking 8 Standard Bank Group analysis of financial results 31 December 215

11 PBB highlights SA financial performance pleasing in a tough market with headline earnings growth of 13 Profitability in the Rest of Africa grew 85 despite challenging trading conditions Continued to solidify the turnaround in the VAF division with headline earnings growing by 79 Good customer growth in chosen segments Strong deposit growth consistent with our strategy Solid revenue growth relative to macro economic environment Improving traction in supporting clients with cross-border ambitions New capabilities in a digital world Financial results presentation / page 17 / Our digital journey Financial results presentation / page 18 / 9

12 RESULTS PRESENTATION Core banking journey end is in sight Fully functional core banking solution delivered, processing substantial volume South Africa 57m transactions processed in 215, increase of 27 Real-time transfers enabled, reflecting immediate value (legacy system up to 2 days) Single customer master file implemented migrated 34m profiles and legacy customer information files decommissioned Radically reduced product deployment life-cycle recent launches less than 6 weeks Faster regulatory implementations using improved functionality combined with enhanced customer information Reduced on-line and branch origination processing times System decommissioning journey commenced with eight systems decommissioned to date Rest of Africa Operational in seven key countries 73 of banking customers on the new platform 31m transactions processed during 215, up 24 We remain committed to complete our core banking programmes by end 217 Financial results presentation / page 19 / Higher volumes with strong growth in digital interactions Electronic Physical SBG app 344m trns 387 R88bn value 31 Internet banking 974m trns 2 R826bn value 7 ATMs 454m trns 1 R332bn value 8 Card Legacy system Enquiry and Teller volumes 48m trns 14 R23bn value bn trns flat R54tn value 6 61m trns 18 R243bn value 11 Financial results presentation / page 2 / 1 Standard Bank Group analysis of financial results 31 December 215

13 PBB summarised income statement change FY15 FY14 Rm Rm Net interest income Non-interest revenue Total income Credit impairment charges (5) Income before operating expenses Operating expenses Headline earnings Net interest margin () Credit loss ratio () Cost-to-income ratio () ROE () Financial results presentation / page 21 / PBB summarised balance sheet change FY15 FY14 Rbn Rbn Loans and advances to customers Mortgage loans Vehicle and asset finance Business lending and other Card debtors Personal unsecured lending Deposit and current accounts from customers Current accounts Savings and Investments Reliance on wholesale priced treasury funding (23) Financial results presentation / page 22 / 11

14 RESULTS PRESENTATION Sustained headline earnings growth CAGR Rbn. FY1 FY11 FY12 FY13 FY14 FY15 Headline earnings ROE Financial results presentation / page 23 / PBB geographic view of headline earnings change FY15 FY14 Rm Rm South Africa Rest of Africa Outside Africa PBB South Africa delivered respectable growth in a muted economic environment whilst absorbing investment in digital and core banking capabilities Rest of Africa continued to be profitable 13 out of 15 countries grew HE Despite Declining commodity prices impacting key countries such as Nigeria, Angola and Zambia Regulatory impact of fee caps in various countries Electricity disruptions Excluding Nigeria, Rest of Africa improved HE by R219m in total, representing approximately 4 growth Outside Africa delivered strong growth as a result of increased client activity, assisted by rand weakness Financial results presentation / page 24 / 12 Standard Bank Group analysis of financial results 31 December 215

15 Increasing momentum in ROA Rm 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Total income (LHS) Operating expenses (LHS) Cost to income ratio (RHS) Financial results presentation / page 25 / Good ROA geographic diversification FY15 revenue by region FY15 assets by region East: Kenya, Uganda, Zambia, Tanzania, Malawi, South Sudan South: Namibia, Botswana, Lesotho, Zimbabwe, Swaziland, Mozambique West: Nigeria, Ghana, Angola, DRC Financial results presentation / page 26 / 13

16 RESULTS PRESENTATION PBB product reporting Transactional products Total income Headline earnings change FY15 FY14 change FY15 FY14 Rbn Rbn Rbn Rbn Mortgage lending Card products Lending products Vehicle and asset finance Bancassurance and wealth PBB Product contribution to headline earnings FY Transactional products Mortgage lending Card products Lending products Vehicle and asset finance Bancassurance and wealth FY15 Financial results presentation / page 27 / PBB SA customer segments Total income Headline earnings change FY15 FY14 change FY15 FY14 Rm Rm Rm Rm Retail Banking Business and Commercial Banking Bancassurance and Wealth PBB SA Retail banking benefited from balance growth, endowment and VAF turnaround Business and commercial banking benefited from strong NII growth mainly due to robust balance growth and endowment impact Agricultural exposures remain constant at 4 of total loans and advances with the NPL coverage ratio increasing from 35 to 42 Bancassurance impacted by slower sales of embedded credit life protection, increased investment in systems and people to position the business ahead of regulatory changes Financial results presentation / page 28 / 14 Standard Bank Group analysis of financial results 31 December 215

