Wrap Text
Provisional results and dividend announcement for the year ended 31 December 2018
Standard Bank Group Limited
Registration number 1969/017128/06
Incorporated in the Republic of South Africa
JSE share code: SBK
ISIN: ZAE000109815
NSX share code: SNB
ISIN: ZAE000109815
A2X share code: SBK
JSE Bond code: SBKI
Standard Bank Group
Provisional results and dividend announcement for the year ended 31 December 2018
The Standard Bank Group Limited's (the group) condensed consolidated financial statements, for the year ended
31 December 2018 (results) are prepared in accordance with the requirements of the JSE Limited (JSE) Listings
Requirements for provisional reports, the requirements of International Financial Reporting Standards (IFRS) and
its interpretations as adopted by the International Accounting Standards Board, the South African Institute of
Chartered Accountants' (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council, the presentation requirements
of IAS 34 Interim Financial Reporting (IAS 34) (excluding paragraph 16 A(j) as permitted by the JSE Listings
Requirements) and the requirements of the South African Companies Act, 71 of 2008 applicable to condensed
financial statements.
The group's results are prepared in accordance with the going concern principle under the historical cost basis as
modified by the fair value accounting of certain assets and liabilities where required or permitted by IFRS. This report
is presented in South African rand, which is the presentation currency of the group. All amounts are stated in millions
of rand (Rm), unless indicated otherwise.
While this report in itself is not audited, the consolidated annual financial statements from which the results below
have been derived were audited by KPMG Inc. and PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon.
That audit report does not necessarily report on all of the information contained in this report.
Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditors'
engagement and, more specifically, the nature of the information that has been audited, they should obtain a copy of the
auditors' report together with the accompanying audited consolidated annual financial statements, both of which are available
for inspection at the company's registered office. The group's reporting suite, including the Standard Bank Group's
annual integrated report and annual financial statements will be made available during April 2019. Copies can be requested
from our registered office or downloaded from the company's website following the announcement in April 2019 on the
JSE's Stock Exchange News Service (SENS).
The accounting policies applied in the preparation of these condensed consolidated financial statements from which the
results have been derived are in terms of IFRS, including IFRS 9 Financial Instruments (IFRS 9), which is effective for
the group from 1 January 2018. These accounting policies are consistent with the accounting policies applied in the
preparation of the group's previous consolidated annual financial statements with the exception of changes referred
to due to IFRS 9.
The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. Therefore
comparability will not be achieved by the fact that the comparative financial information has been prepared on an IAS 39
Financial Instruments: Recognition and Measurement (IAS 39) basis. The group did, however, align certain disclosures within
these results to provide comparable data. The impact of adopting IFRS 9 has been applied retrospectively with an adjustment
to the group's opening 1 January 2018 reserves. The application of IAS 39 for the group's 2017 financial year was
unaffected by the application of IFRS 9. Refer to below and the group's IFRS 9 transition report (transition report),
available at www.standardbank.com/reporting, for more details on IFRS 9.
The board of directors (the board) of the group take full responsibility for the preparation of this report.
The preparation of the group's results was supervised by the group financial director, Arno Daehnke BSc, MSc,
PhD, MBA, AMP.
The results were made publicly available on 7 March 2019.
This report contains pro forma financial information. Refer below for further detail.
Investors are referred to www.standardbank.com/reporting where a detailed analysis of the group's financial results,
including an income statement and a statement of financial position for The Standard Bank of South Africa Limited (SBSA),
can be found.
Shareholders are reminded that should they wish to make use of the group's electronic communication notification
system to receive all shareholder entitled communication electronically as opposed to delivery through physical mail and have
not already done so, this option can still be elected by advising the group's transfer secretaries at the following
email address ecomms@computershare.co.za or fax to +27 11 688 5248 or contact the call centre on +27 861 100 933. Other
related queries can be sent to electroniccommunication@standardbank.co.za.
Highlights
HEADLINE EARNINGS
Up 6% R27 865 million
2017: R26 270 million
HEADLINE EARNINGS PER SHARE
Up 7% 1 748 cents
2017: 1 640 cents
DIVIDEND PER SHARE
Up 7% 970 cents
2017: 910 cents
COMMON EQUITY TIER 1 RATIO1
2018: 13.5%
2017: 13.5%
CREDIT LOSS RATIO2
2018: 0.56%
2017: 0.87%
JAWS2
2018: (2.8)%
2017: 1.1%
COST-TO-INCOME RATIO
Up 57.0%
2017: 55.5%3
RETURN ON EQUITY
Up 18.0%
2017: 17.1%
1 Following the adoption of IFRS 9 the group elected the South African Reserve Bank's (SARB) three year phase-in
provision in terms of its directive 5/2017 (SARB IFRS 9 phase-in provision). The ratio is reported after
applying this phase-in provision. The fully loaded ratio is 13.1%, for further details please
refer below.
2 Refer to the IFRS 9-related accounting impact section below for more information regarding key IFRS 9 changes
impacting these ratios. Comparatives are based on IAS 39.
3 Restated. Refer below.
Overview of financial results
Group results
For the year ended 31 December 2018 (2018), Standard Bank Group delivered sustainable earnings growth and improved
returns. The group's performance was underpinned by the strength and breadth of our client franchise. Group headline
earnings grew 6% to R27.9 billion and ROE improved to 18.0% from 17.1% for the year ended 31 December 2017 (2017).
The group's capital position remained robust, with a common equity tier 1 (CET1) ratio of 13.5%. Accordingly, a final
dividend of 540 cents per share has been declared, resulting in a total dividend of 970 cents per share, an increase
of 7% on the prior year.
Banking activities headline earnings grew 7% to R25.8 billion and ROE improved to 18.8% from 18.0% in 2017.
Non-interest revenue (NIR) continued to record strong growth, driven by retail banking. Net interest income (NII)
growth was dampened, and credit impairment charges were lower, as a result of the adoption of a new accounting standard.
The 2018 group results were less impacted by currency movements than in prior years. On a constant currency basis,
group headline earnings grew 8%. Africa Regions' contribution to banking headline earnings grew to 31% from 28%
in 2017. The top five contributors to Africa Regions' headline earnings were Angola, Ghana, Mozambique, Nigeria
and Uganda.
Operating environment
Global economic growth plateaued at 3.7% as geopolitical tensions rose and risk sentiment deteriorated. Growth
trajectories de-coupled as fiscal stimulus in the US supported continued growth, whilst other advanced economies,
in particular the Euro area, started to slow. Emerging market capital inflows reversed, which negatively impacted
exchange rates and borrowing costs.
Economic growth in sub-Saharan Africa was 2.9%. In 1H18 inflation continued to ease, providing scope for interest
rate cuts. By 2H18, heightened global risks resulted in a pause in monetary policy easing. Across our basket of
currencies, exchange rates were relatively stable, other than in Angola where the Angolan Kwanza (AOA) devalued
approximately 50% relative to the South African Rand (ZAR).
The economic recovery in the West Africa region was supported by buoyant growth in Côte d'Ivoire and Ghana and a
recovery in Nigeria. In Angola, as the impacts of the currency devaluation in early 2018 moderated, inflation stabilised.
Kenya, Tanzania and Uganda all recorded real growth in excess of 5% in 2018. Private sector credit growth in Kenya
remained below pre-rate cap levels. Uganda enjoyed robust growth in domestic demand, public infrastructure investment,
agricultural productivity and a recovery in Foreign Direct Investment.
The countries neighbouring South Africa (SA) continued to feel the drag of SA's poor economic environment, in particular
Lesotho, Namibia and eSwatini. In Mozambique, despite the declining rates cycle, the operating environment remained
difficult and lending activity remained subdued. Zimbabwe's challenges escalated in 3Q18, including acute currency
shortages and inflationary pressures which drove weakened business confidence.
Growth in the SA economy was weaker than expected at 0.7%. The poor macro environment, slow policy progress and higher
taxes weighed on consumer and business confidence and, in turn, demand for credit. A 25 basis point (bps) interest rate
cut in March, on the back of broadly favourable conditions, was later reversed in November as the US fiscal tightening,
oil price and exchange rate outlook were considered a threat to the South African Reserve Bank's inflation targeting.
The ZAR was relatively strong against the major currencies in 1H18, but this reversed in 2H18.
IFRS 9-related accounting impact
Following the transition to IFRS 9, Standard Bank Group is required to suspend interest earlier which resulted in a
R553 million reduction in NII and credit impairment charges in Personal & Business Banking South Africa (PBB SA). In
addition, following a clarification from the IFRS Interpretations Committee in December 2018, the group is required to
recognise previously unrecognised interest earned on loans which cured out of Stage 3 (otherwise referred to as released
interest in suspense (IIS) on cured assets) as a reduction in credit impairment charges. Prior to 2018, IIS on cured assets
was accounted for as interest income. The reclassification amounted to R1 169 million in 2018, of which R1 064 million
related to PBB and R105 million related to Corporate & Investment Banking (CIB). The commentary below includes reference
to the impact of these changes on net interest income, total income and credit impairment charges, as well as some of
the group's key ratios, namely net interest margin, credit loss ratio, cost-to-income ratio and jaws. There was no
impact on 2018 headline earnings.
IFRS 9-
related 2018
accounting 2018 2018 adjusted
2018 impact adjusted 2017 vs 2017 vs 2017
Rbn Rbn Rbn Rbn % %
Net interest income 59.6 1.7 61.3 60.1 (1) 2
Non-interest revenue 45.7 45.7 42.6 7 7
Total income 105.3 1.7 107.0 102.7 3 4
Credit impairment charges (6.5) (1.7) (8.2) (9.4) (31) (13)
Operating expenses (60.1) (60.1) (57.0) 5 5
Headline earnings 27.9 27.9 26.3 6 6
Credit loss ratio (%) 0.56 0.71 0.87
Cost-to-income ratio (%) 57.0 56.1 55.5
Jaws (%) (2.8) (1.1) 1.1
The adjusted figures and ratios are collectively referred to as "Non-IFRS Financial Information" and
is pro forma financial information for purposes of the JSE Listings Requirements. Please refer to
the pro forma financial information section below.
Revenue
Group revenue grew 3% and The Standard Bank of South Africa Limited's (SBSA) revenue was flat. Adjusting for the IFRS
9-related accounting impact, group revenue grew 4% and SBSA, 2%. Africa Regions grew revenue 6%, 12% on a constant
currency basis, reflective of the better economic environment and the underlying momentum in the franchise.
NII decreased 1% as margins declined 16 bps to 458 bps and average interest-earning assets grew 2.5% year on year.
IFRS 9-related accounting impact accounted for 13 bps of the 16 bps decline. The impact of competitive pricing and demand
for higher yielding deposit products in SA and negative endowment in Africa Regions was largely offset by strong growth
in current and savings accounts (CASA) and a mix benefit as unsecured lending grew faster than asset-backed lending.
Non-interest revenue grew 7% supported by broad-based growth across all three underlying categories, namely net fee
and commission revenue up 6%, trading revenue up 4% and other revenue up 11%.
In line with our customers' increasing preference for convenient digital channels over traditional channels,
electronic banking fee revenue increased 11% whilst revenue from account transaction fees increased at a slower rate
of 2%. In SA, the business saw strong digital volume growth across Instant Money, the SBG mobile app and value-added
services as well as card-based transactions. Digital adoption also continued to gain traction in Africa Regions, in
particular, in Namibia, Nigeria and Zimbabwe. Knowledge-based fees grew 3%, following CIB's participation in several
landmark transactions, coupled with increased client activity in the Energy and Infrastructure sectors.
Equities provided an uplift in trading revenue, whilst the fixed income and currencies desks struggled against a high
base in 2017. Other revenue was boosted by better bancassurance-related earnings and CIB's portion of ICBC Standard Bank
Plc's (ICBCS) aluminium recovery which equated to R151 million. In line with IFRS 9, interest income on certain debt
instruments is now recorded in other gains and losses on financial instruments.
Credit impairment charges
Credit impairment charges were R6.5 billion, 31% lower than the prior year, and the group credit loss ratio declined
to 56 bps (2017: 87 bps). Adjusting for the IFRS 9-related accounting impact, the group credit loss ratio would have
been 71 bps.
