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Financial results

Financial results. for the six months ended 30 June 2003. Programme. • Six month review Richard Laubscher • Financial review Stuart Morris • Strategy & prospects Richard Laubscher. Six month review. Richard Laubscher. Key indicators (statutory). for the six months ended 30 June.

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Financial results

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  1. Financial results for the six months ended 30 June 2003

  2. Programme • Six month review Richard Laubscher • Financial review Stuart Morris • Strategy & prospects Richard Laubscher

  3. Six month review Richard Laubscher

  4. Key indicators (statutory) for the six months ended 30 June % change 2003 2002 Post AC133Pre AC133 Core earnings (Rm) -2 1 530 1 560 Core eps (cents) -12 565 645 RoE (%) 18,5 21,4 RoA (%) 1,20 1,73 Margin (%) 2,59 3,05 Efficiency ratio (%) 59,0 53,4 Headline eps (cents) -61 244 630 Capital adequacy (%) 10,1 11,2 NAV per share (cents) -12 5 398 6 105

  5. Key issues • • New accounting standards present fair value balance sheet • • AC133 impacted positively on earnings • • Asset quality sound • • Capital adequacy impacted, but regulatory compliant • • R20bn funding requirement resulted in margin compression • New accounting standards present fair value balance sheet • AC133 impacted positively on earnings • Asset quality sound • Capital adequacy impacted, but regulatory compliant • R20bn funding requirement resulted in margin compression

  6. Key issues (cont.) • NIR under pressure from volatile operatingclimate and weak equity markets • Investment Banking • Wealth Management • Once-off NIB items and BoE deals in 2002 • Strong Rand depressed offshore earnings • Expense growth well contained • Taxation rate increased

  7. Segmental performances for the six months ended 30 June (pre AC133 basis, including BoE) Core earnings (Rm) % change 2003 2002 Corporate -8 358 388 Business Banking +61 339 210 Property & Asset Finance +6 142 134 International & Africa +8 78 72 Imperial Bank +146 64 26 Total Corporate Banking +18 981 830 Peoples Bank -41 82 139 Retail +98 218 110 Gerrard Private Bank -13 21 24

  8. Segmental performances for the six months ended 30 June (pre AC133 basis, including BoE) Core earnings (Rm) % change 2003 2002 Total Banking Operations +15 1 266 1 103 Funding (401) 167 Net Banking Operations -32 865 1 270 Trading +98 426 215 Investment Banking & Advisory -54 124 272 Wealth Management -54 45 97 Shared Services -84 (292) (158) Total -29 1 204 1 696

  9. Financial review Stuart Morris

  10. Key messages • Operational performance • Impact of AC133 • Future accounting changes

  11. Income statements (pre AC133 basis, including BoE) (Rm) H01 % ch 1H2003 2H2002 1H2002 Net interest income +2 3 312 3 443 3 237 Non-interest revenue -5 3 876 4 239 4 081 Total income -2 7 188 7 682 7 318 Provisions +14 795 1 218 921 Net income – 6 393 6 464 6 397 Expenses -7 4 562 4 372 4 282 Net operating income -13 1 831 2 092 2 115 Taxation -9 467 176 430 Net income after taxation -19 1 364 1 916 1 685 Associate income -25 70 70 93 Minorities -180 (230) (160) ( 82) Core earnings -29 1 204 1 826 1 696

  12. Margin Pre AC1331H2003 2H2002 1H2002 Margin (%) 2,68 2,84 3,05 • Benefit of preference share capital raised • Lower endowment • Imperial Bank • Other alliances • Cash dividends • Non-performing assets • Demand for funding

  13. Non-performing loans and provisions Jun 2003 Dec 2002 Jun 2002 % % % Rm adv Rm adv Rm adv Non-performing loans 8 268 3,8 8 001 3,8 7 014 4,4 Expected recoveries 3 591 1,7 3 836 1,8 3 603 2,2 Expected losses 4 677 2,1 4 165 2,0 3 411 2,2 Provisions (coverage) 7 095 3,3 6 553 3,1 4 691 3,0 Adequacy of provisions – Gross coverage (%) 86 82 67 – Net coverage (%) 152 157 138

  14. Non-interest revenue (pre AC133 basis, including BoE) RmH01 1H2003 2H2002 1H2002 % change Commission & fees -32 591 2 894 2 669 Securities & exchange trading +2864 538 844 Investment banking income +145203 285 83 (incl. Canal Walk & Virgin Active) Dividends received -3571 108 109 Other -61147 414 377 Total -53 876 4 239 4 082