17 PBB credit impairments FY15 FY14 Mortgage loans Vehicle and asset finance Card debtors Other loans and advances Personal unsecured lending Access Loans Business lending and other.59.9 PBB credit loss ratio By geography South Africa Rest of Africa Outside Africa Rbn FY11 FY12 FY13 FY14 FY15 Credit impairment charges Credit loss ratio Financial results presentation / page 29 / PBB non-performing loans and provision adequacy FY15 FY14 FY15 FY14 NPL ratio Mortgage loans Vehicle and asset finance Card debtors Other loans and advances Personal unsecured lending Access Loans Business lending and other PBB Coverage ratio Mortgage loans Vehicle and asset finance 5 53 Card debtors Other loans and advances Personal unsecured lending Access Loans Business lending and other PBB Bolstered provision for performing loans by 14 (R615m) to R4.9bn Impact of the SARB directive contributed 31bps to the NPL increase and 51bps to the early arrears increase, with no material impact on the income statement impairment charge as this had already been envisaged in the prior years Financial results presentation / page 3 / 15

18 RESULTS PRESENTATION Moving fast forward We believe our PBB strategy is working and we will improve delivery on our strategy We seek to radically redefine customer experience by Further turning the entire organisation towards our customers Using new system and insight capabilities to deliver what matters to customers Accelerate our digital journey by leveraging new systems and processing capabilities Address increasing regulatory challenges across geographies Given the macroeconomic outlook, non-performing loans and early arrears are expected to remain under pressure Even stronger focus on risk management Invest for growth, whilst maintaining proactive cost management discipline Continue to improve customers lives and fulfill aspirations, even in uncertain times Financial results presentation / page 31 / Corporate & Investment Banking 16 Standard Bank Group analysis of financial results 31 December 215

19 CIB highlights Sustained growth in a volatile market, compounded by ongoing regulatory change Strong headline earnings growth of 59 to R7.9bn, with an ROE of 14.3 (FY14: 1.2) Rationalisation of operations outside Africa Expanded footprint in Africa to support our clients growth journeys Partnering our clients as they grow their businesses Financial results presentation / page 33 / Growth across the continent Robust client revenue performance from South African franchise Strong client revenue growth from South and Central, West Africa and East Africa, offset by muted performance in Nigeria Footprint on the continent remains a competitive advantage with a diversification impact Played pivotal roles in transformative, landmark deals Mandate to provide a full range of solutions for the South African Government Employees Pension Fund Sole bookrunner, underwriter and transaction sponsor for the Oceana rights offer and financial advisor for their acquisition of Daybrook Fisheries Financial advisor and transaction sponsor to AB InBev on the R3.1 trillion secondary inward listing on the JSE Sole corporate finance advisor for Brait s R12.2 billion acquisition of Virgin Active and joint-lead bank and funder for its GBP78 million acquisition of New Look Supporting our clients throughout the economic cycle Financial results presentation / page 34 / 17

20 RESULTS PRESENTATION Awards emeafinance African Banking 215 emeafinance Treasury Service 215 Euromoney Awards of Excellence 215 Global Finance World s Best Emerging Markets Banks 215 Global Finance Worlds Best Investment Banks 216 Global Finance World s Best Treasury & Cash Management Providers 216 The Banker Investment Banking Awards 215 Best investment bank in Africa Standard Bank Best FX services in Africa Best transactional bank for financial institutions in Africa Best bank in Africa Best risk advisor in Africa Best bank in Africa Best investment bank in Africa Best M&A bank in Africa Best overall bank for cash management in Africa Best bank for financial risk management in Africa Most innovative investment bank from Africa Financial results presentation / page 35 / Efficient business operations Progress in investment in key strategic systems New Business Online emarket Trader International Trade and Payments Solution Significant strides made to improve and simplify core processes Continued focus on through the cycle risk management processes Living a culture of compliance by doing the right business the right way Financial results presentation / page 36 / 18 Standard Bank Group analysis of financial results 31 December 215