After adjusting for the IFRS 9-related accounting impact, PBB SA's credit loss ratio decreased year on year, largely
driven by higher post write-off recoveries, operational enhancements in customer credit ratings and continued
improvements in collection processes. PBB Africa Regions also reflected improvements driven by improved risk
performance, enhanced collection strategies and a lower provisioning requirement on highly collateralised
non-performing loans.
CIB's impairment charges declined 35% on the prior year and the credit loss ratio to customers declined to 20 bps
(2017: 44 bps). Stage 3 credit impairment charges increased in SA, reflective of the difficult macro environment,
but decreased in Africa Regions, driven by a recovery of a prior year impairment in Nigeria and improved credit
risk management. CIB remains cautious on the outlook for the construction sector in SA and the consumer sectors
in East Africa and SA.
Operating expenses
Operating expenses growth of 5% should be considered relative to inflation in the underlying markets in which we
operate, as well as the level of investment required to support our businesses' growth. In 2018 we closed our core
banking replacement programme, delivered a variety of digital enhancements and completed various regulatory, risk
and compliance improvements. The group cost-to-income ratio for the year was 57% and after adjusting for
IFRS 9-related accounting impact to revenue, it was 56%. SBSA costs grew 3%, down from 7% in 1H18.
Staff costs were up 7% driven by a combination of annual salary increases, separation costs relating to the IT
restructure and key hires. Net headcount declined ~900 people on the back of a combination of natural attrition,
digital efficiencies and management actions.
Ongoing prudent discretionary spend is reflected in other operating expenses growth of 4%. Tight control of IT
expenses, in particular in 2H18, resulted in year-on-year growth of 5%. The increase in professional fees is
attributable to specific projects related to customer experience in PBB and CIB as well as regulatory changes.
Loans and advances
Gross loans and advances to customers grew 10% year on year, of which PBB's advances to customers grew 7% and CIB's,
13%. In line with underlying macros and strategy, Africa Regions recorded strong year-on-year loan portfolio growth of
31%. In SA, PBB disbursements grew across most products with particularly strong growth recorded by vehicle and asset
finance (VAF) and personal unsecured lending.
Within PBB, the mortgage lending portfolio grew 4% driven by consistent quarter-on-quarter increases in disbursements,
an increase in home loan registration values and a marginal slow-down in prepayments. The VAF lending portfolio grew
10%, driven by growth in SA, as the franchise turnaround started to gain traction. Personal unsecured lending and
business lending both grew 14%. PBB Africa Regions loans to customers grew 22%.
Within CIB, Investment Banking (IB) grew 8%. IB originated over R167 billion of loans in the year across the Oil & Gas,
Industrials, Consumer, Mining and Power & Infrastructure sectors, up from approximately R130 billion in the prior
year. This is reflective of CIB's broad client franchise and ongoing commitment to partnering their clients in their
investment and expansion on the continent. The Africa Regions IB portfolio grew 28%, whilst South Africa IB grew a
respectable 7% in a very slow environment. ZAR weakness in December 2018 inflated year-end balances. Corporate
overdrafts and trade finance facilities, reflected under Transactional products and services, grew 52% year on
year but 15% on average. CIB funding provided to corporates through commercial paper issuances, qualifying as
high-quality liquid assets (HQLA), is reflected as financial investments on the balance sheet. Underlying growth
in CIB gross loans and advances to customers, including HQLA, was 15%. Loans to banks declined as liquidity
raised in 2H17 was repaid.
Funding and liquidity
The group's liquidity position remained strong and within approved risk appetite and tolerance limits. The group's
fourth quarter average Basel III liquidity coverage ratio amounted to 117%, exceeding the minimum phased-in regulatory
requirement of 90%. The group maintained its net stable funding ratio in excess of the 100% regulatory requirement.
During 2018 the group raised R28.3 billion of longer term funding through a combination of negotiable certificates of
deposit, senior debt and syndicated loans and R5.0 billion of Basel III compliant Tier II capital. The group will
continue to monitor opportunities to issue senior unsecured and/or Tier II subordinated debt in the domestic and/or
international markets, in order to optimise the group's capital and funding position.
Deposits from customers grew R88.6 billion, equivalent to 8%, year on year, supported by 10% growth in PBB retail-priced
deposits. Africa Regions recorded CASA inflows in Nigeria, Uganda, Zambia and Zimbabwe. Growth in customers drove
increased deposits held in our offshore operations in the Isle of Man and Jersey.
CIB's deposits and current accounts from customers grew 5% on the back of strong growth in call and current accounts,
growing 19% and 20% respectively. The increase in deposits was driven by new clients in South Africa and across our
Africa Regions franchise as well as increases in deposits from existing clients.
Capital management
The group maintained strong capital adequacy ratios, with a CET1 ratio of 13.5% (2017: 13.5%) and a total capital
adequacy ratio of 16.0% (2017: 16.0%). The group manages its capital levels to support business growth, maintain
depositor and creditor confidence and create value for shareholders whilst ensuring regulatory compliance.
IFRS 9 became effective on 1 January 2018. The fully-loaded day one impact of implementing IFRS 9 was a 70 bps
reduction in the group's CET1 ratio. After adjusting for the three year phase-in provision, the impact was reduced
from 70 bps to 18 bps.
Gross loans and advances to customers
Change 2018 2017
% Rm Rm
Personal & Business Banking 7 649 968 605 187
Mortgage loans 4 362 006 346 518
Vehicle and asset finance 10 89 410 81 640
Card debtors 3 33 216 32 268
Other loans and advances 14 165 336 144 761
Corporate & Investment Banking 13 398 425 352 190
Global markets 25 26 967 21 648
Investment banking 8 324 611 299 522
Transactional products and services 52 46 843 30 859
Real estate and PIM (98) 4 161
Central and other (61) (1 892) (4 841)
Gross loans and advances to customers 10 1 046 501 952 536
Deposits from customers
Change 2018 2017
% Rm Rm
Personal & Business Banking 10 591 318 535 461
Retail priced deposits 10 467 989 426 484
Wholesale priced deposits 13 123 329 108 977
Corporate & Investment Banking 5 667 845 635 775
Central and other (15) (3 971) (4 671)
Deposits from customers 8 1 255 192 1 166 565
Comprising:
Retail priced deposits and
current accounts 10 467 989 426 484
Wholesale priced deposits 6 787 203 740 081
Deposits from customers 8 1 255 192 1 166 565
Headline earnings by business unit
CCY1 Change 2018 2017
% % Rm Rm
Personal & Business Banking 10 10 15 548 14 103
Corporate & Investment Banking 1 (2) 11 177 11 392
Central and other (32) (28) (878) (1 227)
Banking activities 8 7 25 847 24 268
Other banking interests (0) (26) 418 567
Liberty 11 11 1 600 1 435
Standard Bank Group 8 6 27 865 26 270
1 For basis of calculation, please refer below.
Overview of business unit performance
Personal & Business Banking
PBB's headline earnings grew 10% to R15.5 billion, underpinned by customer and balance sheet growth, higher
transaction volumes and lower credit impairment charges. The impact of negative endowment, due to lower average
rates in Malawi, Mozambique, Nigeria and SA, was offset by the benefit of stronger growth in higher margin lending
products, combined with deposit growth outstripping loan growth. PBB jaws were negative 265 bps, however after
adjusting for the IFRS 9-related accounting impact, jaws reduced to negative 26 bps. ROE improved to 21.9% from
20.0% in 2017.
Against a difficult macro and increasingly competitive environment, PBB SA delivered headline earnings of R13.7 billion,
up 3%. Underlying revenue benefited from higher disbursements and better cross-sell following the embedding of all
banking products into the frontline. PBB SA NII declined 1% and credit impairment charges were 28% lower, leading to a
lower credit loss ratio of 83 bps (2017: 119 bps). After adjusting for IFRS 9-related accounting impact, the NII growth
was 4%, credit impairment charges were 3% lower and the credit loss ratio was 112 bps. The favourable performance is
attributed to improved collection strategies, higher post write-off recoveries and operational credit rating enhancements.
This is partially offset by growth in stage 3 in mortgage loans, VAF and business lending given a protracted legal
environment and business strain resulting from economic conditions.
Operating expenses were 6% higher as the franchise continued to invest in embedding the new operating model, improving
the customer experience, staff re-skilling and upskilling and digitisation initiatives. The benefits of these
investments are reflected in improving customer and employee NPS scores, a decline in the number of complaints and
an acceleration in disbursements over the year.
Our customers continued to migrate to our digital platforms apace, in particular, the SBG mobile app. Digital
transaction volumes increased 26%, whilst face-to-face volumes declined 13%. SBG mobile app users increased 30% to
1.3 million, mobile transaction values increased, 44% to 262 billion and transaction volumes increased, 50% to
958 million (over 2.5 million a day). Instant Money, our money transfer platform, also continued to gain traction;
unique users increased 10% to 1.7 million. Our customers' preference for digital channels is unequivocal. In order
to deliver the always-on, always-secure offering they expect, we have to leverage the strategic IT assets we have,
accelerate our product development and rollout and digitise our execution processes. This will require a reallocation
of resources from our physical to our digital channels and a concomitant reconfiguration of our branch infrastructure.
PBB Africa Regions headline earnings grew more than threefold from R183 million in 2017 to R817 million in 2018.
The businesses in Angola, Ghana, Kenya, Uganda and Zambia grew market shares in both assets and deposits. Loans to
customers increased 22% and deposits from customers grew 21%. The group's market leading digital solutions assisted in
driving customer growth. The number of active customers grew 11%. Transaction volumes increased 27% driven by digital
transaction volumes which increased 34%, whilst branch transactions declined 12%. A growing customer base, combined
with strong take up of mobile banking, resulted in a 90% increase in mobile banking transaction volumes year on year
(2018: 52 million transactions).
Despite negative endowment, as rates fell in Malawi, Mozambique and Nigeria, net interest income grew 5% on the back
of strong balance sheet growth, in particular CASA, and margin expansion. Non-interest revenue grew 13%, underpinned by
an increase in the account base, higher transaction volumes, strong trade finance flows and growth in fees from our
pension fund business in Nigeria. PBB Africa Regions contributed almost half of the Africa Regions legal entities' total
income. The credit loss ratio decreased to 138 bps from 247 bps in the prior year, reflective of improved book quality
and improved collections as well as non-repeat of higher prior year charges in Nigeria and Malawi. Operating expenses
grew 5%, delivering positive jaws of 336 bps and a decline in the cost-to-income ratio to 79% (2017: 82%).
Wealth International grew headline earnings 60% supported by growth in client deposit balances to GBP5.1 billion,
increased client activity and endowment benefit.
Corporate & Investment Banking
CIB's headline earnings of R11.2 billion were down 2% on the prior year, and up 1% on a constant currency basis.
Revenue from strong operational client activity in Africa Regions was offset by lower trading and capital markets related
revenue linked to subdued market conditions. Declining interest rates in Africa Regions and competitive pricing in SA
negatively impacted margins. Disciplined cost management constrained cost growth to 5% but was not sufficient to avoid
negative jaws of 414 bps. Recognising the need to improve efficiency levels, CIB has initiated structural changes to
change the cost base going forward. The credit loss ratio to customers declined to 20 bps due to a combination of
improved performance and recoveries. Sovereign and financial institution ratings downgrades in early 2018 resulted
in a higher capital demand, which negatively impacted return on risk weighted assets and ROE (2018: 19.3%).
CIB continued to grow and diversify its client base driving year-on-year client revenue growth of 8%. Client segments
underpinning growth were multinationals and large domestic corporates and key sectors included Financial Institutions,
Industrials and Power & Infrastructure. Africa Regions' performance was underpinned by strong revenue growth in Angola,
Kenya, Zambia and Zimbabwe.
Investment banking's performance was underpinned by strong balance sheet growth, including corporate debt issuances
and foreign currency loans to SA and African multinationals. Average loans increased 9% and margins were flat. Energy
and Infrastructure transactions supported NIR. Credit impairment charges were lower year on year due to better portfolio
performance and a recovery from a previously impaired exposure in Nigeria.
Transactional products and services continued to grow its Africa Regions client base and deposit base. Declining rates
impacted NII whilst increases in trade and transaction activity supported NIR.
