Standard Bank : SBG Annual Results Booklet (singles)

	STANDARD BANK GROUP
	FINANCIAL
Angola	RESULTS
Mussulo Bay	for the year ended 31 December 2023

STANDARD BANK GROUP

ANALYSIS OF FINANCIAL RESULTS

for the year ended 31 December 2023

ANALYSIS OF FINANCIAL RESULTS for the year ended 31 December 2023

Standard Bank Group

is purpose-driven, African focused, client led and digitally enabled. We provide comprehensive and integrated financial and related solutions to our clients. We drive inclusive growth and sustainable development.

PRESENCE IN INTERNATIONAL MARKETS

Beijing Dubai London New York

INTERNATIONAL FINANCIAL SERVICES

Isle of Man Jersey Mauritius

• East Africa
• South & Central Africa
• West Africa
• South Africa

Listed on the JSE Limited (JSE) since 1970

>160 years of operation

Operating in

20 countries in Africa

Business units

		Personal & Private Banking
Banking
Business & Commercial Banking

Corporate & Investment Banking

Insurance & Asset Management

1

79

GROUP RESULTS	21
KEY LEGAL ENTITY	109
INFORMATION

BUSINESS UNIT	53
REPORTING

ADDITIONAL 127 INFORMATION

BANKING FINANCIAL	71
PERFORMANCE

SHAREHOLDER

INFORMATION

LIQUIDITY AND CAPITAL MANAGEMENT

Standard Bank Group's (SBG or the group) analysis of financial results for the year ended 31 December 2023 have not been audited or independently reviewed. The preparation of the financial results was supervised by the Chief Finance & Value Management Officer, Arno Daehnke BSc, MSc, PhD, MBA, AMP.

STANDARD BANK GROUP ANALYSIS OF FINANCIAL RESULTS	1
for the year ended 31 December 2023

Highlights

STANDARD BANK GROUP1

				Profit attributable
Headline		Headline earnings		to ordinary
earnings (Rm)		per share (HEPS) (c)	shareholders (Rm)
42 948 27%		2 590 26%		44 211 29%
2022: R33 853 million		2022: 2 050 cents		2022: R34 243 million
Return on equity		Net asset		Common equity			Dividend per
(ROE) (%)		value per share (c)		tier 1 ratio (%)			share (c)
18.8		14 269	8%		13.7			1 423 18%
2022: 16.3%		2022: 13 172 cents		2022: 13.4%			2022: 1 206 cents
Headline earnings and return on equity			Headline earnings and dividend per share
CAGR2 (2018 - 2023): 9%					CAGR (2018 - 2023): Dividend per share:	8%
						Headline earnings per share: 8%

Rm

%

Cents

%

2018

2019

2020

2021

20221

■

■■ ■

■

■

Headlineearnings

■

■■ ■

■■ ■

Returnonequity

■

Dividendpershare

■

Headlineearningspershare

■■ ■

Dividendpayoutratio

BUSINESS UNITS3

Banking

Return on		Cost-to-income ratio					Credit loss ratio1
equity (%)	(%)1		Jaws (%)1			(CLR) (bps)
19.5		51.4			+5.7			98
2022: 16.4%	2022: 53.9%		2022: +9.0%			2022: 83 bps
Insurance & Asset Management
Return on		Assets under		Long-term insurance	Insurance
equity		management		indexed new			operations new
(%)		(Rbn)		business (Rm)			business value (Rm)
13.1		1 480	7%		12 128	8%		3 000 13%
2022: 10.5%		2022: R1 382 billion		2022: R11 226 million			2022: R2 656 million

1. Restated, refer to page 111 - 114 for further detail. 
2. Compound annual growth rate.
3. Refer to pages 22 - 23 for more information.

2 GROUP RESULTS

FINANCIAL RESULTS, RATIOS AND STATISTICS

Change

%

2023 2022

Standard Bank Group (SBG)

