Standard Bank Group said its headline earnings from continuing operations increased by 20% to R21 068 million. The results for the year ended 31 December 2014, however, showed headline earnings were affected by the performance of the discontinued global markets outside Africa business, as it increased by only 1% to R17 323 million.
According to the group results, total income grew by 15% and expenses were 11% higher than 2013, while credit impairments were 2% lower. Net income before taxation grew by 31% and profit from continuing operations was 32% higher. The group concluded the sale of 60% of the group’s interest in the global markets business outside Africa, the completion of which was announced on 2 February 2015.
“This transaction delivers the final major piece in the repositioning of capital allocation to focus on our customers and clients in Africa and marks a new chapter in the partnership between Standard Bank and ICBC,” Ben Kruger, Chief Executive, Standard Bank Group said.
The headline loss from this discontinued operation was R3 745 million. As disclosed by the group during the course of 2014, legal proceedings have been instituted against several parties with respect to the group’s rights to physical aluminium held in bonded warehouses in China.
The group believes that the financing arrangements were impacted by fraudulent activities in respect of the physical aluminium. The impact of this on the group’s income statement has been estimated at R1 624m within the discontinued operation. In addition, the discontinued operation suffered losses from trading operations amounting to R1 674 million. This was due mainly to the high volatility and dislocation displayed in international markets in the final quarter of 2014. The poor operating performance was exacerbated by R447 million of mainly systems costs required to separate and prepare for sale a global markets business that was highly integrated within the group.
The global growth profile is expected to continue to be unbalanced with the United States the only major economy for which growth expectations have recently been raised. South Africa continues to face both structural and cyclical headwinds in 2015 exacerbated by an under-supplied electricity market although some relief is likely from the fall in the price of oil. While sub-Saharan Africa’s outlook is influenced by lower commodity prices, the overall growth profile remains robust.
Sim Tshabalala, Chief Executive, Standard Bank Group, said the group’s brand and positioning has never been stronger following a steady realignment of the group’s resources to focus on our customers on the African continent.
“The group’s medium-term return on equity target of between 15% and 18% remains in place and reflects our confidence in the ability of our people to deliver the necessary consistent growth to achieve the target.”
Personal & Business Banking (PBB)
PBB achieved headline earnings of R9 834 million, 17% higher than 2013. Robust revenue growth in NII and NIR of 15% and 13% respectively was offset by higher credit impairments of 5%. PBB’s cost-to-income ratio was stable at 59.8% as operating costs grew by 14%. ROE declined marginally to 18.2% from 18.6% in the prior period. PBB South Africa headline earnings grew by 10% in a difficult operating environment and PBB rest of Africa recorded headline earnings of R105 million from a loss of R366 million in 2013.
Corporate & Investment Banking (CIB)
CIB’s headline earnings of R4 983 million declined by 23% in 2014 due to a combination of a headline loss of R3 745 million incurred in the discontinued operation in which a 60% share has been sold to ICBC and headline earnings of R8 728 million achieved by CIB’s continuing operations. The continuing operations headline earnings growth of 26% represents a pleasing underlying performance across the continuing CIB franchise. Total income increased by 14% with NII up by 18% and NIR growing by 11%. Credit impairments declined by 40% due to reduced specific credit impairments. Costs were well controlled, with staff costs flat on 2013 due to lower incentive payments, and 12% increase in other operating costs.
Liberty’s headline earnings for the year to 31 December 2014 decreased by 3% to R3 968 million of which R2 158 million was attributable to the group. Headline earnings from the group’s South African retail operations were R1 689 million (2013: R1 467 million) reflecting an earnings increase of 15%.