2017 annual results summary

Group results

Standard Bank Group’s financial performance for the year ended 31 December 2017 was strong. The group delivered a 14% growth in headline earnings to R26.3 billion and ROE improved to 17.1% from 15.3% in 2016. The group’s capital position remained robust, with a common equity tier 1 (CET1) ratio of 13.5%. Accordingly, a final dividend of 510 cents per share has been declared, resulting in a total dividend of 910 cents per share, an increase of 17% on the prior year.

Banking revenue growth remained subdued, credit impairment charges were broadly flat and costs were well managed to deliver positive jaws of 1.0%. Banking activities headline earnings grew 10% to R24.3 billion and ROE improved to 18.0% from 16.8% in 2016. Group headline earnings growth was boosted by an improved contribution from ICBC Standard Bank Plc (ICBCS) and Liberty.

Although less marked than in the first half of the year, currency movements continued to adversely impact the group’s reported results, reducing group and banking headline earnings growth by four percentage points year on year. On a constant currency basis, group headline earnings grew by 18%. Despite the dilution impact from a strengthening Rand, Africa Regions still increased its contribution to banking headline earnings to 28% from 26% in 2016, and contributed positively to group headline earnings per share growth and ROE. The top five contributors to Africa Regions’ headline earnings were Angola, Ghana, Mozambique, Nigeria and Uganda.

Operating environment

Global macroeconomic conditions were positive during 2017, supporting increased trade volumes and underpinning global growth of 3.7% for the year. A benign inflation environment and low wage growth across most advanced economies resulted in slower than expected monetary policy tightening. Continued capital flows to emerging markets supported emerging market funding costs and currencies.

Economic growth in sub-Saharan Africa rebounded from 1.4% in 2016 to 2.7% in 2017, underpinned by improving commodity prices and trade. Across many of our key countries inflation began to ease, stemming interest rate hikes and, in certain countries, provided scope for rate cuts in the second half of the year. Although exchange rates largely stabilised in the second half, many were weaker year on year against the strengthening Rand.

The recovery in the West Africa region was supported by higher oil prices and production volumes, together with higher business and consumer confidence levels. Foreign currency liquidity constraints in Nigeria eased, following the introduction of the NAFEX rate in the second quarter of the year.

East Africa started to emerge from the drought conditions. In Kenya specifically, higher food price inflation, political uncertainty as a result of the disputed electoral process, and the impact of the regulatory caps and floors introduced in September 2016, resulted in a slow-down in economic activity and credit growth.

The South & Central Africa region was supported by improved commodity prices, however those surrounding South Africa continued to feel the effects of low South African demand. In Mozambique, some sectors of the economy improved during 2017, mainly on account of higher coal prices. Monetary policy tightening helped rebalance the foreign exchange market and resulted in the Metical appreciating in the second half of the year, but was 16% weaker on average against the Rand compared to 2016. Inflation declined, despite a large increase in fuel prices.

Growth in South Africa remained weak at 1.3%, continuing its deviation from the global trend. During the year, consumer and business confidence remained low as a result of the poor macro environment and heightened political and policy uncertainties. This was exacerbated by successive downgrades by the three credit rating agencies. As a consequence, demand for credit remained lacklustre, moderating from the already subdued levels in 2016. Despite local sentiment, South Africa emerged from a technical recession in the second quarter and inflation re-entered the 3 - 6% target range, providing scope for a 25 basis point (bps) interest rate cut in July. The Rand, although volatile, was on average stronger against the major currencies, as well as those of our key countries in Africa Regions.


Our banking activities achieved revenue growth of 3%. This growth rate was 9% in constant currency, which is a testament to our solid client franchises.

Net interest income (NII) increased 6%, assisted by margin expansion of 26 bps to 474 bps. Average interest earning assets were flat on the prior year. The yield on the client lending book expanded mainly as a result of higher average interest rates in Angola, Mozambique and Nigeria, partly offset by an increase in the yield on the client funding portfolio in these countries. In South Africa, the combination of an improved yield on the mortgage lending portfolio and enhanced risk-based pricing of new loans in the personal unsecured and business lending portfolios also provided a benefit. A small positive endowment impact on capital and transactional balances in Africa Regions was achieved.