Headline earnings contribution by business unit1
Total headline earnings	Rm	27	42 948	33 853
SBG Franchise2
Rm	30	41 662	31 936
Banking	Rm	31	38 842	29 616
Insurance & Asset Management	Rm	22	2 820	2 320
ICBCS	Rm	(33)	1 286	1 917
Ordinary shareholders' interest
Profit attributable to ordinary shareholders	Rm	29	44 211	34 243
Ordinary shareholders' equity	Rm	8	236 445	218 197
Share statistics
Headline earnings per ordinary share (HEPS)	cents	26	2 590.4	2 050.4
Diluted HEPS	cents	26	2 559.7	2 035.6
Basic earnings per share (EPS)	cents	29	2 666.6	2 074.1
Diluted EPS	cents	28	2 635.0	2 059.0
Dividend per share	cents	18	1 423	1 206
Net asset value per share	cents	8	14 269	13 172
Tangible net asset value per share	cents	10	13 501	12 259
Dividend payout ratio	%		55	59
Number of ordinary shares in issue	thousands	0	1 657 075	1 656 553
Return ratios
Return on equity (ROE)	%		18.8	16.3
Return on risk-weighted assets (RoRWA)	%		2.9	2.6
Capital adequacy
Common equity tier 1 capital adequacy ratio	%		13.7	13.4
Tier 1 capital adequacy ratio	%		15.0	14.4
Total capital adequacy ratio	%		17.0	16.5
Number of clients
Active client base	thousands	6	18 847	17 710
Taxation
Effective direct taxation rate	%		24.2	23.1
Employee statistics
Number of employees	number	2	50 451	49 325

Banking

ROE	%	19.5	16.4
Loan-to-deposit ratio	%	78.9	78.6
Net interest margin (NIM)3	bps	494	432
Non-interest revenue to operating expenses	%	72.4	73.0
Credit loss ratio (CLR)3	bps	98	83
Jaws3	%	5.7	9.0
Cost-to-income ratio3	%	51.4	53.9

Insurance & Asset Management

ROE	%		13.1	10.5
Assets under management	Rbn	7	1 480	1 382
Long-term insurance indexed new business	Rm	8	12 128	11 226
Insurance operations new business value4	Rm	13	3 000	2 656
Short-term insurance gross written premiums	Rm	9	5 155	4 728
Solvency capital requirement cover of Liberty Group Limited	times covered		1.81	1.76

1. Refer to pages 22 - 23 for more information.
2. Standard Bank Group Franchise represents the group's core business activities which consists of Personal & Private Banking, Business & Commercial Banking, Corporate & Investment Banking, and Insurance & Asset Management.
3. Restated, refer to page 111 - 114 for further detail. 
4. Represents the expected economic value of new business generated, in that specific reporting period, over its lifetime.

STANDARD BANK GROUP ANALYSIS OF FINANCIAL RESULTS	3
for the year ended 31 December 2023

MARKET AND ECONOMIC INDICATORS

SBK versus JSE Banks and All Share Index

(ZAR)

• January December
  ■ StandardBank ■ JSEBanksIndex ■ JSEAllShareIndex

SBK versus Emerging Markets and World Financials (USD)

• January December
  ■ StandardBank
  ■ MSCIEmergingMarketsIndex ■ MSCIWorldFinancials

			Average				Closing
		Change				Change
	%	2023	2022	%	2023	2022
Market indicators
South Africa (SA) prime overdraft rate	%		11.42	8.61			11.75	10.50
SA SARB repo rate	%		7.92	5.11			8.25	7.00
SA Consumer Price Index	%		5.9	6.9			5.1	7.2
Weighted average Group inflation1	%		8.8	9.2			8.0	10.2
Weighted average Africa Regions inflation1	%		14.4	13.5			14.6	15.8
UK Consumer Price Index	%		7.4	9.1			4.0	10.5
JSE All Share Index	7	75 902	70 665	5	76 893	73 049
JSE Banks Index	2	9 967	9 725	11	10 948	9 854
SBK share price	11	180.26	161.75	24	208.10	167.79
Key exchange rates
USD/ZAR	13	18.45	16.30	9	18.52	16.97
GBP/ZAR	14	22.95	20.19	15	23.53	20.42
ZAR/AOA	32	37.42	28.37	51	45.24	29.99
ZAR/GHS	17	0.63	0.54	8	0.65	0.60
ZAR/NGN	34	34.97	26.08	88	51.05	27.14
ZAR/KES	5	7.59	7.22	16	8.44	7.27
ZAR/UGX	(11)	202.08	225.80	(7)	204.09	218.89
ZAR/MZN	(12)	3.46	3.92	(8)	3.45	3.76
ZAR/ZMW	6	1.10	1.04	30	1.38	1.06
ZAR/ZWL	>100	101.52	22.05	>100	329.66	40.32

1 Excludes Zimbabwe.

4 GROUP RESULTS

OVERVIEW OF FINANCIAL RESULTS

In 2023, Standard Bank Group delivered earnings growth of 27% and a return on equity of 18.8%. This strong performance is underpinned by our robust and growing franchise and is reflective of the positive momentum in all our businesses.

