STANDARD BANK GROUP BANK OF AMERICA CONFERENCE 22 September 2020
PAGE 1 PURPOSE AFRICA IS OUR HOME, WE DRIVE HER GROWTH
Well positioned to weather the storm • Record 1H revenues, R56bn • Robust customer deposit growth +19%, supporting liquidity • Good operating performance despite Covid-19 headwinds • Substantial capital capacity2, can absorb >6.5x 1H20 credit charges • Strong provision levels +30% since FY19 and significantly above GFC • Well regulated industry and levels experienced management team
Compelling competitive advantages • Purpose-driven organisation • Modern IT backbone, focus on accelerating digitisation • Unrivalled African-focused capabilities • Diversified client base, service 62% offering and revenue streams • Established, fit-for-purpose of banking headline earnings from Africa franchise with modern digital core • Resources and appetite to support Regions1 the post-Covid-19 recovery • Robust capital and liquidity position
1 Operations in Africa outside of South Africa 2 Based on CET1 capital above the SARB CET1 regulatory minimum (7.0%)
PAGE 2 STRATEGY EVOLVING WITH THE TIMES AND ACCELERATING DELIVERY
GROUP PURPOSE Africa is our home, we drive her growth the reason we exist
GROUP VISION To be the leading financial services organisation in, for and across Africa, delivering what we aspire to be exceptional client experiences and superior value
IN EXECUTING OUR GROUP STRATEGY OUR KEY FOCUS AREAS ARE IN OUR FUTURE-READY TRANSFORMATION, WE WILL BECOME
Client centric Truly human Deliver exceptional client experiences Providing services, solutions and opportunities that our clients and employees need to achieve growth, prosperity and fulfilment Digital
Leverage digital to drive efficiencies Truly digital Serving clients predominantly online, Integrated and collaborative processing in the cloud, embracing open Co-create integrated, platform-based solutions innovation underpinned by data and insights
PAGE 3 1H20 PERFORMANCE RESILIENT UNDERLYING PERFORMANCE IN A CHALLENGING OPERATING ENVIRONMENT
Pre-provision operating income Group headline earnings Common equity tier 1 ratio1
1H20: R24.3bn 1H20: R7.5bn 1H20: 12.6% 1H19: R23.3bn 1H19: R13.4bn 1H19: 14.0% 4% 44% R75bn Capital capacity2
Jaws Credit loss ratio Return on equity
1H20 100 1H20 169 1H20 8.5
1H19 110 1H19 76 1H19 16.2
bps bps %
1 Common equity tier 1 (CET1) capital adequacy ratio (based on SARB IFRS 9 phased-in approach) 2 CET1 capital available to absorb losses i.e. above regulatory minimum of 7.0%
PAGE 4 COVID-19 RESPONSE
PAGE 5 THREE-PRONGED APPROACH – REMAINS VALID FOCUSED AND DELIBERATE IN OUR ACTIONS
3 PHASE APPROACH
1 RESPOND 2 RECOVER 3 RE-IMAGINE Address immediate Covid-19 threat Facilitate return to growth Adapt to the ‘new normal’ Rapid response strategies with positive societal Coming out of the crisis Remain human-centric and digital impact • Focus on business resilience • Manage / mitigate economic fallout • Assess client behaviours / demand – new opportunities • Ensure employee safety and wellbeing • Allocate capital to support clients and communities • Accelerate digital adoption • Implement client relief plans • Deliver a future-ready group • Manage risk, capital and liquidity
• Engage regulator and industry bodies
• Engage with shareholders
• Support communities
PAGE 6 1H20 PRIORITIES RAPID IN OUR RESPONSE AND BALANCED IN OUR APPROACH
Support our clients Support our employees Support our communities
