A run-through of Standard Bank’s FY results

Markets react positively despite slow growth.

Standard Bank’s full year results revealed earnings to be towards the upper end of the company’s previously guided range. Headline earnings increase by a marginal 1% over the reporting period, although the figure pertaining to continuing operations showed a much healthier 20% increase.

The return on equity figure at 12.9% deteriorated from the previous year’s figure of 14.1%. The company’s cost to income ratio improved to 54.5% from 56.8% in 2013 while the credit loss ratio improved to 1% from 1.12% (2013). Non-interest revenue grew by 14% and net interest income by 15% equating to a 15% improvement in total revenue.

The final dividend for the group was increased by 12%.

The market reacted positively to the results: the share was up 5.02% at R156.37 by 11:30.

A division breakdown summary from the Standard banks SENS release is as follows:

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% due largely to the commissioning of major IT systems. ROE declined marginally to 18.2% from 18.6% in the prior period due to higher average capital allocated. 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’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 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 and a release of portfolio provisioning to the income statement due to the improved risk profile of credit exposures. Costs were well controlled, with staff costs flat on 2013 due to lower incentive payments, and 12% increase in other operating costs.

Liberty

The financial results reported are the consolidated results of our 54% investment in Liberty Holdings Limited. Bancassurance results are included in PBB. Liberty’s headline earnings for the year to December 2014 decreased by 3% to R3 968 million of which R2 158 million was attributable to the group.

Real estate and principal investment management (PIM)

Achieved headline earnings of R234 million mainly due to profit earned on the disposal of real estate investments and valuation adjustments on the property portfolio. The PIM portfolio and private equity activity continues to be wound-down with minimal remaining distressed debt net exposure. 

Central and other

Headline earnings of R348 million improved from the R82 million recorded in 2013. The improvement was largely due to the attributable income from the 20% associate investment that the group retains in Argentina amounting to R357 million compared with R249 million in the prior period and profit realised on hedges implemented during the year.

This article was first published on IG here, and republished with permission.

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