21 CIB summarised income statement change FY15 FY14 Rm Rm Total Income Operating expenses Pre-provision operating profit Credit impairment charges Income from operations Share of (loss)/profit from associates (>1) (1 123) 64 Discontinued operation 97 (14) (3 745) Headline earnings Headline earnings pro-forma continuing operations ROE () Credit loss ratio () Cost-to-income ratio () Jaws () (3.1) 4. Financial results presentation / page 37 / CIB business units Transactional Products and Services Total income Headline earnings change FY15 FY14 change FY15 FY14 Rbn Rbn Rbn Rbn Global Markets Investment Banking Business unit contribution to total income IB 25 FY 15 Other 1 TPS SA 17 Real estate and PIM (59).3.8 (84)..3 Share of loss from ICBCS associate Discontinued operation 97 (.1) (3.7) CIB (1.2) GM ROA 22 FY 14 GM SA 16 TPS ROA 19 Financial results presentation / page 38 / 19

22 RESULTS PRESENTATION CIB revenue trend CAGR Rm FY11 FY12 FY13 FY14 FY15 Financial results presentation / page 39 / CIB credit performance Rbn FY11 FY12 FY13 FY14 FY15 bps Gross loans Credit loss ratio Financial results presentation / page 4 / 2 Standard Bank Group analysis of financial results 31 December 215

23 Moving forward Global economic outlook remains weak Focus on growth sectors on the continent, whilst remaining cautious on those sectors under pressure Continue to put our clients at the heart of everything we do Maintain cost management discipline Resolute on our African strategy Financial results presentation / page 41 / Conclusion 21

24 RESULTS PRESENTATION Reflecting on the results These results are a testament to our balanced portfolio of businesses Good performance from PBB SA Impact on revenue of interchange regulations Increase in costs from conversion of temporary employees to permanent Continued IT investment and delivered a number of successes during the year Made progress in PBB in the Rest of Africa CIB s underlying earnings grew off a high base Business units connected to underlying economic fundamentals slower Balance sheet expanded to high quality corporate names Completion of the sale of a controlling interest in SB Plc to ICBC Wealth s customer-focused strategy to capture market share in SA and the significant growth potential in the Rest of Africa nearing completion Financial results presentation / page 43 / SBSA delivering growth CAGR SBSA a key contributor to group headline earnings Rbn FY1 FY11 FY12 FY13 FY14 FY15 Headline earnings ROE 2 SBSA Financial results presentation / page 44 / 22 Standard Bank Group analysis of financial results 31 December 215

25 ROA trend over 5 years Revenue 24 CAGR Headline earnings CAGR CAGR CAGR Rbn FY11 FY12 FY13 FY14 FY15 South and central East West Rbn FY11 FY12 FY13 FY14 FY15 South and central East West ROE 5 Financial results presentation / page 45 / Moving upwards through the ROE range: what we can control We are a customer-centric universal financial services group focused on Africa Strategy and commitment to Africa unchanged Africa is our home, we drive her growth Partnering with ICBC to connect China to Africa Robust balance sheet has been reinforced over the year Strong capital adequacy ratios, high levels of available liquidity, higher portfolio provisioning Disciplined credit, risk and cost management in response to weaker macroeconomic environment Creating consistently excellent customer experiences Major investment in core banking transformation on track for completion in 217 Well-positioned portfolio of businesses across sub-saharan Africa, including SA Measured growth expected from portfolio Careful management of resource exposures Work still to be done to improve competitiveness in the Rest of Africa, including growth where appropriate Financial results presentation / page 46 / 23

26 RESULTS PRESENTATION Moving upwards through the ROE range: what we can respond to We need to respond appropriately to macroeconomic developments China s economic growth and rebalancing Growth in sub-saharan Africa expected to pick up slightly to 4.2 but risks are tilted to the downside Continued low commodity prices Global interest rate cycle 216 likely to be a more difficult year for consumers and businesses in SA Manage SA country risk by active engagement with SA Inc We are working hard with the authorities and others to promote a stable, growth-friendly environment Early indications are promising Risk of lower than expected growth and SA sovereign being downgraded to sub-investment grade Financial results presentation / page 47 / Medium term ROE target range We remain committed to making progress in lifting ROE further into the target range over the medium term Further progress dependent on stable economic environment, particularly in South Africa FY11 FY12 FY13 FY14 FY15 Financial results presentation / page 48 / 24 Standard Bank Group analysis of financial results 31 December 215