Non-interest revenue was flat on 2016, with the largest component, net fee and commission revenue, remaining at the same level as the prior year. Trading revenue declined 2% and other revenue grew by 7%.

On a constant currency basis, net fee and commission revenue grew 7%. This was the result of healthy volume-based increases in both card-based commissions and electronic banking fees as well as higher documentation and administration fees. Our Africa Regions showed strong growth of 20%.

Trading revenue grew 8% in constant currency off the back of a strong performance in Africa Regions, which contributed 45% of the group’s trading revenues. Fixed income and currencies (FIC) trading revenue grew 15% in constant currency, with strong growth in fixed income driven by increased client activity. Foreign exchange trading was impacted by liquidity shortages and regulatory constraints in some key markets in Africa Regions. Equity trading revenue experienced lower trading volumes, and was negatively impacted by the elimination, in terms of IFRS, of gains on SBK shares held by the group to facilitate client trading activities, following a significantly higher SBK share price and long client positions.

Credit impairment charges

Credit impairment charges of R9.4 billion were 1% lower than the prior year, while gross average loans and advances fell by 2%. This resulted in the group credit loss ratio remaining flat at 86 bps.

In Personal & Business Banking (PBB), impairment charges declined 3% year on year, mainly as a result of a lower portfolio impairment charge. This was driven by a decline in early arrears from continued improvements in early stage collections and payment methods. Impairment charges for vehicle and asset finance (VAF) and mortgage loans in South Africa declined as the quality of the books continued to improve, with a concomitant decline in credit loss ratios for these portfolios. Higher specific impairment charges were raised mainly against business lending, both in South Africa, following the migration of a few larger exposures to NPLs, as well as in Africa Regions, driven predominantly by increased charges in Nigeria, following an accelerated write-off of NPLs, and a single counterparty write-off in Malawi. Overall, coverage levels were maintained.

Corporate & Investment Banking’s (CIB) impairment charges rose 1% on the prior year. Combined with a flat gross average customer loan book, the credit loss ratio to customers was 44 bps (2016: 44 bps). Specific impairment provision adequacy increased from 56% in the prior year to 60%, to account for stress in the Power & Infrastructure and Oil & Gas sectors in Kenya and Nigeria. A decline in portfolio impairments in Africa Regions from elevated levels recorded in the prior year was largely offset by an increase in South Africa.

Operating expenses

Operating expenses grew 2% year on year, and in constant currency were up 8%. This reflects inflationary growth in South Africa of 5%, while in Africa Regions, costs were up 18% in constant currency due to higher inflation and continued investment. The cost-to-income ratio for the year was 55.7%, an improvement on the 56.3% in the prior year.

Staff costs were up 8% in constant currency. Following a year of disciplined focus on headcount, the overall staff complement remained at a similar level to 2016, declining 1% in South Africa with a marginal increase in Africa Regions to support business growth.

Other operating expenses grew 9% on a constant currency basis despite an 18% higher amortisation charge relating to IT intangible assets. After many years of double digit growth, the total IT function spend was well contained, growing 5% in Rand. A higher marketing cost was incurred, mainly for the “What’s your next” and Shyft campaigns in South Africa. The growth rate was assisted by the non-recurrence of an operational loss of R300 million in the prior year related to the Japan fraud incident.

Loans and advances

Gross loans and advances to customers grew by 1% year on year, of which PBB’s advances to customers grew by 3% and CIB’s declined by 2%.

Within PBB, mortgage lending grew 3%. New business disbursements of R42.4 billion were made in South Africa during the year despite the number of registrations falling 14% compared to 2016. During the year, PBB continued to write the largest proportion of new mortgage business in South Africa and maintained its leading market share at the end of 2017. VAF lending showed a modest 1% growth, as new business disbursements only slightly exceeded the run off in this book in South Africa, while the book in Africa Regions contracted. Credit card balances rose 3% while other personal unsecured lending fell by 2%. Business lending grew by 7%, with PBB Africa Regions showing good growth on a constant currency basis.