Global markets' revenue was adversely impacted by negative emerging market sentiment and lower flows. CIB's
on-the-ground presence and deep local knowledge enables it to identify opportunities and trade even in dislocated markets.
Central and other
This segment includes costs associated with corporate functions, as well as the group's treasury and capital
requirements, and central hedging activities. In 2018, the segment recorded a loss of R878 million, 28% less than the
prior year. The primary driver of the higher loss in 2017 was the elimination, in terms of IFRS, of gains on SBK shares
held by the group to facilitate client trading activities, which did not recur in 2018.
Other banking interests
Other banking interests recorded headline earnings of R418 million. ICBCS recorded growth in its underlying franchise
revenue and a recovery of US$38 million relating to the aluminium previously written off. This was unfortunately offset
by the trading business performance which was negatively impacted by declining global emerging market risk appetite and
reduced flows, resulting in ICBCS recording a loss of US$14.9 million for the year. The group's 40% share thereof
equated to R74 million. ICBCS's ability to deliver sustainable profits is dependent on its ability to continue to
integrate into, and leverage, ICBC's extensive client base. ICBCS did not require additional capital in 2018 on the
back of lower than expected RWA growth. ICBCS's business plan indicates the need for a capital injection of
approximately US$200 million in the next 12 to 18 months, subject to RWA growth. The group's share thereof would
be US$80 million.
ICBC Argentina delivered a strong performance despite the dislocation experienced in the domestic market. The headline
earnings contribution from the group's 20% stake in ICBC Argentina increased 19% to R492 million. Adjusting for the
significant devaluation of the Argentinian peso, earnings were up 95% on a constant currency basis year on year.
During 2019, we will continue to work with our strategic partners at ICBC to develop a lasting solution for these
businesses.
Liberty
The financial results reported are the consolidated results of the group's 56% investment in Liberty, adjusted for SBK
shares held by Liberty for the benefit of Liberty policyholders which are deemed to be treasury shares in the group's
consolidated accounts.
Liberty's operating earnings were up 42% on the prior year, driven by strong performances in Individual Arrangements
and STANLIB. As is to be expected, given the negative trend in asset prices during the year, Liberty's shareholder
investment portfolio was impacted by volatile market conditions resulting in lower market returns. We will continue
to support Liberty as it executes its remedial and recovery plan and by continuing to deepen the collaboration between
our businesses. Liberty's IFRS headline earnings, after the adjustments for the impact of the BEE preference share
income and the Liberty Two Degrees listed Real Estate Investment Trust accounting mismatch, declined to R2.6 billion
from R3.3 billion in the prior year. Investors are referred to the full Liberty announcement dated 28 February 2019
for further detail.
Headline earnings attributable to the Standard Bank Group, adjusted by R129 million for the impact of deemed treasury
shares, were R1.6 billion, 11% higher than in the prior year.
Prospects
Global growth is expected to weaken slightly in 2019 to 3.5% as the slowdown in momentum seen in 2H18 continues into
2019. With risks to the downside, economic conditions will remain challenging and volatile in 2019. Subdued demand will
impact global trade, industrial production and could drive commodity and oil prices lower.
Whilst not immune from global risks, prospects for sub-Saharan Africa overall are good with growth expected to
accelerate from 2.9% in 2018 to 3.5% in 2019. Over a third of the countries in the region are expected to grow above 5%.
With elections set for May 2019, South Africa is expected to be a tale of two halves. Subdued growth is anticipated
in 1H19 as political and policy uncertainty continues to undermine confidence and delay investment and growth. An
acceleration in 2H19 and into 2020, driven by corporate investment, whilst expected, will be dependent on the rate of policy
progress, structural reform, broader economic stimulus and job creation. A return of stable electricity supply is critical.
Assuming some progress and no further downgrades by rating agencies, we expect inflation to remain within the target
range and interest rates to remain at current levels in 2019. This should support an uptick in growth to 1.3% for the
year.
There is no doubt that in the years ahead the financial services industry, the competitive and regulatory environment
and our customers' and employees' expectations will continue to change. Across the group, we are making the changes
necessary to best position the franchise to deliver to all our stakeholders. We are focused on transforming our customer
and employee experience and improving our productivity to deliver a "future-ready" group. In 2019, we will build on the
franchise momentum from 2018, continue to simplify, rationalise and digitise and seek ways to accelerate our delivery.
We remain committed to our medium-term targets of delivering sustainable earnings growth and an ROE in our 18%-20%
target range. Finally, in delivering on our purpose of driving Africa's growth, we will continue to support faster,
more inclusive and more sustainable growth and human development in South Africa and across the continent we are proud
to call home.
Stakeholders should note that any forward-looking information in this announcement has not been reviewed and reported
on by the group's external auditors.
Sim Tshabalala
Group chief executive
Thulani Gcabashe
Chairman
6 March 2019
Declaration of dividends
Shareholders of Standard Bank Group Limited (the company) are advised of the following dividend declarations out of
income reserves in respect of ordinary shares and preference shares.
Ordinary shares
Ordinary shareholders are advised that the board has resolved to declare a final gross cash dividend No. 99 of
540 cents per ordinary share (the cash dividend) to ordinary shareholders recorded in the register of the company
at the close of business on Friday, 12 April 2019. The last day to trade to participate in the dividend is
Tuesday, 9 April 2019. Ordinary shares will commence trading ex dividend from Wednesday, 10 April 2019.
The salient dates and times for the cash dividend are set out in the table that follows.
Ordinary share certificates may not be dematerialised or rematerialised between Wednesday, 10 April 2019, and
Friday, 12 April 2019, both days inclusive. Ordinary shareholders who hold dematerialised shares will have their
accounts at their Central Securities Depository Participant (CSDP) or broker credited on Monday, 15 April 2019.
Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders'
bank accounts on the payment date. In the absence of specific mandates, dividend cheques will be posted to
shareholders.
Preference shares
Preference shareholders are advised that the board has resolved to declare the following final dividends:
- 6.5% first cumulative preference shares (first preference shares) dividend No. 99 of 3.25 cents (gross) per first
preference share, payable on Monday, 8 April 2019, to holders of first preference shares recorded in the books of the
company at the close of business on the record date, Friday, 5 April 2019. The last day to trade to participate in the
dividend is Tuesday, 2 April 2019. First preference shares will commence trading ex dividend from Wednesday, 3 April 2019.
- Non-redeemable, non-cumulative, non-participating preference shares (second preference shares) dividend No. 29 of
390.22 cents (gross) per second preference share, payable on Monday, 8 April 2019, to holders of second preference shares
recorded in the books of the company at the close of business on the record date, Friday, 5 April 2019. The last day to
trade to participate in the dividend is Tuesday, 2 April 2019. Second preference shares will commence trading ex
dividend from Wednesday, 3 April 2019.
The salient dates and times for the preference share dividend are set out in the table that follows.
Preference share certificates (first and second) may not be dematerialised or rematerialised between Wednesday,
3 April 2019, and Friday, 5 April 2019, both days inclusive. Preference shareholders (first and second) who hold
dematerialised shares will have their accounts at their CSDP or broker credited on Monday, 8 April 2019.
Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders'
bank accounts on the payment date. In the absence of specific mandates, dividend cheques will be posted to
shareholders.
The relevant dates for the payment of dividends are as follows:
Non-redeemable,
non-cumulative,
non-participating
6.5% cumulative preference shares
Ordinary preference shares (Second preference
shares (First preference shares) shares)
JSE Limited
Share code SBK SBKP SBPP
ISIN ZAE000109815 ZAE000038881 ZAE000056339
Namibian Stock Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Dividend number 99 99 29
Dividend per share (cents) 540 3.25 390.22
Last day to trade in order
to be eligible for the cash dividend Tuesday, 9 April 2019 Tuesday, 2 April 2019 Tuesday, 2 April 2019
Shares trade ex the cash dividend Wednesday, 10 April 2019 Wednesday, 3 April 2019 Wednesday, 3 April 2019
Record date in respect of
the cash dividend Friday, 12 April 2019 Friday, 5 April 2019 Friday, 5 April 2019
Dividend cheques posted and CSDP/broker
account credited/updated (payment date) Monday, 15 April 2019 Monday, 8 April 2019 Monday, 8 April 2019
The above dates are subject to change. Any changes will be released on the Stock Exchange News Service (SENS) and
published in the South African and Namibian press.
Tax implications
The cash dividend received under the ordinary shares and the preference shares is likely to have tax implications for
both resident and non-resident ordinary and preference shareholders. Such shareholders are therefore encouraged to
consult their professional tax advisers.
In terms of the South African Income Tax Act, 58 of 1962, the cash dividend will, unless exempt, be subject to
dividends tax that was introduced with effect from 1 April 2012. South African resident ordinary and preference shareholders
that are not exempt from dividends tax, will be subject to dividends tax at a rate of 20% of the cash dividend, and this
amount will be withheld from the cash dividend with the result that they will receive a net amount of 432 cents per
ordinary share, 2.6 cents per first preference share and 312.176 cents per second preference share. Non-resident ordinary
and preference shareholders may be subject to dividends tax at a rate of less than 20% depending on their country of
residence and the applicability of any Double Tax Treaty between South Africa and their country of residence.
The issued share capital of the company, as at the date of declaration, is as follows:
- 1 618 514 218 ordinary shares
- 8 000 000 first preference shares
- 52 982 248 second preference shares.
The company's tax reference number is 9800/211/71/7 and registration number is 1969/017128/06.
Financial statistics
for the year ended 31 December 2018
2018 2017
Number of ordinary shares in issue, net of deemed
treasury shares (000's)
End of period 1 590 217 1 597 371
Weighted average 1 593 719 1 601 855
Diluted weighted average 1 609 901 1 621 921
Cents per ordinary share
Basic earnings 1 722.6 1 637.8
Diluted earnings 1 705.3 1 617.5
Headline earnings 1 748.4 1 640.0
Diluted headline earnings 1 730.9 1 619.7
Dividend per share 970 910
Net asset value 10 380 9 830
Financial performance (%)
ROE 18.0 17.1
Net interest margin on banking activities 4.58 4.74
Credit loss ratio on banking activities3 0.56 0.87
Cost-to-income ratio on banking activities1 57.0 55.5
Jaws on banking activities1 (2.8) 1.1
Capital adequacy ratios (%)2
CET1 capital adequacy ratio 13.5 13.5
Tier 1 capital adequacy ratio 14.1 14.2
Total capital adequacy ratio 16.0 16.0
1 Refer below for details on the restatements affecting this ratio.
2 The 2018 ratios are reported after applying the IFRS 9 phase-in transition adjustment
allowed by the SARB, for further details regarding the ratio assuming the no phase-in
provision (fully loaded ratio) please refer below.
3 Restated 2017
Condensed consolidated statement of financial position
as at 31 December 2018
2018 2017
Rm Rm
Assets
Cash and balances with central banks 85 145 75 310
Derivative assets 51 678 75 610
Trading assets 181 112 160 894
Pledged assets 19 879 20 785
Financial investments 547 405 533 314
Current and deferred tax assets 4 519 2 109
Disposal group assets held-for-sale 762
Loans and advances 1 120 668 1 048 027
Policyholders' assets 6 708 7 484
Other assets 22 514 22 996
Interest in associates and joint ventures 10 376 9 665
Investment property 33 326 32 226
Property and equipment 19 194 16 179
Goodwill and other intangible assets 23 676 23 329
Total assets 2 126 962 2 027 928
Equity and liabilities
Equity 199 063 190 017
Equity attributable to ordinary shareholders 165 061 157 020
Equity attributable to other equity instrument holders 9 047 9 047
Equity attributable to non-controlling interests 24 955 23 950
Liabilities 1 927 899 1 837 911
Derivative liabilities 55 057 76 896
Trading liabilities 59 947 62 855
Current and deferred tax liabilities 8 015 8 614
Disposal group liabilities held-for-sale 237
Deposits and debt funding 1 357 537 1 243 911
Policyholders' liabilities 310 994 322 918
Subordinated debt 26 359 24 289
Provisions and other liabilities 109 753 98 428
Total equity and liabilities 2 126 962 2 027 928
Condensed consolidated income statement
for the year ended 31 December 2018
2018 20172
Rm Rm
Income from banking activities 105 331 102 699
Net interest income1 59 622 60 125
Non-interest revenue1, 2 45 709 42 574
Income from investment management and life insurance
activities1 21 722 24 394
Total income 127 053 127 093
Credit impairment charges1 (6 489) (9 410)
Net income before operating expenses 120 564 117 683
Operating expenses from banking activities2 (60 084) (57 049)
Operating expenses from investment management and life
insurance activities (16 404) (17 800)
Net income before capital items and equity accounted earnings 44 076 42 834
Non-trading and capital related items (641) (261)
Share of post tax profit from associates and joint ventures 912 1 102
Net income before indirect taxation 44 347 43 675
Indirect taxation (2 609) (2 481)
Profit before direct taxation 41 738 41 194
Direct taxation (9 095) (10 479)
Profit for the period 32 643 30 715
Attributable to ordinary shareholders 27 453 26 235
Attributable to other equity instrument holders 738 594
Attributable to non-controlling interests 4 452 3 886
Earnings per share (cents)
Basic earnings per ordinary share 1 722.6 1 637.8
Diluted earnings per ordinary share 1 705.3 1 617.5
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements.
