Download PDF - Standard Bank - Investor Relations
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<strong>Standard</strong> <strong>Bank</strong> Group Limited Audited results and dividend announcement for the year ended 31 December 2012<br />
flat for personal market customers and, in some<br />
instances, reducing prices in South Africa.<br />
Transactional banking revenues now make up more<br />
than 40% of the group’s banking revenues.<br />
Income growth far exceeded cost growth in the rest<br />
of Africa, resulting in a lower cost-to-income ratio for<br />
the region, and allowing excellent revenue growth to<br />
translate into even better headline earnings growth<br />
of 68%.<br />
Liberty results were particularly strong with headline<br />
earnings up 42% as a result of favourable investment<br />
markets and steady performance from its retail<br />
insurance business in South Africa.<br />
Challenges in 2012<br />
Aligning our operations outside Africa to our<br />
Africa-centred strategy requires that we simplify and<br />
scale them optimally according to the revenue<br />
generation opportunities we can reasonably expect<br />
and capital required to produce those revenues.<br />
During the year, we continued to right-size our<br />
operations outside of Africa in a responsible and<br />
deliberate manner.<br />
Divestitures from Russia, Turkey and Argentina<br />
completed during the year resulted in proceeds<br />
exceeding USD800 million and significantly reduced<br />
capital requirements outside Africa. Further, the<br />
refocusing of our business model in Brazil has<br />
reduced capital utilisation in that entity.<br />
Our operations outside Africa were subject to intense<br />
management action during the year. Given the narrowed<br />
focus and the prevailing macroeconomic environment,<br />
revenues from this operation were not sufficient to cover<br />
specific credit impairments and the enlarged cost base of<br />
a small investment bank in the new regulatory regime.<br />
<strong>Standard</strong> <strong>Bank</strong> Plc incurred a headline loss of<br />
USD351 million in 2012 after taking into account a<br />
once-off restructuring charge, significantly impacting the<br />
group’s results. Of the loss incurred, only USD54 million<br />
related to continuing operations.<br />
The impact and expected benefit of the actions we<br />
have undertaken to enhance the sustainability of our<br />
international operations are outlined in the section<br />
that follows.<br />
• A restructuring process has been undertaken<br />
in our operations outside Africa to secure a<br />
sustainable reduction in costs of approximately<br />
USD100 million a year.<br />
• Investment banking assets and the related credit<br />
risk have been transferred to The <strong>Standard</strong> <strong>Bank</strong><br />
of South Africa Limited (SBSA) balance sheet.<br />
Since 2011, we have been systematically<br />
reducing the risk carried on the <strong>Standard</strong> <strong>Bank</strong><br />
Plc balance sheet, particularly investment<br />
banking credit risk, through a series of asset<br />
transfers to SBSA and by restricting new assets<br />
originated by <strong>Standard</strong> <strong>Bank</strong> Plc to the SBSA<br />
balance sheet. The last of these risk transfers<br />
took place in November 2012.<br />
We are cognisant of the need to save costs and<br />
reduce capital requirements in London without<br />
materially affecting lines of business that generate<br />
significant revenues for our CIB franchise. Between<br />
2010 and 2012, capital utilisation outside Africa has<br />
reduced from USD3 billion to USD1,5 billion.<br />
A release of regulatory capital out of London is likely<br />
to be a gradual process in consultation with the<br />
relevant regulatory authorities and we continue to<br />
look at opportunities to improve revenue production<br />
given a relatively fixed international cost base.<br />
Further to our numerous existing co-operation<br />
initiatives with the Industrial and Commercial <strong>Bank</strong> of<br />
China Limited (ICBC), we are jointly exploring areas<br />
of greater co-operation, including global markets<br />
and commodities where our respective presences<br />
and strengths can be leveraged.<br />
Income statement analysis<br />
Our banking activities achieved pleasing top-line<br />
growth of 17%, which is testament to our solid client<br />
franchises. Credit impairments increased by 37%,<br />
somewhat higher than we had anticipated due to<br />
impairments on loans originated in prior years by our<br />
London operation in activities which have since been<br />
closed. Costs rose 15%, following last year’s flat cost<br />
growth, partially due to rand weakness and the<br />
higher cost of additional regulatory compliance in<br />
London. Excluding these effects, costs were up<br />
10%*. Net income before restructuring was up<br />
13%, but the once-off restructure charge restricted<br />
headline earnings from banking operations to 7%<br />
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