In CIB, term loans extended to clients to support their growth ambitions grew by a muted 2%, as new business was offset by maturities and early repayments by clients. Loans granted under resale agreements, used primarily for liquidity management purposes, declined as other high quality liquid assets increased to meet higher regulatory liquidity requirements.

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 LCR amounted to 135%, exceeding the minimum phased-in Basel III LCR requirement of 80%. The group successfully achieved compliance with the minimum Basel III net stable funding ratio requirements with effect 1 January 2018.

Despite the downgrades of the SA sovereign credit ratings during the year, the market cost of liquidity widened only marginally. A number of key debt capital market and term loan funding transactions were executed, taking advantage of pockets of relatively well-priced liquidity as investor appetite for capital markets' issuances remained robust. The group successfully increased its longer term funding during 2017, raising R32.4 billion through a combination of senior debt and syndicated loans. An additional R24.6 billion was raised through negotiable certificates of deposit with tenors in excess of 12 months.

Deposits from customers grew 5% year on year. The group’s most stable source of funding, retail deposits from PBB customers, increased 6% in Rand and 9% in constant currency. The bank maintained its leading retail deposit market share in South Africa, growing retail-priced deposits by 8%, and continued to grow its franchise in Africa Regions, where retail-priced deposits grew 4% (15% in constant currency). The group’s offshore operations in the Isle of Man and Jersey continue to be an important source of USD and GBP funding, growing 4% in Rand and 6% on a constant currency basis. CIB’s focus on transactional banking clients assisted growth in current accounts and cash management deposits of 2% in Rand and 5% in constant currency.

Capital management

The group maintained strong capital adequacy ratios, with a CET1 ratio of 13.5% (2016: 13.9%) and a total capital adequacy ratio of 16.0% (2016: 16.6%). In line with the group’s objective to optimise its capital stack, SBG successfully executed two Basel III compliant Additional Tier 1 (AT1) bond issues in March and September 2017, raising R3.5 billion, the proceeds of which have been invested in The Standard Bank of South Africa (SBSA).

In December 2017, the Basel Committee on Banking Supervision published the finalised Basel III reforms, which aim to reduce excessive variability of risk-weighted assets and improve the comparability of banks’ capital ratios. The regulations will be implemented on 1 January 2022 with a transitional arrangement for phasing in the aggregate output floor until 2027. Going forward we will plan and manage the business with the new requirements and deadlines in mind.

IFRS 9 became effective on 1 January 2018. The group will provide a transition report with its first quarter results for 2018. The day one impact of implementing IFRS 9’s expected credit loss impairment requirements, which comprise the most material impact, is expected to reduce the group’s CET 1 ratio by approximately 70 bps, which will be phased in over three years. We expect an increase of approximately R8.7 billion in balance sheet impairments; an increase of 32% on IAS 39's balance sheet impairments (including interest in suspense).

Overview of business unit performance

Personal & Business Banking

PBB’s headline earnings of R14.0 billion were 10% higher than the prior year, driven by growth in pre-provision operating profit and lower credit impairment charges as a result of improved collections strategies. An ROE of 20.0% was achieved, an improvement on the 18.8% recorded in the prior year.

PBB in South Africa delivered a strong performance with headline earnings of R13.2 billion up 11%. Total income grew by 6%, supported by good volume-based increases in target customer segments. Operating expenses were 6% higher, despite incurring an extra R289 million amortisation charge on strategic IT investments such as core banking, and increased spending on marketing campaigns. PBB SA delivered positive jaws of 0.4%. Credit impairment charges declined by 4% leading to a lower credit loss ratio of 119 bps (2016: 129 bps). An improved performance in both secured and personal unsecured lending (including card debtors) was partially offset by a higher impairment charge for business lending. Impairment charges for mortgages were R355 million lower than the prior year. This was driven by an improvement across the mortgage portfolio in South Africa, particularly in the older vintages. Within South Africa, mortgages written post 2008, which have a lower average credit loss ratio and better margin, now represent approximately 70% of the book (2016: 64%).