Therefore comparability will not be achieved by the fact that the comparative financial information
has been prepared on an IAS 39 basis.
2 Refer to the restatement section for details about the restatement to non-interest revenue and
operating expenses from banking activities.
Condensed consolidated statement of other comprehensive income
for the year ended 31 December 2018
2018 2017
Rm Rm
Profit for the period 32 643 30 715
Other comprehensive income/(loss) after tax for the period 5 056 (5 940)
Items that may be subsequently reclassified to profit
or loss 5 104 (5 607)
Exchange differences on translating foreign operations 5 217 (6 180)
Movement in the cash flow hedging reserve and foreign
currency hedge reserves (108) 111
Movement in the available-for-sale revaluation reserve - IAS 391 462
Net change in debt financial assets measured at fair value
through other comprehensive income (OCI) - IFRS 91 (5)
Items that may not be subsequently reclassified to profit or loss (48) (333)
Defined benefit fund remeasurement 12 (219)
Change in own credit risk recognised on financial liabilities
designated at fair value through profit or loss - IFRS 91 55
Net change in fair value of equity financial assets measured at
fair value through OCI - IFRS 91 (130)
Other gains/(losses) 15 (114)
Total comprehensive income for the period 37 699 24 775
Attributable to ordinary shareholders 31 877 21 514
Attributable to other equity instrument holders 738 594
Attributable to non-controlling interests 5 084 2 667
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements.
Therefore comparability will not be achieved by the fact that the comparative financial information
has been prepared on an IAS 39 basis. Refer to the accounting policy elections, including the IFRS 9
transition adjustments and restatement below for more detail.
Condensed consolidated statement of changes in equity
for the year ended 31 December 2018
Equity
attributable
Ordinary to other Non-
shareholders' equity controlling Total
equity holders interests equity
Rm Rm Rm Rm
Balance at 1 January 2017 150 757 5 503 23 099 179 359
Total comprehensive income for the period 21 514 594 2 667 24 775
Transactions with owners and non-controlling interests recorded (15 251) 2 950 (1 665) (13 966)
directly in equity
Equity-settled share-based payment transactions1 (885) 29 (856)
Deferred tax on share-based payment transactions 276 276
Transactions with non-controlling interests (54) 160 106
Net dividends paid (13 552) (594) (1 364) (15 510)
Net increase in treasury shares (1 153) (490) (1 643)
Other equity movements 117 3 544 3 661
Unincorporated property partnerships' capital reductions and (151) (151)
distributions
Balance at 31 December 2017 157 020 9 047 23 950 190 017
IFRS 9 transition2 (6 261) (376) (6 637)
Balance at 1 January 2018 (IFRS 9) 150 759 9 047 23 574 183 380
Total comprehensive income for the year 31 877 738 5 084 37 699
Transactions with owners and non-controlling interests recorded (17 575) (738) (3 481) (21 794)
directly in equity
Equity-settled share-based payment transactions1 600 26 626
Deferred tax on share-based payment transactions (128) (128)
Transactions with non-controlling interests3 (1 609) (1 386) (2 995)
Net dividends paid (15 113) (738) (1 725) (17 576)
Net increase in treasury shares (1 295) (412) (1 707)
Other equity movements (30) 16 (14)
Unincorporated property partnerships' capital reductions and (222) (222)
distributions
Balance at 31 December 2018 165 061 9 047 24 955 199 063
1 Includes hedges of the group's equity settled share incentive schemes.
2 Refer below for detail on the IFRS 9 transition adjustments.
3 Refer below for detail on significant transactions with non-controlling interests.
Condensed consolidated statement of cash flows
for the year ended 31 December 2018
2018 20173
Rm Rm
Net cash flows from operating activities3 34 697 21 020
Direct taxation paid (10 256) (10 078)
Other operating activities 44 903 31 098
Net cash flows used in investing activities3 (8 728) (5 298)
Capital expenditure (9 426) (5 391)
Other investing activities 698 93
Net cash flows used in financing activities (18 335) (12 674)
Dividends paid1 (17 701) (15 574)
Equity transactions with non-controlling interests2 (1 843) 1 173
Issuance of other equity instruments 3 544
Issuance of subordinated debt 6 100 2 246
Redemption of subordinated debt (4 550) (4 180)
Other financing activities (341) 117
Effect of exchange rate changes on cash and cash equivalents 2 251 (5 212)
Net increase/(decrease) in cash and cash equivalents 9 835 (2 164)
Cash and cash equivalents at the beginning of the period 75 310 77 474
Cash and cash equivalents at the end of the period 85 145 75 310
Cash and balances with central banks 85 145 75 310
1 Refer below for detail on the dividends paid to Additional Tier 1 (AT1) equity
holders.
2 Refer below for detail on significant transactions with non-controlling interests.
Includes non-controlling interests' share of subsidiary distributions.
3 Refer below for details about the restatement to the statement of cash flows.
Notes
Financial investments
as at 31 December 2018
2018 20171
Rm Rm
Corporate and sovereign 261 484 240 703
Bank 71 210 46 278
Mutual funds and unit-linked investments 85 034 98 169
Listed equities 96 395 122 545
Unlisted equities 6 506 5 554
Interest in associates and joint ventures held at
fair value 13 848 15 197
Other instruments 12 928 4 868
Total financial investments 547 405 533 314
Net financial investments measured at amortised cost 144 145
Gross financial investments measured at amortised cost 144 339
Less: Expected credit loss (ECL) for financial investments
measured at amortised cost2 (194)
Financial investments measured at fair value 403 260
Financial investments measured at fair value through
profit or loss 348 923
Debt financial investments measured at fair value
through OCI3 53 083
Equity financial investments measured at fair value
through OCI 1 254
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements.
The group has aligned its categories for financial investments disclosed in 2017 to those disclosed
for 2018. This did not result in a restatement to the group's statement of financial position as at
31 December 2017.
2 The group recognised an ECL of R97 million on debt financial investments measured at amortised cost
upon the transition to IFRS 9 on 1 January 2018. Refer to the credit impairment charges note for the
2018 credit impairment charge of R82 million on financial investments measured at amortised cost.
3 The group recognised an ECL of R175 million on debt financial investments measured at fair value
through OCI upon the transition to IFRS 9 on 1 January 2018. At 31 December 2018, the ECL for debt
financial investments measured at fair value through OCI was R206 million. Refer to the credit
impairment charges note for the 2018 credit impairment charge of R19 million relating to
financial investments measured at fair value through OCI.
Loans and advances
as at 31 December 2018
2018 20171
Rm Rm
Loans and advances measured at fair value through
profit or loss 1 204 110
Net loans and advances measured at amortised cost 1 119 464 1 047 917
Gross loans and advances measured at amortised cost 1 156 149 1 070 361
Mortgage loans 361 830 346 508
Vehicle and asset finance 89 651 83 136
Card debtors 32 395 32 253
Corporate and sovereign 397 261 352 025
Bank 110 852 117 935
Other loans and advances 164 160 138 504
Credit impairments for loans and advances (IAS 39) (22 444)
Total credit impairment on loans and advances (IFRS 9)2 (36 685)
Total loans and advances 1 120 668 1 048 027
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements.
Therefore comparability will not be achieved by the fact that the comparative financial information
has been prepared on an IAS 39 basis. The group has, however, aligned its categories for loans and
advances disclosed in 2017 to those disclosed for 2018. This did not result in a restatement to the
group's statement of financial position as at 31 December 2017.
2 For details on the group's accounting policy on interest in suspense, refer below.
Reconciliation of expected credit loss for loans and advances at amortised cost
Total Net Closing
Opening ECL transfers impairments Impaired Exchange ECL
1 January between raised/ accounts and other 31 December
20181 stages (released)2 written-off movements 2018
Rm Rm Rm Rm Rm Rm
Mortgage loans 9 396 1 067 (995) 662 10 130
Stage 1 1 126 382 (470) (1) 1 037
Stage 2 2 014 (144) 131 17 2 018
Stage 3 6 256 (238) 1 406 (995) 646 7 075
Vehicle and asset finance 3 236 1 074 (1 027) 119 3 402
Stage 1 766 226 (227) 5 770
Stage 2 994 (324) 240 38 948
Stage 3 1 476 98 1 061 (1 027) 76 1 684
Card debtors 3 179 1 187 (1 341) 42 3 067
Stage 1 698 176 (231) 643
Stage 2 821 (109) 266 2 980
Stage 3 1 660 (67) 1 152 (1 341) 40 1 444
Corporate 7 667 889 (1 275) 1 214 8 495
Stage 1 781 150 (88) 107 950
Stage 2 1 956 (1 240) (124) 449 1 041
Stage 3 4 930 1 090 1 101 (1 275) 658 6 504
Sovereign 125 (47) 2 80
Stage 1 84 (13) 2 73
Stage 2 36 (34) 2
Stage 3 5 5
Bank 45 (18) 36 63
Stage 1 45 (14) 29 63
Stage 2 (4) 7 3
Other loans and advances 11 391 3 085 (3 541) 513 11 448
Stage 1 2 289 50 (189) 57 2 207
Stage 2 2 454 (271) (85) 54 2 152
Stage 3 6 648 221 3 359 (3 541) 402 7 089
Total 35 039 7 237 (8 179) 2 588 36 685
Stage 1 5 789 984 (1 232) 199 5 740
Stage 2 8 275 (2 088) 390 567 7 144
Stage 3 20 975 1 104 8 079 (8 179) 1 822 23 801
1 IFRS 9 resulted in a transition increase in ECL of R2 563 million for mortgage loans; R1 001 million for
vehicles and asset finance; R694 million for card debtors; R561 million for CIB; and R2 108 million for
other loans and advances. The opening ECL as at 1 January 2018 incorporates these IFRS 9 transition
adjustments.
2 Net impairments raised/(released) less recoveries of amounts written off in previous years equals income
statement impairment charge (refer credit impairment charges note below).
Reconciliation of credit impairments for loans and advances (IAS 39)
Vehicle and
Mortgage asset Card Other loans Corporate
loans finance debtors and advances lending Total
Rm Rm Rm Rm Rm Rm
20171
Specific impairments
Balance at beginning of the year 3 640 1 410 1 598 5 121 2 890 14 659
Net impairments raised/(released)2 1 826 1 261 1 415 4 371 1 024 9 897
Impaired accounts written off (1 159) (1 146) (1 383) (3 861) (245) (7 794)
Discount element recognised in interest
income (317) (120) (26) (345) (102) (910)
Exchange and other movements (11) (38) (8) (283) (242) (582)
Balance at end of the year 3 979 1 367 1 596 5 003 3 325 15 270
Portfolio impairments
Balance at beginning of the year 1 137 801 651 2 749 1 796 7 134
Net impairments raised/(released)2 (55) (141) 61 (159) 649 355
Exchange and other movements (5) (7) (47) (40) (216) (315)
Balance at end of the year 1 077 653 665 2 550 2 229 7 174
Total specific and portfolio impairments 5 056 2 020 2 261 7 553 5 554 22 444
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements. The group has
aligned its categories for loans and advances disclosed in 2017 to those disclosed for 2018. This did not result
in a restatement to the group's statement of financial position as at 31 December 2017.