Group results

In the twelve months to 31 December 2023 (FY23), the group recorded headline earnings of R42.9 billion, up 27% relative to the twelve months to 31 December 2022 (FY22) and delivered a return on equity (ROE) of 18.8% (FY22: 16.3%). This strong performance is underpinned by our robust and growing franchise and reflective of the good momentum in our business. Our Africa Regions franchise contributed 42% to group headline earnings. The top eight contributors to Africa Regions' headline earnings were Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda, Zambia and Zimbabwe.

In FY23, the group effectively defended and grew its banking franchise and improved banking earnings and returns. Client franchise health showed improvements across a number of metrics. Active customers grew by 6% to 18.8 million, with growth recorded in both South Africa and Africa Regions. In addition, digital retail clients in South Africa increased by 8% as more clients transitioned to our convenient digital channels. In the year, the group recorded over 2.8 billion digital transactions for retail clients, up 30% year on year, and distributed over R41.1 billion on behalf of our South African clients via our digital wallet platform. Client satisfaction scores improved across various channels, particularly digital in South Africa.

The Insurance & Asset Management franchise recorded an improved insurance performance and growth in its assets under management year on year. Since the announcement of the Liberty minority buyout, the group has received over R5.7 billion in distributions related primarily to capital optimisation. In FY23, the group successfully bought out the minorities of Liberty2Degrees (L2D). L2D holds an attractive portfolio of commercial properties.

The group ended the year with a common equity tier 1 ratio of 13.7% (31 December 2022: 13.4%). This positions the group well to reward shareholders and continue to grow. The SBG board approved a final dividend of 733 cents per share which, when combined with the interim dividend, equates to a dividend payout ratio of 55% for FY23.

In 2023, the group mobilised over R50 billion of sustainable finance for corporate clients and provided over R2 billion in loans to SMEs to help business owners access affordable and reliable alternative energy products. In addition, the group disbursed over R145 million to homeowners and over R840 million to businesses for solar installations in South Africa.

Operating environment

In 2023, uncertainty remained elevated globally. The year was one of two halves. In the six months to 30 June 2023 (1H23), inflation remained elevated and interest rates continued to rise. In the second six months to 31 December 2023 (2H23), central banks paused whilst monitoring inflation trends and developing geopolitical risks. Across most markets, inflation was stickier than forecast and interest rate cuts were delayed. The International Monetary Fund (IMF) forecast global real gross domestic product (GDP) growth of 3.1% in 2023.

Sub-Saharan Africa also experienced inflationary pressures and monetary policy tightening. Higher debt costs increased fiscal pressures and sovereign risks in certain countries, which in turn, drove currency weakness. There was progress on Ghana's debt restructure, Kenya's funding outlook improved, and Nigeria took steps to liberalise the Naira. While currency movements were mixed across the group's portfolio of countries, they were weaker on average by the end of the year.

In South Africa, inflation peaked in March 2023 at 7.1%, and then declined to end the year at 5.1% in December 2023. The South African Reserve Bank increased interest rates by a cumulative 125 basis points by the end of May 2023 and then paused.

The repo rate closed the year at 8.25%. While electricity disruptions and logistics constraints placed pressure on businesses and corporates, and in turn on the economy, progress was made during the year, particularly in the last quarter, towards delivering sustained improvements on both fronts. South Africa's real

GDP grew at 0.6% in 2023.

Overview of performance

The group's products and services are grouped into i) Banking and ii) Insurance & Asset Management.

HEADLINE EARNINGS BY BUSINESS UNIT

	CCY	Change	2023	20221
	%	%	Rm	Rm
SBG Franchise	39	30	41 662	31 936
Banking	40	31	38 842	29 616
Insurance & Asset Management	29	22	2 820	2 320
ICBCS (40% stake)	(40)	(33)	1 286	1 917
Standard Bank Group	34	27	42 948	33 853

1 Restated, refer to page 111 - 114 for further detail.

Banking

Banking headline earnings reflected a strong performance, up 31% period on period. Banking ROE increased from 16.4% to 19.5%.

Loans and advances

Gross loans and advances grew by 7% year on year to R1.7 trillion. Subdued growth across the retail portfolios together with a decline in business lending was more than offset by strong growth in the Corporate and Sovereign lending portfolio. Higher interest rates negatively impacted demand and affordability and resulted in a slowdown across mortgages, card and personal unsecured lending in 2H23. In South Africa, personal unsecured loan applications increased but approvals declined. The business lending portfolio declined by 5% due to lower client demand linked to elevated rates, reduced appetite to invest, and higher early repayments. Renewable-energy deals and higher demand for trade facilities supported the corporate portfolio. The Africa Regions' loans and advances to customers grew by 20% in constant currency but was broadly flat in ZAR.