• Provided temporary relief to retail and SME • Introduced health and safety protocols • Intentional focus on health, education and clients with balances of R118bn • Enabled >80% of people to work remotely jobs • Assisted corporate clients with R48bn of • Provided digital tools to enable productivity • With the help of ICBC, we co-ordinated the exposures sourcing and delivery of USD1.4m of PPE 1 • Supported ongoing staff learning / re-skilling from ICBC contacts in China • Paid R6.4bn in insurance claims using digital tools • Provided >R65m in fee waivers and • CSI-related donations of >R20m in South moratoriums Africa and >USD1.6m in Africa Regions
1 Claims paid from short term and life insurance businesses
PAGE 7 SOUTH AFRICA - ACTIVITY LEVELS AND OUTLOOK
PAGE 8 SOUTH AFRICA – 2Q20 ECONOMIC ACTIVITY HIT HARD LOCKDOWNS DROVE A SIGNIFICANT DECLINE IN ACTIVITY ACROSS ALL SECTORS BAR ONE – GDP DECLINED 51%1
2Q20 QoQ SAAR2 2Q20 YoY Latest YoY3
New vehicle sales New vehicle sales New vehicle sales -97% New vehicle sales -63% -30%
Manufacturing Manufacturing Manufacturing Manufacturing -33% -16% production -76%
Mining Mining Mining production -76% Mining -33% -28%
Real retail sales Real retail sales Real retail sales -66% Real retail sales -23% -8%
Real wholesale trade Real wholesale trade Real wholesale trade -59% Real wholesale trade -21% -3%
Average -75% -35% -17%
Source: Stats SA, Naamsa, Standard Bank Research 1 Annualised 2Q20 decline. The biggest negative contributions came from the manufacturing (-74.9%), trade (-67.4%) and transport (-67.9%) industries. The only sector to report growth in Q2:20 was the agriculture, forestry and fishing industry 2 Seasonally adjusted and annualised 3 As at August 2020 PAGE 9 SOUTH AFRICA - ACTIVITY LEVELS RECOVERING ELECTRICITY SUPPLY A THREAT TO THE RECOVERY
Google mobility data Electricity consumption Foreigners’ purchases of SA local bonds
80 5,000 15
60 4,800 10
40 4,600 5 4,400 20 0 4,200 0 -5
4,000 GWh Index -20 -10 3,800 avg) week (4 -40 -15 3,600 Rbn -60 3,400 -20 -80 3,200 -25 -100 3,000 -30 Feb Mar Apr May Jun Jul Aug Jan Feb Mar Apr May Jun Jul Aug Jan Feb Mar Apr May Jun Jul Aug Sep
Recreation, retail Grocery, pharmacy 2019 2020 Rbn Rbn (4 week avg)
Source: Google, Standard Bank Research Source: Eskom, Standard Bank Research Source: IIF, Standard Bank Research
PAGE 10 PBB SOUTH AFRICA – ACTIVITY LEVELS SIGNIFICANT DECLINE IN DISBURSEMENTS IN APRIL, WITH JUMP POST LIFTING OF LOCKDOWN
Mortgage disbursements1 VAF2 disbursements1 Personal lending disbursements1
Lockdown Lockdown Lockdown 4 +23% +26% 46% 43%4 -5% +25% -15% 0% -36% 4 +10% +6% 65% -67%
-35% Rbn Jan Feb Mar Apr May Jun Jul Aug Face-to-face Digital -61% -73% -72% % change 2Q20 vs 1Q20
-100% 59% 16% Rbn Rbn 3 3 Jan Feb Mar Apr May Jun Jul Aug Jan Feb Mar Apr May Jun Jul Aug Face-to-face Digital
1 % change relative to March 2020 4 2Q20 change relative to 1Q20 2 Vehicle and asset finance 3 Average for 3 months PAGE 11 PBB SOUTH AFRICA – ACTIVITY LEVELS ACTIVITY IMPROVED AS LOCKDOWN LEVELS EASED
Customer spend Branch activity % change in spend month on month Volumes1 Values1 Lockdown Lockdown Professional services 2 Other retail -11% Electric-appliance -22% -20% -20% Interior furnishings -40% -36% -37% -37% Hardware -43% Other services -61% Utilities Repair shops Food stores-warehouse Mail order Jan Feb Mar Apr May Jun Jul Aug Jan Feb Mar Apr May Jun Jul Aug Discount stores Drug stores Vehicles Sporting-toy stores ATM activity Quasi cash Volumes1 Values1 Clothing stores Lockdown Department stores Change in Lockdown Health care customer -4% Gas stations -11% -9% -5% -4% -2% spend YoY -14% Education -11% Restaurants-bars -38% Recreation Jun-20/Jun-19 -44% Other transport - down 15% Auto rental Apr-20/Apr-19 Hotel-motel - down 68% Airline Travel agencies Jan Feb Mar Apr May Jun Jul Aug Jan Feb Mar Apr May Jun Jul Aug -100% +65% 1 % change relative to March 2020 2 Professional services includes online service providers