2 Net impairments raised/(released) less recoveries of amounts written off in previous years, as well as credit
recovery on off-balance sheet exposure, equals income statement impairment charges.
Loans and advances at amortised cost performance
SB 1 - 12 SB 13 - 20 SB 21- 25 Default
Gross
loans and Stage 1 Stage 2 Stage 1 Stage 2 Stage 1 Stage 2 Stage 3
advances Rm Rm Rm Rm Rm Rm Rm
Loans and advances at amortised cost
Personal & Business Banking 701 723 191 602 1 815 407 955 7 083 8 220 50 589 34 459
Mortgage loans 362 006 108 575 1 786 196 795 4 332 4 261 27 840 18 417
Vehicle and asset finance 89 410 1 250 11 75 939 1 214 347 7 138 3 511
Card debtors 33 216 1 604 8 25 382 174 317 3 882 1 849
Other loans and advances 217 091 80 173 10 109 839 1 363 3 295 11 729 10 682
Personal unsecured lending 59 459 961 46 457 8 1 556 5 625 4 852
Business lending and other 157 632 79 212 10 63 382 1 355 1 739 6 104 5 830
Corporate & Investment Banking 510 113 291 386 4 912 179 889 17 965 3 833 2 394 9 734
Corporate 388 973 182 578 4 801 170 726 17 598 1 142 2 394 9 734
Sovereign 8 288 4 533 109 3 319 129 198
Banking 112 852 104 275 2 5 844 238 2 493
Other service (55 687) (55 687)
Gross carrying amount of loans and
advances at amortised cost 1 156 149 427 301 6 727 587 844 25 048 12 053 52 983 44 193
Gross loans and advances at fair value 1 204
Total gross loans and advance 1 157 353
The group uses a 25-point master rating scale to quantify the credit risk for each borrower (corporate asset classes)
or facility (specialised lending and retail asset classes), as illustrated in the table below. These ratings are mapped
to PDs by means of calibration formulae that use historical default rates and other data from the applicable PPB portfolios.
Balance
sheet
expected
Securities credit loss
and on default
expected exposures
recoveries and interest Gross
on default in suspense default Stage 3
exposures on stage 3 coverage exposures
Rm Rm % %
Loans and advances at amortised cost
Personal & Business Banking 17 167 17 292 50 4.9
Mortgage loans 11 342 7 075 38 5.1
Vehicle and asset finance 1 827 1 684 48 3.9
Card debtors 405 1 444 78 5.6
Other loans and advances 3 593 7 089 66 4.9
Personal unsecured lending 900 3 952 81 8.2
Business lending and other 2 693 3 137 54 3.7
Corporate & Investment Banking 3 225 6 509 67 1.9
Corporate 3 225 6 509 67 2.5
Sovereign
Banking
Other service
Gross carrying amount of loans and advances at amortised cost 20 392 23 801 54 3.8
Gross loans and advances at fair value
Total gross loans and advance
The group uses a 25-point master rating scale to quantify the credit risk for each borrower (corporate asset classes)
or facility (specialised lending and retail asset classes), as illustrated in the table below. These ratings are mapped
to PDs by means of calibration formulae that use historical default rates and other data from the applicable PPB
portfolios.
Loans and advances performance
Net after
Total securities
specifically Securities and and expected
impaired expected recoveries on
Gross loans non- recoveries on specifically
and Performing performing specifically impaired
advances loans loans impaired loans loans
Rm Rm Rm Rm Rm
20171,2
Personal & Business Banking 645 868 616 949 28 919 16 976 11 943
Mortgage loans 346 518 331 014 15 504 11 525 3 979
Vehicle and asset finance 81 640 78 514 3 126 1 759 1 367
Card debtors 32 268 30 148 2 120 524 1 596
Other loans and advances 185 442 177 273 8 169 3 168 5 001
Personal unsecured lending 52 016 47 827 4 189 1 002 3 187
Business lending and other 133 426 129 446 3 980 2 166 1 814
Corporate & Investment Banking 472 437 466 862 5 575 2 250 3 325
Central and other (47 834) (47 836) 2 2
Gross loans and advances 1 070 471 1 035 975 34 496 19 226 15 270
Percentage of total book (%) 100.0 96.8 3.2 1.8 1.4
1 The loans and advances performance disclosures have been presented at a segment level, whereas the other
loans and advances disclosures within these results are disclosed on group consolidated view, unless
stated otherwise.
2 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements.
The group has aligned its performance for loans and advances disclosed in 2017 to those disclosed
for 2018. This did not result in a restatement to the group's statement of financial position as at
31 December 2017.
Balance sheet
impairments
for non-
performing Total
specifically Specific gross non- Non-
impaired impairment performing performing
loans coverage loans loans
Rm % Rm %
20171,2
Personal & Business Banking 11 943 41 28 919 4.5
Mortgage loans 3 979 26 15 504 4.5
Vehicle and asset finance 1 367 44 3 126 3.8
Card debtors 1 596 75 2 120 6.6
Other loans and advances 5 001 61 8 169 4.4
Personal unsecured lending 3 187 76 4 189 8.1
Business lending and other 1 814 46 3 980 3.0
Corporate & Investment Banking 3 325 60 5 600 1.2
Central and other 2 2
Gross loans and advances 15 270 44 34 521 3.2
Percentage of total book (%) 1.4
1 The loans and advances performance disclosures have been presented at a segment level, where as the other
loans and advances disclosures within these results are disclosed on group consolidated view, unless
stated otherwise.
2 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements.
The group has aligned its performance for loans and advances disclosed in 2017 to those disclosed
for 2018. This did not result in a restatement to the group's statement of financial position as at
31 December 2017.
Contingent liabilities and commitments
as at 31 December 2018
2018 2017
Rm Rm
Letters of credit and bankers' acceptances 17 802 13 413
Guarantees 85 576 63 761
Contingent liabilities 103 378 77 174
Investment property 748 385
Property and equipment 620 94
Other intangible assets 270 299
Commitments 1 638 778
Loan commitments of R77 253 million (2017: R62 347 million) are either irrevocable over the life of the facility or
revocable only in response to material adverse changes.
Day one profit or loss
The table below sets out the aggregate net day one profit or loss yet to be recognised in profit or loss at the
beginning and end of the year with a reconciliation of changes in the balances during the period.
Derivative Trading
instruments assets Total
Rm Rm Rm
Balance at 1 January 2017 161 588 749
Additional net profit on new transactions during the year 544 162 706
Recognised in trading revenue during the year (508) (108) (616)
Exchange differences (37) (37)
Balance at 31 December 2017 160 642 802
Balance at 1 January 2018 160 642 802
Additional net profit on new transactions during the period 299 339 638
Recognised in trading revenue during the period (307) (136) (443)
Exchange differences 24 24
Balance at 31 December 2018 176 845 1 021
Headline earnings
for the year ended 31 December 2018
2018 2017
Rm Rm
Profit for the period 27 453 26 235
Headline adjustable items (reversed)/added 641 187
IAS 16 - (Gain)/loss on sale of property and equipment (15) 10
IAS 21 - Realised foreign currency profit on foreign operations (214)
IAS 27/IAS 28 - (Gains)/losses on disposal of businesses (47) 18
IAS 28/IAS 36 - Impairment of associate 5
IAS 36 - Impairment of intangible assets 449 447
IFRS 5 - Headline adjustable items: Impairment of disposal group
assets held for sale 249
IAS 39 - Realised gains on available-for-sale assets1 (74)
Taxation on headline earnings adjustable items (122) (94)
Non-controlling interests' share of headline earnings adjustable items (107) (58)
Standard Bank Group headline earnings 27 865 26 270
Headline earnings per ordinary share (cents)
Headline earnings per ordinary share 1 748.4 1 640.0
Diluted headline earnings per ordinary share 1 730.9 1 619.7
1 Headline Earnings Circular 4/2018 specifies that realised gains or losses on debt instruments
measured at fair value through OCI, in terms of IFRS 9, are not excluded from headline earnings,
therefore, from 1 January 2018, IAS 39 realised gains or losses on available-for-sale assets is
not applicable.
Private equity associates and joint ventures
as at 31 December 2018
The following table provides disclosure of those private equity associates and joint ventures that are equity
accounted in terms of IAS 28 Investments in Associates and Joint Ventures and have been ring-fenced in terms
of the requirements of the circular titled Headline Earnings issued by SAICA, and amended from time to time.
On the disposal of these associates and joint ventures held by the group's private equity division, the gain
or loss on the disposal will be included in headline earnings.
2018 2017
Rm Rm
Cost 48 48
Carrying value 619 546
Fair value 619 546
Attributable income before impairment 93 159
Non-interest revenue
for the year ended 31 December 2018
2018 2017
Restated
Rm Rm
Net fee and commission revenue1 30 375 28 670
Fee and commission revenue 36 592 34 290
Accounting transaction fees 11 669 11 488
Card-based commission 6 760 6 535
Documentation and administration fees 2 273 2 197
Electronic banking 3 829 3 446
Foreign currency service fees 2 244 1 879
Insurance - fees and commission 1 904 1 945
Knowledge-based fees and commission 2 350 2 278
Other 5 563 4 522
Fee and commission expense1 (6 217) (5 620)
Trading revenue 11 129 10 731
Other revenue 3 533 3 173
Other gains and losses on financial instrument 672
Total non-interest revenue2 45 709 42 574
1 Refer to restatement section for details about the restatement to net fee and commission revenue.
2 For more detail on the split of each non-interest revenue category per key business unit, please
refer to the group's analysis of financial results available at www.standardbank.com/reporting.
Credit impairment charges
for the year ended 31 December 2018
2018 2017
Rm Rm
Credit impairments (IAS 39)1 10 252
Portfolio impairments 355
Specific impairments 9 897
Credit impairments (IFRS 9)1 7 515
Financial investments 101
Loans and advances 7 237
Letters of credit and guarantees 177
Modification losses 145
Recoveries on loans and advances previously written off (1 171) (842)
Total credit impairment charge 6 489 9 410
1 The group has, as permitted by IFRS 9, elected not to restate its comparative financial statements.
Therefore comparability will not be achieved by the fact that the comparative financial information
has been prepared on an IAS 39 basis.
Related party balances and transactions
Tutuwa related parties
Tutuwa participants were allowed to access their underlying equity value post the expiry of the lock-in period on
31 December 2014. The number of shares in issue that is financed by the group as at 31 December 2018 is 2 985 513
(2017: 5 750 291). The weighted number of these shares for the year ended 31 December 2018 equated to 4 178 422
(2017: 5 750 291).
Post-employment benefit plans
The group manages R8 754 million (2017: R11 864 million) of the group's post-employment benefit plans' assets.
Other significant balances between the group and the group's post-employment benefit plans are listed below:
2018 2017
Rm Rm
Investments held in bonds and money market instruments 778 1 089
Value of ordinary group shares held1 3 040 749
1 The comparative disclosure for the value of ordinary group shares held by the group's post-employment
benefit plans has been restated as it was erroneously disclosed as R2 157 million in 2017. The restatement
has no impact on the income statement and statement of financial position.
Balances and transactions with ICBCS
The following significant balances and transactions were entered into between the group and ICBCS, an associate
of the group.
2018 2017
Amounts included in the group's statement of financial position Rm Rm
Derivative assets 905 2 227
Trading assets 9 7
Loans and advances 28 726 31 413
Other assets 245 590
Derivative liabilities (3 260) (2 340)
Trading liabilities (2 933)
Deposits and debt funding (282) (1 050)
Provisions and other liabilities (437) (759)
Services
The group entered into certain transitional service level arrangements with ICBCS in order to manage the orderly
separation of ICBCS from the group post the sale of 60% of Standard Bank Plc (SB Plc). In terms of these arrangements,
services are delivered to and received from ICBCS for the account of each respective party. As at 31 December 2018 the
expense recognised in respect of these arrangements amounted to R229 million (2017: R277 million).