Total provisions increased by 15% to R64.0 billion. Total coverage increased from 3.6% at 31 December 2022 to 3.8% at 31 December 2023 driven by an increase in Stage 3 loans and related provisions. Stage 3 coverage decreased marginally from 50% at 31 December 2022 to 47% at 31 December 2023 driven by the increase in the proportion of early stage non-performing (Stage 3) loans which attract lower coverage.

Deposits and funding

Deposits from customers increased by 7% year on year to

R1.9 trillion, driven by ongoing underlying client franchise growth. Wholesale-priced deposits grew by 7% and retail-priced deposits grew by 4%. Deposits from banks decreased by 4% year on year. Current and savings balances growth slowed as clients increased spending and/or moved their funds to term products to take advantage of more attractive interest rates. Term deposits grew by 12%.

Revenue

Revenue grew by 21%, driven by net interest income growth of 25% and non-interest revenue growth of 14%.

The group has amended the methodology for recognising interest on Stage 3 loans. This change resulted in an increase in net interest income and an equal and opposite increase in credit impairment charges. The change also resulted in a 7 basis point increase in the group's FY22 net interest margin to 432 basis points and a

8 basis point increase in the group's FY22 credit loss ratio to 83 basis points.

Net interest income growth was driven by strong average balance sheet growth (average gross loans to customers grew by 11%) and higher margins. The net interest margin increased by 62 basis points to 494 basis points. Strong margin expansion, driven

by higher average interest rates across South Africa, Africa Regions and International (i.e. positive endowment), was moderated by pricing pressure in South Africa linked to increased competition

in home loans, vehicle and asset finance, and corporate lending. Positive endowment contributed the equivalent of

R10.8 billion uplift in net interest income in FY23 compared to FY22 (55 basis points).

A larger, increasingly engaged client base and annual price increases, combined with higher client trade and transactional activity resulted in 10% growth in net fee and commissions. Increased client card spend and travel supported healthy growth in card and foreign exchange related fees.

STANDARD BANK GROUP ANALYSIS OF FINANCIAL RESULTS	5
for the year ended 31 December 2023

Trading revenue increased by 20% to R20.5 billion, driven by increased client-backed trades as well as market-specific opportunities linked to market dislocations which occurred during the year.

Growth in other gains on financial instruments was driven by an increase in the fair value financial investment portfolio and higher mark-to-market gains.

Credit impairment charges

Credit impairment charges increased by 22% to R16.3 billion. The increase in charges was driven by new loan origination, client strain driving partial payments, negative sovereign risk migration, and new defaults in the Industrial sector and legacy exposures in the Consumer sector. In South Africa, credit impairment charges increased across all portfolios, compounded by the non-recurrence of credit recoveries on the payment holiday portfolio in FY22

(R500 million). In Africa Regions, balance sheet growth, client- specific provisions, and risk migrations led to higher credit charges. The group's credit loss ratio increased from 83 basis points in FY22 to 98 basis points in FY23, at the top of the group's through-the-cycle credit loss ratio target range of 70 to

100 basis points.

Operating expenses

In FY23, we invested in our franchise and our client propositions. We hired over 1 000 people, increased our points of representation in South Africa, launched several new products (including our solar loan) and expanded our digital offerings and functionality. Operating expenses increased by 15% to R79.7 billion, impacted by inflationary pressures, particularly in Africa Regions. Staff costs grew by 17% driven by a larger staff complement, annual increases, and higher performance-linked incentives. Other operating costs grew by 12% driven by higher business activity- related spend.

Software, cloud, and technology-related costs increased by 14% due to higher spend on cloud migration and software licenses as well as personalisation and other focused AI-driven projects.

System stability and availability was excellent throughout the year. Amortisation declined by 4% as the group's large historic

IT programs started to roll off.

Growth in premises-related costs was well contained at 10%. Increased municipal charges and higher fuel costs linked to electricity disruptions in South Africa were offset by savings from continued infrastructure optimisation. In South Africa, continued rationalisation of our footprint led to a reduction in our branch square meterage (down 4% year on year) and our ATM network (down 6% year on year). Professional fees increased due to higher audit fees and higher legal fees related to collection initiatives. In addition, travel and entertainment costs increased as business- related activity continued to recover off a low base. Total income growth exceeded cost growth, resulting in strong positive jaws of 5.7% and a decline in the cost-to-income ratio to 51.4% (FY22: 53.9%).

Central and other

This segment includes costs associated with corporate functions and the group's treasury and capital requirements that have not been otherwise allocated to the business units. In FY23, the central headline loss amounted to R1.0 billion (FY22: loss of R1.4 billion). The loss decreased due to an increase in net interest income driven by higher average interest rates and a higher level of capital held at the Centre.