As our journey to digitise the group and deliver an always-on experience to customers continues to progress, PBB SA’s staff complement declined by 1%, while the total square meterage of the branch network declined by a further 3% to 375 000 square metres. This footprint has been reduced by more than 15% since 2010, without a material change in the number of branches. PBB SA now has almost 2.2 million unique customers actively using digital channels as their preference, with more of these choosing to use our mobile banking offering than internet banking. Mobile banking transactions processed were 32% higher than in 2016. By contrast, teller and enquiry volumes in branches declined by 14% and 13% respectively.

Results from PBB Africa Regions and Wealth International were impacted by the strengthening Rand on average in 2017 compared to 2016. To reflect the underlying trends in these businesses, the commentary that follows refers to the constant currency changes of PBB Africa Regions and Wealth International.

Headline earnings from PBB Africa Regions improved by 9% to R202 million. Customer loans expanded by 11%, mainly in Kenya and Namibia, and deposits from customers grew by 15%, with particularly pleasing growth in Nigeria, Kenya and Uganda. PBB Africa Regions’ result was underpinned by customer acquisition in key markets, with a focus on delivering digital solutions. The number of active customers grew by more than 20% in Nigeria, Kenya, Tanzania, and Zambia. Customers in PBB Africa Regions performed more than 27 million transactions on mobile banking, up from approximately 10 million in 2016.

Net interest income grew by 9%, benefiting from balance growth, and the positive endowment impact of higher average interest rates in Mozambique and Nigeria. Non-interest revenue grew by 13%, underpinned by higher transaction volumes and an increase in the account base. PBB Africa Regions comprises almost half of the Africa Regions legal entities’ total income. The credit loss ratio increased to 253 bps from 228 bps in the prior year, driven predominantly by increased charges in Nigeria and Malawi. Excluding these, the credit loss ratio for PBB Africa Regions declined to 152 bps.

Wealth International grew headline earnings by 32%, supported by growth in USD, GBP and EUR denominated client deposit balances to GBP5.1 billion (2016: GBP4.8 billion) in our operations in the Isle of Man and Jersey during the year and margin expansion following interest rate increases in the US and UK.

Corporate & Investment Banking

CIB’s headline earnings of R11.5 billion were up 11% on the prior year, and 17% on a constant currency basis. Continued cost discipline and improvements in productivity and efficiency metrics resulted in positive jaws of 4.6%. The credit loss ratio to customers of 44 bps was within CIB’s target range of 40 to 60 bps. Higher headline earnings, together with disciplined capital utilisation, delivered an ROE of 22.2%, an improvement from 19.5% in 2016.

Due to the impact of currency on CIB’s results, the commentary that follows refers to the constant currency changes. CIB delivered strong revenue growth of 13%, with sectoral, geographic and product diversity supporting the performance. This reflects our focus on strengthening our capabilities and improving co-ordination to better serve our clients across Africa. CIB recorded strong performances from multinational corporates and large domestic clients in the Financial Institutions, Industrials, Telecoms & Media and Oil & Gas sectors. Revenues in the CIB SA franchise were up 4%. The West Africa franchise delivered a resounding turn around, with revenues up by more than 30%. South & Central Africa continued to be a steady performer, delivering revenue growth of 13%. Following focused attention on East Africa, this region delivered strong revenue growth of 14%.

Transactional Products and Services (TPS) was the outstanding performer, with headline earnings up 32%. TPS plays a core role across the wider CIB franchise, being critical to the wholesale client franchise across the African continent. Revenues grew by 18%, with NII well ahead of the prior year. Africa Regions delivered a strong performance, underpinned by increased client activity, good deposit growth and supported by the positive endowment effect from higher interest rates. Continued investment in key electronic platform capability resulted in a higher amortisation charge. Credit impairment charges declined from elevated levels in the prior year.