Balances and transactions with the Industrial and Commercial Bank of China Limited (ICBC)
The group, in the ordinary course of business, receives term funding from, and provides loans and advances to, ICBC
for strategic purposes. These monies are renegotiated and settled on an ongoing basis on market-related terms. The
following balances and transactions were entered into between the group and ICBC, a 20.1% shareholder of the group,
excluding those with ICBCS.
2018 2017
Amounts included in the group's statement of financial position Rm Rm
Loans and advances 15 539 2 939
Other assets1 345 611
Deposits and debt funding (3 724) (91)
1 The group recognised losses in respect of certain commodity reverse repurchase agreements with third parties prior
to the date of conclusion of the sale and purchase agreement, relating to SB Plc (now ICBCS) with ICBC. As a
consequence of the sale and purchase agreement, the group holds the right to 60% of insurance and other recoveries,
net of costs, relating to claims for those recognised losses prior to the date of conclusion of the transaction.
Settlement of these amounts will occur based on audited information on pre-agreed anniversaries of the completion
of the transaction and the full and final settlement of all claims in respect of losses incurred. As at
31 December 2018, a balance of USD 24 million (R345 million) is receivable from ICBC in respect of this arrangement
(2017: USD50 million; R611 million).
The group has off-balance sheet letters of credit exposure issued to ICBC as at 31 December 2018 of R1 952 million
(2017: R766 million). The group received R63 million in fee and commission revenue relating to these transactions
(2017: R8 million).
Mutual funds
The group invests in various mutual funds that are managed by Liberty. Where the group has assessed that it has control
(as defined by IFRS) over these mutual funds, it accounts for these mutual funds as subsidiaries. Where the group has
assessed that it does not have control over these mutual funds, but has significant influence, it accounts for them as
associates.
The following significant balances and transactions were entered into between the group and the mutual funds which the
group does not control:
2018 2017
Amounts included in the group's statement of financial
position and income statement Rm Rm
Trading liabilities (592) (275)
Deposits and debt funding (24 896) (15 706)
Trading losses (26) (101)
Interest expense (2 689) (695)
Change in group directorate
The following changes in directorate took place during the year ended 31 December 2018:
RETIREMENTS
RMW Dunne As non-executive director 30 May 2018
BJ Kruger As non-executive director 31 December 2018
Condensed segment report
for the year ended 31 December 2018
The group's primary segments comprise the group's banking activities (comprising PBB, CIB and central and other), the
group's other banking interests (comprising the group's interest in ICBC Argentina and ICBCS) and Liberty (comprising
the group's investment management and life insurance activities).
2018 20171
Rm Rm
Net interest income contribution by business unit
Personal & Business Banking 41 754 40 963
Corporate & Investment Banking 19 190 20 434
Central and other (1 322) (1 272)
Standard Bank Group 59 622 60 125
Non-interest revenue and income from investment management
and life insurance activities contribution by business unit
Personal & Business Banking2 28 053 26 745
Corporate & Investment Banking 17 791 16 336
Central and other (135) (507)
Banking activities2 45 709 42 574
Liberty 21 722 24 394
Standard Bank Group2 67 431 66 968
Revenue contribution by business unit
Personal & Business Banking2 69 807 67 708
Corporate & Investment Banking 36 981 36 770
Central and other (1 457) (1 779)
Banking activities2 105 331 102 699
Liberty 21 722 24 394
Standard Bank Group2 127 053 127 093
Profit or loss attributable to ordinary shareholders
Personal & Business Banking 15 539 14 023
Corporate & Investment Banking 10 900 11 363
Central and other (865) (1 112)
Banking activities 25 574 24 274
Other banking interests 418 600
Liberty 1 461 1 361
Standard Bank Group 27 453 26 235
Total assets by business unit
Personal & Business Banking 767 328 705 232
Corporate & Investment Banking 970 739 907 335
Central and other (33 732) (14 599)
Banking activities 1 704 335 1 597 968
Other banking interests 7 852 7 493
Liberty2 414 775 422 467
Standard Bank Group2 2 126 962 2 027 928
Total liabilities by business unit
Personal & Business Banking 690 187 630 796
Corporate & Investment Banking 902 652 843 982
Central and other (51 933) (32 043)
Banking activities 1 540 906 1 442 735
Liberty2 386 993 395 176
Standard Bank Group2 1 927 899 1 837 911
1 Where responsibility for individual cost centres and divisions within business units change, the
comparative figures have been reclassified accordingly.
2 Refer to the restatement section for restatements that affected these disclosures.
Other reportable items
Additional Tier 1 capital
The group did not issue Basel III compliant AT1 capital bonds that qualify as Tier 1 capital during the period
(2017: R3.5 billion nominal value). During the period, coupons to the value of R447 million (2017: R229 million)
were paid to AT1 capital bond holders. Current tax of R125 million (2017: R64 million) relating to the AT1 capital
bonds was recognised directly in equity resulting in an aggregate net equity impact of R322 million
(2017: R165 million). The AT1 capital bonds have been recognised within other equity instruments in the statement
of financial position.
Capital management
The group manages its capital levels to support business, growth, maintain depositor and creditors' confidence, create
value for its shareholders and ensure regulatory compliance. The main regulatory requirements to be complied with are
those specified in the Banks Act No.94 of 1990 and related regulations, which are aligned with Basel III. Regulatory
capital adequacy is measured through the CET1, Tier 1 and total capital adequacy.
The group has elected the three year phase-in as outlined in the SARB's Directive 5/2017. This phase-in results in the
IFRS 9 impact being amortised on a straight-line basis, from 25% in 2018 to reach 100% by 2021. The group's capital
adequacy ratios based on a phased-in and fully loaded basis are shown in the table below:
Phased-in (IFRS 9) Fully loaded (IFRS 9)
1 January 1 January
2018 2018 2018 2018
Capital ratio % % % %
CET1 13.5 13.3 13.1 12.8
Tier 1 14.1 13.9 13.6 13.4
Total capital adequacy 16.0 15.9 15.8 15.7
Equity securities
During the period, the group allotted 1 729 572 shares (2017: 2 877 827 shares) in terms of the group's share
incentive schemes and repurchased 2 483 523 shares (2017: 2 030 824 shares).
The total equity securities held as treasury shares at the end of the period was 25 310 447 shares (2017: 16 213 766
shares). These treasury shares exclude group shares that are held by certain structured entities (SEs) relating to the
group's Tutuwa initiative (refer to the related party balances and transactions note for more detail) since those SEs
hold the voting rights on such shares and are accordingly not treasury shares as defined by the JSE Listings
Requirements.
Legal proceedings
In the ordinary course of business, the group is involved as a defendant in litigation, lawsuits and other proceedings.
Management recognises the inherent difficulty of predicting the outcome of defended legal proceedings. Nevertheless,
based on management's knowledge from investigation, analysis and after consulting with legal counsel, management believes
that there are no individual legal proceedings that are currently assessed as being 'likely to succeed and material' or
'unlikely to succeed but material should they succeed'. The group is also the defendant in some legal cases for which
the group is fully indemnified by external third parties, none of which are individually material. Management is
accordingly satisfied that the legal proceedings currently pending against the group should not have a material adverse
effect on the group's consolidated financial position and the directors are satisfied that the group has adequate
insurance programmes and, where required in terms of IFRS for claims that are probable, provisions in place to meet
claims that may succeed.
Competition Commission - trading of foreign currency
On 15 February 2017 South Africa's Competition Commission lodged five complaints with the Competition Tribunal against
18 institutions, including one against The Standard Bank of South Africa Limited ("SBSA") and two against a former
subsidiary of the Standard Bank Group, Standard New York Securities Inc ("SNYS"), in which it alleges unlawful collusion
between those institutions in the trading of USD/ZAR. Standard Bank Group has, with the help of external counsel, conducted
its own internal investigations and found no evidence that supports the complaints. Both SBSA and SNYS have, together
with 12 of the other respondents, applied for dismissal of the complaint referral on various legal grounds. These
applications were heard in July 2018 and judgement has been reserved. The allegations against SBSA are confined to USD/ZAR
trading activities within SBSA and do not relate to the conduct of the group more broadly.
Indemnities granted following disposal of SB Plc
Under the terms of the disposal of SB Plc on 1 February 2015, the group provided ICBC with certain indemnities to be
paid in cash to ICBC or, at ICBC's direction, to any SB Plc (now ICBCS) group company, a sum equal to the amount of
losses suffered or incurred by ICBC arising from certain circumstances. Where an indemnity payment is required to be
made by the group to the ICBCS group, such payment would be grossed up from ICBC's shareholding at the time in ICBCS
to 100%. These payments may, inter alia, arise as a result of an enforcement action, the cause of which occurred prior
to the date of disposal. Enforcement actions include actions taken by regulatory or governmental authorities to enforce
the relevant laws in any jurisdiction. While there have been no material claims relating to these indemnification
provisions, the indemnities provided are uncapped and of unlimited duration as they reflect that the pre-completion
regulatory risks attaching to the disposed-of business remain with the group post completion. Any claims that may arise
for SNYS with respect to the Competition Commission matter are likely to fall within the scope of this indemnity as the
alleged conduct, which is the subject of the referral, is alleged to have taken place prior to the disposal of SB Plc.
Subordinated debt
During the period, the group issued R5.0 billion (2017: Rnil) Basel lll compliant bonds that qualified as Tier 2 capital.
The capital notes are perpetual, non-cumulative with an issuer call option after a minimum period of five years and one
day, and on every coupon payment date thereafter. The payment dates are quarterly with the first call date being
13 February 2023.
R3.5 billion (2017: R3.0 billion) Basel III compliant Tier 2 subordinated debt instruments were redeemed during the
year.
R0.1 billion (2017: R0.3 billion) of Basel II compliant Tier 2 subordinated debt instruments were issued during the
year and R0.1 billion (2017: R0.2 billion) was redeemed in jurisdictions that have not yet adopted the Basel III
framework.
The terms of the Basel III compliant Tier 2 capital bonds include a regulatory requirement which provides for the
write-off, in whole or in part, on the earlier of a decision by the relevant regulator (the SARB) that a write-off without
which the issuer would have become non-viable is necessary, or a decision to make a public sector injection of capital or
equivalent support, without which the issuer would have become non-viable.
During the period, the group issued subordinated debt that qualifies as regulatory insurance capital R1.0 billion
(2017: R2.0 billion) and R1.0 billion (2017: R1.0 billion) was redeemed.
Transactions with non-controlling interests
Change in shareholding of subsidiaries
2018
Rm
Net carrying amount of non-controlling interests acquired 1 139
Net consideration (paid to)/received from non-controlling interests (2 675)
Net decrease in equity attributable to ordinary shareholders (1 536)
Transactions with non-controlling interests primarily comprise of:
Stanbic Africa Holdings Limited
During the period, Stanbic Africa Holdings Limited (SAHL), a wholly owned subsidiary of SBG, increased its shareholdings
in its listed Nigerian and Kenyan subsidiaries through acquisitions of additional shares from non-controlling interests
(NCI). Increases in the group's interest in a subsidiary, when the group already has control, are accounted for as
transactions with equity holders of the group. The difference between the purchase consideration and the group's
proportionate share of the subsidiary's additional net asset value acquired is accounted for directly in equity.
Nigeria
In Nigeria, SAHL's shareholding in Stanbic IBTC Holdings PLC (SIBTC) increased by 12% from 53% to 65% through an
announced off market trade on the Nigerian Stock Exchange and further on market share purchases for a total cash
consideration of R2 567 million.
The group recognised a net decrease in NCI of R950 million and a decrease in retained earnings and equity attributable
to owners of the group of R1 617 million because of changes in the group's ownership interest in SIBTC.
Kenya
In Kenya, SAHL's shareholding in Stanbic Holdings Plc (SH Plc) increased by 9% from 60% to 69% following a two-stage
tender offer and further on market share purchases for a total cash consideration of R485 million.
The group recognised a decrease in NCI of R514 million and an increase in retained earnings and equity attributable to
owners of the group of R29 million because of changes in the group's ownership interest in SH Plc.