6 GROUP RESULTS

OVERVIEW OF FINANCIAL RESULTS

Insurance & Asset Management

Post the Liberty minority buyout in FY22, Liberty has been integrated into the group and is now included, with other related businesses, in the Insurance & Asset Management (IAM) business unit.

The insurance operations new business value increased by 13% year on year to R3.0 billion mainly due to an improved claims experience and increased sales. Insurance operating earnings grew by 23% to R3.9 million supported by the South African insurance business which increased operating earnings by 27% to

R3.9 million.

Assets under Management (AUM) in the South African asset management businesses increased by 8% to R1.0 trillion. This growth was attributed to the STANLIB South Africa business given positive local and offshore investment market movements during 2023. Asset management operating earnings decreased by 20% to R928 million, largely as a result of higher planned operating expenditure in STANLIB.

Overall, IAM headline earnings grew by 22% to R2.8 billion in FY23 and delivered an ROE of 13.1% (FY22: 10.5%). The capital coverage of the key legal entities within IAM remain robust.

ICBC Standard Bank Plc

ICBC Standard Bank Plc (ICBCS) recorded a strong operational performance in FY23 driven by increased client activity linked to market volatility. ICBCS (via the group's 40% stake) contributed R1.3 billion to group earnings (FY22: R1.9 billion, R1.2 billion thereof related to the insurance settlement and R0.7 billion thereof related to ICBCS' operational performance).

Profit attributable

The group's profit attributable to ordinary shareholders increased by 29% to R44.2 billion. The primary driver of the difference between the group's headline earnings and profit attributable was fair value gains on investment property in Zimbabwe.

Capital and liquidity

The group's common equity tier 1 ratio (including unappropriated profits) was 13.7% as at 31 December 2023 (31 December 2022, 13.4%). The group's Basel III liquidity coverage ratio and net stable funding ratio both remained well above the 100% regulatory requirements.

Prospects

In 2024, while global risks are expected to persist, the IMF is forecasting a soft landing. Inflation is expected to continue to fall providing scope for interest rate cuts. The IMF expects global real GDP growth to be 3.1% in 2024, in line with 2023.

Real GDP growth in sub-Saharan Africa is expected to accelerate from 3.3% to 3.8% as higher levels of growth in East Africa more than offsets lower growth in South Africa and Nigeria. The interest rate outlook is mixed. While some markets may still see interest rate increases in 1H24 (Angola, Kenya, Nigeria and Zambia), most markets are expected to start cutting interest rates in 2H24. Overall, the outlook is positive, but the region remains at risk of global shocks and climate events. In addition, 13 countries in sub-Saharan Africa will hold elections in 2024, including six where the group operates, namely Botswana, Ghana, Mauritius, Mozambique, Namibia, and South Africa.

In South Africa, inflation is expected to decline to 5.0% on average in 2024, supported by a lack of demand-driven inflation, a lack of wage pressure and favourable base effects. The repo rate is expected to decline to 7.50% by year end (Standard Bank Research: 3 cuts of 25 basis points each starting in July 2024 and one 25 basis point cut in 2025). The electricity shortfall is expected to ease notably, relative to that experienced in 2023, driven by an increase in Eskom supply and the ongoing expansion of private sector generation capacity. Actions to ease the logistics constraints are also expected to gather pace. Together, this should support an improvement in real GDP growth to 1.2% in 2024. The South African election outcome is not expected to drive a change in policy direction. Accordingly, the continued gradual policy reform should be growth-supportive over time. Any acceleration in resolving the electricity, road, rail, and port constraints would aid this further.

While organic growth (in constant currency) is expected to remain relatively robust, the group's year-on-year trends in reported currency (ZAR) will be dampened by the currency devaluations experienced in certain of our Africa Regions' countries in 2023 and forecast for 2024. The guidance that follows is based on year-on- year movements in reported currency (ZAR).

For the twelve months to 31 December 2024 (FY24), we expect average interest rates to be marginally down and pricing to remain competitive. Balance sheet growth to remain slow in 1H24, but improve in 2H24. Accordingly, net interest income is expected to be up low-to-mid single digits year on year. Fee and commissions are expected to grow at mid-single digits supported by a larger client base, increased client activity and higher client spend. Trading revenue is likely to decline off a high base in FY23, but will be subject to market developments and client flow. While there is a heightened focus on costs, we need to continue to invest in our business to remain competitive and grow. Banking revenue growth is expected to be similar to banking cost growth and Jaws flat to positive.