Global Markets delivered a resilient performance, growing headline earnings by 13% to R4.6 billion. In South Africa, foreign exchange and equities trading slowed, with equities impacted by the low market volatility experienced in most global markets. Liquidity shortages and regulatory constraints negatively impacted trading activity in Africa Regions, particularly in Angola and Mozambique. The introduction of the new, more flexible forex regime in Nigeria assisted forex flows in the second half.

Investment Banking revenues were up 6%, reflecting fees earned on a number of landmark transactions and client activity in both debt and equity capital markets. Loans in the Investment Banking portfolio grew a subdued 4% on average and 2% on year-end balances. Competition for high quality clients caused margin compression. As a result, NII remained at a similar level to the prior year. Credit impairments increased as a result of a small number of impairments in stressed sectors in the Africa Regions, as well as higher portfolio provisions following the downgrade of the South African sovereign risk.  

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 2017, the segment recorded a loss of R1 246 million, 24% higher than the prior year. The primary driver of the increased loss was the elimination, in terms of IFRS, of gains on SBK shares referred to earlier.  

Other banking interests

Other banking interests recorded headline earnings of R567 million, compared to a loss of R8 million in 2016.

The group’s 40% stake in ICBCS contributed R152 million, a significant improvement on the R591 million loss recorded in the prior year. The FIC and equities businesses delivered a strong result and higher commodity prices assisted the commodities business. Of the R152 million contribution, approximately R100 million relates to a UK consortium tax relief credit. Adjusted for this, ICBCS effectively broke even at an operational level in the second half of the year.

ICBC Argentina delivered growth in revenues on an improving macro-economic environment, particularly in the second half, to report earnings after tax that were marginally lower than 2016. The headline earnings contribution from the group’s 20% stake in ICBC Argentina declined 29% to R415 million off a high base set in 2016. On a constant currency basis, earnings were down 11%.


The financial results reported are the consolidated results of the group’s 55.5% 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 normalised headline earnings for the year improved by 8% to R2.7 billion, supported by improving SA retail insurance earnings and higher returns from investment markets. Liberty's capital position remains strong. 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, rose to R3.3 billion from R2.2 billion in the prior year. Investors are referred to the full Liberty announcement dated 2 March 2018 for further detail.

Headline earnings attributable to the Standard Bank Group, adjusted by R369 million for the impact of the deemed treasury shares, were R1.4 billion, 50% higher than in the prior year.


The global growth outlook remains positive and relatively synchronised, with recent momentum in advanced economies expected to continue. China’s growth is expected to remain robust. Although upside inflationary pressures are emerging, particularly in the US, monetary policies in the advanced economies are expected to maintain a moderate pace of tightening, which should help sustain capital flows to emerging markets. From a 22-year low in 2016, growth in sub-Saharan Africa is expected to accelerate to 3.3% in 2018, supported by a world-wide economic upswing, and slightly rising commodity prices. In general, economic prospects across our network of countries are expected to improve, providing a favourable backdrop for our business.

We are also optimistic about the prospects in our home market of South Africa. We believe that the positive steps taken already by the ruling party subsequent to its leadership conference will improve business and consumer confidence. This positive sentiment, as well as pent-up demand, should begin to reflect in key economic indicators.

In the face of fast-growing competition from established banks and new competitors, we have a relentless focus on three immediate priorities - to transform into a client-centred, digitally enabled, and integrated universal financial services organisation.

We are in the final stages of our core banking journey and, by the end of the first quarter of 2018, 93% of our transactional accounts in South Africa will have been migrated onto our core banking platform. With this modernised platform in place, we will increasingly focus on front-end solutions and innovations, the benefit of which will be experienced directly by our customers.

We support faster, more inclusive and more sustainable economic growth and human development in South Africa and throughout the continent we are proud to call our home. At the same time, we are focused on improving the returns we deliver to our shareholders. Accordingly, we have lifted our medium-term ROE target range from 15% - 18% to 18% - 20%. We will continue to focus on the levers available to deliver on our targets, including positive jaws, efficient capital allocation and improving returns from PBB Africa Regions. We stand ready to serve our customers with consistent excellence, wherever they are and whatever financial services they require, online or in person.

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
7 March 2018

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