Liberty Group Limited
During the period, Liberty Group Limited's (Liberty) shareholding in Liberty Two Degrees (L2D) decreased by 4% from
63% to 59% for a total consideration of R301 million. Liberty recognised an increase in NCI of R249 million and an
increase in retained earnings and equity attributable to ordinary shareholders of R52 million because of changes in
Liberty's ownership interest in L2D.
Stanbic Bank Zimbabwe functional currency
In 2009, Stanbic Bank Zimbabwe (SBZ) concluded that the United States Dollar (USD) was its functional currency in terms of
IAS 21 The Effects of Changes in Foreign Exchange Rates (IAS 21). However, an acute shortage of USD in Zimbabwe resulted
in an increase in electronic balances through the Real Time Gross Settlement System (RTGS) as well as the issuance of bond
notes which were exchangeable for USD at an official rate of 1:1. In October 2018, the Reserve Bank of Zimbabwe (RBZ)
instructed banks to separate bank accounts into FCA Nostro (USD balances) and FCA RTGS (RTGS balances). This created clarity
that within Zimbabwe both USD and RTGS were legal tender and that these different currencies were not interchangeable, even
though the official exchange rate was 1:1. As a result, SBZ concluded that its functional currency changed from USD to RTGS
on 1 October 2018 because the majority of SBZ's transactions were conducted in RTGS. SBZ was prohibited from trading at any
exchange rate other than the official rate and all exchange transactions undertaken by SBZ in 2018 occurred at the official
rate of 1:1. The International Financial Reporting Interpretations Committee discussed the determination of an exchange rate
when there is a long-term lack of exchangeability and concluded that the closing rate at which items should be translated is
the rate to which an entity would have access at the end of the reporting period through a legal exchange mechanism. The only
legal exchange mechanism that SBZ had access to in the financial period since the change in functional currency was the
official exchange mechanism. This led to SBZ concluding that the appropriate exchange rate to use at the date of the change
in functional currency and subsequent to the change in functional currency up until the end of the current reporting period
is the official rate of 1:1.
Post-balance sheet event
During February 2019, RBZ announced that RTGS dollars will replace USD as the new base currency of the country.
A new foreign interbank market was also established and this interbank market will complement the existing official
foreign exchange mechanism with the RBZ. The establishment of this interbank market has created an additional legal
exchange mechanism whereby the bank is able to trade RTGS dollars. Whilst the RBZ has not yet indicated which exchange
mechanism can be utilised for dividend repatriation, the 2.5 RTGS:USD exchange rate which has emerged from this interbank
exchange market at the end of February 2019 can be utilised to estimate the financial impact. The group has estimated a
decrease of R746 million on the foreign currency translation reserve, relating to this development by applying the
2.5 RTGS:USD exchange rate to the 31 December 2018 SBZ balance sheet position.
IFRS 16 Leases
This standard will replace the IAS 17 Leases as well as the related interpretations and sets out the principles for
the recognition, measurement, presentation and disclosure of leases for both parties to a contract, being the lessee
(customer) and the lessor (supplier). The core principle of this standard is that the lessee and lessor should recognise
all rights and obligations arising from leasing arrangements on balance sheet. The most significant change pertaining to
the accounting treatment for operating leases is from the lessees' perspective. IFRS 16 eliminates the classification of
leases as either operating or finance leases as required by IAS 17 and introduces a single lessee accounting model,
where a right of use (ROU) asset together with a liability for the future payments is to be recognised for all leases with
a term of more than 12 months, unless the underlying asset is of low value. The group has elected to apply IFRS 16
retrospectively without restating comparative periods, which will continue to be presented in terms of IAS 17, with a
transition adjustment as at 1 January 2019. The single lessee accounting model, which comprises IFRS 16's most material
impact for the group, is expected to result in an increase of approximately R5 billion in total assets,
R4.73 billion in total liabilities and an increase in reserves of approximately R250 million.
Accounting policy elections
Adoption of new and amended standards effective for the current financial period
The accounting policies are consistent with those reported in the previous year except for the adoption of the
following standards and amendments effective for the current period:
- IFRS 4 Insurance Contracts (amendment) (IFRS 4), the amendment to applying IFRS 9 Financial Instruments with IFRS 4
introduced two approaches: an overlay approach and a deferral approach. The amended standard will provide all companies
that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the
volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is issued; and provide
companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9
until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing financial instruments
standard IAS 39. The amendments to IFRS 4 supplement existing options in the standard that can already be used to address
the temporary volatility. The group did not apply the optional temporary exemption of applying IFRS 9 until 2021.
- IFRS 15 Revenue from Contracts with Customers (IFRS 15), with effect from 1 January 2018, replaces the existing
revenue standards and the related interpretations. The standard sets out the requirements for recognising revenue that
applies to all contracts with customers (except for contracts that are within the scope of the standards on leases, insurance
contracts or financial instruments). The core principle of the standard is that revenue recognised reflects the
consideration to which the company expects to be entitled in exchange for the transfer of promised goods or services to the
customer. The standard incorporates a five step analysis to determine the amount and timing of revenue recognition. The
group adopted IFRS 15 on 1 January 2018 and, as permitted by IFRS 15, did not restate its comparative financial results.
The standard does not apply to revenue associated with financial instruments, and therefore does not impact the majority
of the group's revenue.
- IFRIC 22 Foreign Currency Transactions and Advance Consideration provides guidance on how to determine the date of
the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset,
expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability arising from the
payment or receipt of advance consideration in a foreign currency.
The above mentioned standards and interpretation to the IFRS standards, adopted on 1 January 2018, did not effect the
group's previously reported financial results or disclosures and did not impact the group's results upon transition or
the group's accounting policies.
- IFRS 9 Financial Instruments with effect from 1 January 2018, replaced IAS 39. IFRS 9 introduced new requirements
which included an ECL impairment model and new requirements for the classification and measurement of financial assets,
refer below for more detail.
IFRS 9 Financial Instruments
Background
With effect from 1 January 2018, IFRS 9 replaced IAS 39. IFRS 9 introduced new requirements which included an ECL
impairment model and new requirements for the classification and measurement of financial assets as follows:
ECL impairment IFRS 9's ECL impairment model's requirements represented the most material IFRS 9 transition impact
requirements for the group.
The ECL model applies to financial assets measured at either amortised cost or at fair value through
comprehensive income (FVOCI), loan commitments when there is a present commitment to extend credit
(unless these are measured at fair value through profit or loss (FVTPL)) and financial guarantees.
ECL is, at a minimum, required to be measured through a loss allowance at an amount equal to the lower of
12-month or full lifetime ECL (where the lifetime is less than 12 months) of the financial asset. A loss
allowance for full lifetime ECL is required for a financial asset if the credit risk of that financial
instrument has increased significantly since initial recognition.
Classification and IFRS 9 requires all financial assets to be classified and measured on the basis of the entity's business
measurement model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
The accounting for financial assets differs in various other areas to existing requirements such as embedded
derivatives and the recognition of fair value adjustments in OCI.
All changes in the fair value of financial liabilities that are designated at FVTPL due to changes in own
credit risk are required to be recognised within OCI.
Adoption of IFRS 9
The group retrospectively adopted IFRS 9 on 1 January 2018 with an adjustment to the group's opening 1 January 2018
reserves and, as permitted by IFRS 9, did not restate its comparative financial results. Accordingly, the group's
previously reported financial results up to 31 December 2017 are presented in accordance with the requirements of IAS 39
and for 2018, and future reporting periods, are presented in terms of IFRS 9. However, the group has elected to continue
to apply the hedge accounting requirements of IAS 39. The group prepared a IFRS 9 transition report on which a reasonable
assurance audit opinion, included in the report, was provided by the group's external auditors that outlined the impact of
the transition to IFRS 9. For further information, regarding the transition impact, refer to the transition report,
available at www.standardbank.com/reporting.
IFRS 9's ECL requirements
The most material IFRS 9 transition impact for the group is that of IFRS 9's new ECL requirements which results in the
earlier recognition of credit impairment provisions primarily as a result of the drivers outlined in the table below.
This impact was solely as a result of the adoption of IFRS 9 and is not as a result of changes in the credit quality of
the group's loan exposures.
12-month ECL for IFRS 9 contains a minimum 12-month ECL for exposures for which there has not been a significant increase
performing loans in credit risk (SICR), whereas IAS 39 required credit impairments to be recognised only following the
(stage 1) identification of objective evidence of impairment.
Significant increase in A lifetime ECL is recognised for all exposures for which there has been a SICR, being a material change
credit risk (SICR) in the probability of default, since origination.
(stage 2)
Off-balance sheet IFRS 9's scope includes off-balance sheet exposures, such as unutilised loan commitments, guarantees and
exposures letters of credit.
Lifetime model work In terms of determining ECL for stage 1 and 2 exposures where there is a probability of default, the
out requirement potential loss from a lifetime perspective is considered, which would include the probability of
recovery post default and subsequent re-default.
For stage 3 exposures, being exposures that are either in default or where default is imminent, this
would include consideration of cures and subsequent re-default.
Forward looking IFRS 9 requires an adjustment for forward looking economic expectations in the determination of SICR
economic expectations and in the measurement of the ECL.
IFRS 9 key financial impacts
Table 1: Impact on the group's summarised statement of financial position on 1 January 2018
IFRS 9 transition adjustment at
1 January 2018
Group IFRS 9 Group
IAS 39 at classification IFRS 9 at
31 December and 1 January
2017 IFRS 9 ECL measurements Total 2018
Rm Rm Rm Rm Rm
Assets
Financial investments 533 314 (272) 32 (240) 533 074
Loans and advances 1 048 027 (7 839) (83) (7 922) 1 040 105
Interest in associates
and joint ventures 9 665 (53) (3) (56) 9 609
Other financial and
non-financial assets1 436 922 2 234 94 2 328 439 250
Total assets 2 027 928 (5 930) 40 (5 890) 2 022 038
Equity and liabilities
Equity 190 017 (6 276) (361) (6 637) 183 380
Equity attributable to
ordinary shareholders 157 020 (5 930) (331) (6 261) 150 759
Equity attributable to
other equity holders 9 047 9 047
Equity attributable to
non-controlling interests 23 950 (346) (30) (376) 23 574
Liabilities2 1 837 911 346 401 747 1 838 658
Total equity and liabilities 2 027 928 (5 930) 40 (5 890) 2 022 038
1 Materially relates to the recognition of additional deferred tax assets following the recognition of the
IFRS 9 ECL and classification and measurement transition adjustment.
2 Materially relates to the recognition of ECL on off-balance sheet letters of credit, bankers
acceptances and guarantees.
Table 2: Impact on the group's summarised statement of changes in equity on 1 January 2018
IFRS 9
Group transition Group
IAS 39 at adjustment at IFRS 9 at
31 December 1 January 1 January
2017 2018 2018
Rm Rm Rm
Ordinary share capital and share premium 18 063 18 063
Retained earnings1 144 539 (5 302) 139 237
Statutory credit risk reserve2 3 089 (948) 2 141
Other3 (8 671) (11) (8 682)
Total ordinary shareholder's equity 157 020 (6 261) 150 759
Other equity instruments 9 047 9 047
Non-controlling interests4 23 950 (376) 23 574
Total equity 190 017 (6 637) 183 380
1 The change in the retained earnings relates to IFRS 9's classification and measurement and ECL changes
and the reversal of the statutory credit risk reserve (SCRR) as explained further below.
2 In addition to the R6 637 million impact on the group's reserves, as a result of the adoption of IFRS 9,
a debit of R948 million to the group's SCRR and a corresponding credit to the group's retained earnings
has been recognised. The SCRR has historically been maintained by means of an appropriation of retained
earnings to a non-distributable reserve, being the SCRR, by the group's operations in the Africa Regions
as a result of country regulators requiring a higher credit impairment provision than that as determined
in accordance with IAS 39. Given that IFRS 9 typically results in an impairment provision that is
equivalent to or greater than that as required by the Africa Regions' regulators, a transfer from the
SCRR back to retained earnings is required on transition to IFRS 9. The transfer has only been reflected
with respect to those countries whose regulators that, at the date of this transition report, had approved
such releases. This transfer has no impact on the group's net asset value, total reserves or capital ratios.