  15. Expenses (pre AC133 basis, including BoE) RmH01 1H2003 2H2002 1H2002 % change Staff expenses +12 364 2 235 2 347 Computer processing +18613 466 518 Premises +20464 498 387 Communication & travel -3229 232 237 Marketing +14229 272 201 Fees & insurance +5370 353 351 Other +22293 316 241 Total +74 562 4 372 4 282

  16. Taxation Rm %

  17. Capital adequacy as at 30 June 2003 2002 Rbn %*Rbn %* Tier 1 14,1 6,3 15,6 9,0 – Ordinary capital & reserves 12,1 5,4 15,6 9,0 – Preference capital 2,0 0,9 – – Tier 2 8,4 3,8 3,9 2,2 – Callable notes 6,0 2,7 2,0 1,1 – Other 2,4 1,1 1,9 1,1 Total 22,5 10,1 19,5 11,2 * Percentage of risk-weighted assets

  18. Impact of AC133 • Asset & liability classifications • Opening transitional adjustments • Impact on current year

  19. Balance sheet classifications as at 30 June 2003 (Rm) Assets Liabilities Marked to market 88 551 52 136 Held for trading (IS) 85 898 52 136 Available for sale (equity) 2 653 – Amortised cost 227 152 245 468 Originated loans 215 259 – Held to maturity 1 280 – Non-trading liabilities – 244 041 Other 10 613 1 427 Total shareholders’ funds – 18 099 315 703 315 703

  20. AC 133 – opening transitional adjustments Rm Balances as previously stated 12 239 Credit impairment adjustments (632) Fair value adjustments (741) Balances as now stated 10 866

  21. AC 133 – opening transitional adjustments Income Distributable Credit impairments (Rm) statement reserves NDR Total Release of general reserve provision 1 717 – – 1 717 Additional specific provision (585) (963) – (1 548) Creation of portfolio impairment (1 132) – – (1 132) Transfer to general risk legal reserve – (585) 585 – – (1 548) 585 (963) Taxation – 464 (175) 289 – (1 084) 410 (674) Attributable to minorities – 42 – 42 Total – (1 042) 410 (632)

  22. AC 133 – opening transitional adjustments Distributable Fair value adjustments (Rm) reserves NDR Total Revaluation of held for trading portfolios (449) – (449) Revaluation of available for sale portfolios – 28 28 Non-qualifying foreign exchange hedges (451) – (451) (900) 28 (872) Taxation 139 (8) 131 Total (761) 20 (741)

  23. AC 133 – Income statement impact on current year 2003 2003 (Rm) AC133 Difference Pre AC133 Net interest income 3 489 177 3 312 Non-interest revenue 4 239 363 3 876 Total income 7 728 540 7 188 Provisions 891 (96) 795 Net income 6 837 444 6 393 Expenses 4 562 – 4 562 Net operating income 2 275 444 1 831 Taxation 592 (125) 467 Net income after taxation 1 683 319 1 364 Associate income 70 – 70 Minorities (223) 7 (230) Core earnings 1 530 326 1 204

  24. AC 133 – Income statement impact on current year 2003 2003 (Rm) AC133 Difference Pre AC133 Core earnings 1 530 326 1 204 Translation losses (735) (284) (451) Merger costs (134) – (134) Headline earnings 661 42 619 Exceptional capital items (309) 52 (361) Attributable earnings 352 94 258

  25. Future accounting policy changes • AC133/IAS39 debate continuing • Foreign operations being reclassified • Share-based payments to be expensed • Accounting for leases

  26. Strategy and prospects Richard Laubscher

  27. Strategic priorities • Achieve critical mass in Retail • Future of Peoples Bank • Bancassurance • Joint ventures/Alliances • Transactional banking • T&O Strategy • IT investments & Didata • Offshore processing • International & Africa • Financial Services Charter • Black ownership

  28. Key strategic issues • Merger & reorganisation proceeding well • Synergies & plan on track • Client focus: retention good • Staff focus • Financial Services Charter • BEE credentials • Basel II developments positive

  29. Prospects & actions • Focus on merger – synergy extraction • Expense reduction drive • Cost of funding improvement (MT) • Investment banking & advisory – deal flow improving • Wealth Management • Pursue new processing opportunities • Client retention and service improvement • Image & reputation enhancement

  30. Q & A

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