3 Of the R593 million in the group's available-for-sale reserve as at 31 December 2017, R582 million has
been reclassified on the adoption of IFRS 9 to the FVOCI category and R11 million relates to gains and
losses on instruments that were classified as available-for-sale and are now classified as either FVTPL
or at amortised cost.
4 The change relates to the non-controlling interests' share of the IFRS 9 impact post tax relating to
IFRS 9's classification and measurement and ECL changes.
Table 3: Impact on financial instrument classification (excluding impact of IFRS 9 ECL)
IFRS 9 transition adjustment at
1 January 2018
Group Group
IAS 39 at Fair IFRS 9
31 value at
December Held-for- Amortised through 1 January Transitional
2017 trading Fair value1 cost OCI 2018 adjustment
Rm Rm Rm Rm Rm Rm Rm
Financial assets
Held-for-trading 241 482 241 482 241 482
Designated at fair value 409 456 370 517 38 126 408 643 (813)
Held to maturity 81 607 3 261 79 187 82 448 841
Loans and receivables 1 142 431 66 908 1 075 492 26 1 142 426 (5)
Available-for-sale 45 149 423 10 041 34 537 45 001 (148)
1 920 125 241 482 441 109 1 202 846 34 563 1 920 000 (125)
Financial liabilities
Held-for-trading 139 751 139 751 139 751
Designated at fair value 173 176 165 559 7 813 173 372 196
Other amortised cost 1 284 837 9 311 1 275 731 1 285 042 205
1 597 764 139 751 174 870 1 283 544 1 598 165 401
1 Includes designated at fair value and fair value default financial instruments
IFRS 9 accounting policies
Interest in suspense
In addition to the above identified changes between IAS 39 and IFRS 9, interest in suspense (refers to contractual
interest which accrues on financial assets which are classified as non-performing) is presented as follows:
IAS 39 accounting treatment
Up to 31 December 2017, IAS 18 Revenue required interest income to be recognised only when it was probable that the
economic benefits associated with a transaction would flow to the entity. The group, in line with these requirements,
suspended the recognition of contractual interest income on all exposures where it was determined that future economic
benefits were not probable. The accounting presentation policy for this suspended contractual interest was to present
the balance sheet interest in suspense account as part of the gross carrying amount of the financial asset (i.e. gross
carrying amount net of interest in suspense). In addition, upon the curing of the non-performing financial asset, the
group elected an accounting presentation policy to recognise this suspended contractual interest (previously unrecognised
interest) within the net the interest income line within the income statement. This policy was elected on the basis that
the presentation best represented the nature of the amount in terms of IAS 1 Presentation of Financial Statements (IAS 1).
IFRS 9 accounting treatment
IFRS 9 requires that interest income for financial assets classified as Stage 3 be calculated on the net carrying
amount (after deducting credit impairments), which will result in a portion of contractual interest being suspended.
IFRS 9 requires that this suspended contractual interest be presented as part of the financial assets' gross carrying
amount. The group has applied this requirement by presenting balance sheet suspended contractual interest together
within credit impairment. Hence suspended contractual interest does not impact the net carrying amount of the financial
asset as presented on the statement of financial position. However, this change in presentation has resulted in an
increased gross carrying amount of financial asset and increased credit impairments when compared to IAS 39.
The group has presented previously unrecognised interest earned on curing of a financial asset out of Stage 3 within
credit impairment. This presentation is consistent with the IFRIC clarification issued in December 2018.
Restatements
Change in accounting policy
Expenses incurred with respect to the group's customer loyalty programme (UCount) have historically been recorded as
part of operating expenses in the income statement. During the year, the group amended its accounting policy for these
expenses to rather be presented as part of net fee and commission revenue (within non-interest revenue). This policy
aligns with the group's policy for other expenses that are presented within net fee and commission revenue. The impact
of the change in the accounting policy on the group's financial results is as follows:
2017
As previously
presented Restated
Income/ Income/
(expense) Restatement (expense)
Rm Rm Rm
Non-interest revenue 43 037 (463) 42 574
Operating expenses in banking activities (57 512) 463 (57 049)
The following condensed primary financial statement and notes have been impacted by this restatement:
- condensed consolidated income statement
- non-interest revenue
- operating expenses
- condensed segment report.
The above restatement had the following effect on key financial statistics:
2017
As previously
reported Restatement Restated
Jaws 1.0% 0.1% 1.1%
Cost-to-income 55.7% (0.2%) 55.5%
Restatement of statement of cash flows
During 2018 a comprehensive review of the group's long-term insurance business model was undertaken due
to various regulatory changes including the new regulatory capital regime effective 1 July 2018 and the
enterprise risk management framework. The above review supported a change in key judgement relating to
the appropriateness of all cash flows relating to investment portfolios backing policyholder liabilities
and supporting regulatory and group risk adjusted minimum capital levels. Management are of the opinion
that these should be reflected as cash flows from operating activities rather than as previously reflected
as cash flows from investing activities. This provides more relevant information as it more accurately
reflects the nature of the cash flows as a result the statement of cash flows for 2017 has been restated.
The impact of the restatement on the group's statement of cash flows is as follows:
2017
As previously
presented Restated
cash inflow/ cash inflow/
(cash outflow) Restatement (cash outflow)
Rm Rm Rm
Cash flows presented within operating activities
Other operating activities 34 215 (3 117) 31 098
Cash flows presented within investing activities
Capital expenditure (5 451) 60 (5 391)
Other investing activities (2 964) 3 057 93
Other information
Pro forma financial and constant currency information
The pro forma financial information and pro forma constant currency information disclosed in these results
is the responsibility of the group's directors. Because of its nature, the pro forma financial information
may not be a fair reflection of the group's results of operation. The pro forma financial information and
pro forma constant currency information contained in this announcement have been reviewed by the group's
external auditors and their unmodified limited assurance report prepared in terms of ISAE 3420 is available
for inspection at the company's registered office on weekdays from 09:00 to 16:00.
IFRS 9-related accounting impact
In compliance with IFRS 9, the group is required to suspend interest earlier which resulted in a R553 million
reduction in net interest income and credit impairment charges. In addition, following a clarification from the
IFRS Interpretations Committee in December 2018, the group is required to recognise previously unrecognised
interest earned on loans which cured out of Stage 3 (otherwise referred to as released IIS on cured assets) as
a reduction in credit impairment charges. Prior to 2018, IIS on cured assets was accounted for as interest income.
The reclassification from interest income to credit impairment charges amounted to R1 169 million in 2018. The table
below shows the impact of these changes on net interest income, total income and credit impairment charges as well
as some of the group's key ratios, namely credit loss ratio, cost-to-income ratio and jaws. The adjusted figures and
ratios are collectively referred to as "Non-IFRS Financial Information" and is pro forma financial information for
purposes of the JSE Listings Requirements. There was no impact on 2018 headline earnings. The directors are
responsible for compiling the Non-IFRS Financial Information on the basis of the applicable criteria specified in
the JSE Listings Requirements, including JSE Guidance Letter: Presentation of pro forma financial information dated
4 March 2010.
2018
2018 Adjustment adjusted
Rbn Rbn Rbn
Net interest income 59.6 1.7 61.3
Non-interest revenue 45.7 45.7
Total income 105.3 1.7 107.0
Credit impairment charges (6.5) (1.7) (8.2)
Headline earnings 27.9 27.9
Credit loss ratio (%) 0.56 0.74
Cost-to-income ratio (%) 57.0 56.2
Jaws (%) (2.8) (1.1)
Pro forma constant currency financial information
The pro forma constant currency information disclosed in these results is the responsibility of the group's directors.
The pro forma constant currency information has been presented to illustrate the impact of changes in currency rates on
the group's results and may not fairly present the group's financial position, changes in equity, results of operations
or cash flows. In determining the change in constant currency terms, the comparative financial year's results for the
year ended 31 December 2017 have been adjusted for the difference between the current and prior period's average exchange
rates (determined as the average of the daily exchange rates). The measurement has been performed for each of the
group's material currencies.
The following average exchange rates were used in the determination of the pro forma constant currency information
and were calculated using the average of the average monthly exchange rates (determined on the last day of each of
the 12 months in the period).
2018 average 2017 average
exchange rate exchange rate
US dollar 13.23 13.30
Pound sterling 17.63 17.13
Argentinian peso 0.50 0.81
Nigerian naira 0.04 0.04
Kenyan shilling 0.13 0.13
Zambian kwacha 1.27 0.72
Mozambique metical 0.22 0.21
7 March 2019
Administrative and contact details
Standard Bank Group Limited
Registration number 1969/017128/06
Incorporated in the Republic of South Africa
Website: (www.standardbank.com)
Registered office
9th Floor, Standard Bank Centre
5 Simmonds Street, Johannesburg, 2001
PO Box 7725, Johannesburg, 2000
Group secretary
Zola Stephen
Tel: +27 11 631 9106
Email: Zola.Stephen@standardbank.co.za
Head: Investor relations
Sarah Rivett-Carnac
Tel: +27 11 631 6897
Email: Sarah.Rivett-Carnac@standardbank.co.za
Group financial director
Arno Daehnke
Tel: +27 11 636 3756
Email: Arno.Daehnke@standardbank.co.za
Head office switchboard
Tel: +27 11 636 9111
Directors
TS Gcabashe (chairman), H Hu1 (deputy chairman),
JH Maree (deputy chairman), A Daehnke*,
GJ Fraser-Moleketi, GMB Kennealy,
NNA Matyumza, KD Moroka, ML Oduor-Otieno2,
AC Parker, ANA Peterside CON3, MJD Ruck, PD Sullivan4, SK Tshabalala* (chief executive),
JM Vice, L Wang1
*Executive Director 1Chinese 2Kenyan 3Nigerian 4Australian
All nationalities are South African, unless otherwise specified above.
Share transfer secretaries in South Africa
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank,
Johannesburg, 2196
PO Box 61051, Marshalltown, 2107
Share transfer secretaries in Namibia
Transfer Secretaries (Proprietary) Limited
4 Robert Mugabe Avenue
(entrance in Burg Street), Windhoek
PO Box 2401, Windhoek
JSE independent sponsor
JP Morgan Equities South Africa Proprietary Limited
Namibian sponsor
Simonis Storm Securities (Proprietary) Limited
JSE joint sponsor
The Standard Bank of South Africa Limited
Share codes
JSE share code: SBK ISIN: ZAE000109815
NSX share code: SNB ZAE000109815
A2X share code: SBK
SBKP ZAE000038881 (First preference shares)
SBPP ZAE000056339 (Second preference shares)
SSN series and CLN series (all JSE-listed bonds issued in terms of The Standard Bank of South Africa Limited's
Domestic Medium Term Note Programme and Credit Linked Note Programme)
Please direct all customer queries and comments to:
Information@standardbank.co.za
Please direct all shareholder queries and comments to:
InvestorRelations@standardbank.co.za
Refer to www.standardbank.com/reporting for a list of definitions, acronyms and abbreviations
Disclaimer
This document contains certain statements that are "forward-looking" with respect to certain of the group's plans,
goals and expectations relating to its future performance, results, strategies and objectives. Words such as "may",
"could", "will", "expect", "intend", "estimate", "anticipate", "aim", "outlook", "believe", "plan", "seek", "predict"
or similar expressions typically identify forward-looking statements. These forward-looking statements are not statements
of fact or guarantees of future performance, results, strategies and objectives, and by their nature, involve risk and
uncertainty because they relate to future events and circumstances which are difficult to predict and are beyond the group's
control, including but not limited to, domestic and global economic business conditions, market-related risks such as
fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including changes
related to capital and solvency requirements), the impact of competition, inflation, deflation, the timing impact and other
uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of changes in
domestic and global legislation and regulations in the jurisdictions in which the group and its affiliates operate.
The group's actual future performance, results, strategies and objectives may differ materially from the plans, goals
and expectations expressed or implied in the forward-looking statements. The group makes no representations or warranty,
express or implied, that these forward-looking statements will be achieved and undue reliance should not be placed on such
statements. The group undertakes no obligation to update the historical information or forward-looking statements in this
document and does not assume responsibility for any loss or damage arising as a result of the reliance by any party
thereon.
www.standardbank.com/reporting
www.standardbank.com
Date: 07/03/2019 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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