PAGE 12 SOUTH AFRICA – MACRO-ECONOMIC OUTLOOK SLOW GRIND UPWARD
Key takeouts Growth - Real GDP, % Expenditure - HCE/ GFCF1, % • V-shaped growth rebound masks a protracted SBG Research relative to 91.5% 95.6% 97.8% recovery to 2019 real GDP levels 6.5% 2019 GDP 4.3% 5.7% 2.0% • Permanent job and income cuts as well as 4.5% 3.9% depressed confidence will likely weigh on recovery 2.3% 2.6% in consumption as economy re-opens • Recovery likely to be uneven SBG Research -10.5% HCE • Lockdown will weigh on company earnings and -8.5%-8.2% SARB - Sept 20 GFCF fiscal metrics, constrain private and public sector -15.4% capex; infrastructure a possible recovery lever 2020 2021 2022 2020 2021 2022 • Low global inflation, weak pass-through and weak local demand to contain inflation for a protracted Inflation - CPI (avg), % Interest rates - Repo rate (YE), % period despite weak ZAR Dec-19, 6.5% SARB target range, 3-6% • Weak growth and subdued inflation keep risks biased to the downside 4.1% 4.2% 4.25% • Normalisation of interest rates expected to be 3.3% 3.75% delayed 3.50%
• A recovery will depend largely on reforms, stable SARB SARB 2 rate increases in 3Q 3.3% 4.0% 4.4% - electricity supply, and the stabilisation of the Covid- Sept 20 Sept 20 and 4Q 2021 19 pandemic (dependant on an effective vaccine) 2020 2021 2022 2020 2021 2022 Source: SARB, Bloomberg, Standard Bank Research 1 IMF expects global contraction of 4.9% in 2020 followed by recovery of 5.4% in 2021 2 Household Consumption Expenditure/ Gross Fixed Capital Formation PAGE 13 AFRICA REGIONS – PERFORMANCE AND OUTLOOK
PAGE 14 AFRICA REGIONS LEGAL ENTITY RESILIENT PERFORMANCE AGAINST A DIFFICULT BACKDROP, SUPPORTED BY A GROWING FRANCHISE
1H20 1H19 Change Change •Keyto sell takeouts its 20% stake in ICBCA to ICBC Rbn Rbn % CCY % • Strong loan and deposit growth offset a Net interest income 10.6 9.6 11 7 decline in margin driven by negative endowment and continued reserving and Non-interest revenue 9.3 7.6 22 18 balance sheet (LDR1) pressure in Nigeria Total income 19.9 17.2 16 12 • NIR growth driven by strong trading flows (related to market disruptions) and 12 8 Operating expenses (9.9) (8.9) ongoing client franchise growth Pre-provision profit 10.0 8.3 20 16 • Costs were tightly managed, but Credit impairment charges (1.4) (0.7) 96 91 impacted by cost of living adjustments in some countries and increased depositor insurance costs in Nigeria, Ghana and Africa Regions headline earnings 4.8 4.3 11 7 Angola • Credit normalised, in line with expectations. Current year charges Credit loss ratio, bps 123 76 include additional impairments in Nigeria, Cost-to-income ratio, % 49.8 51.6 Zambia and Kenya • Credit recoveries recognised in Malawi, Jaws, bps 410 260 Botswana, Mozambique and Tanzania Return on equity, % 19.9 22.3 • Hyper-inflation adjustments relating to Zimbabwe resulted in a net gain of R46m included in headline earnings 1 Loan-to-deposit ratio
PAGE 15 REGIONAL PERFORMANCE A PARTICULARLY STRONG PERFORMANCE FROM THE WEST REGION UNDERPINNED AFRICA REGIONS’ GROWTH
Headline earnings Return on equity
1H20 1H19 Change Change 1H20 1H19 Rbn Rbn % CCY % % %
Africa Regions 4.8 4.3 11 7 19.9 22.3
East Africa1 0.89 0.87 2 (11) 15.4 20.2
South and 1.76 1.83 (4) (3) 19.0 21.7 Central Africa2
West Africa3 2.16 1.62 33 28 23.7 24.5
Strong performance Muted performance
Moderate performance Single representation / development phase
1 Kenya, South Sudan, Tanzania, Uganda 2 Botswana, Eswatini, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Zambia, Zimbabwe 3 Angola, DRC, Ghana, Côte d’Ivoire, Nigeria
PAGE 16 AFRICA REGIONS – MACRO-ECONOMIC OUTLOOK
Key takeouts Local currency vs USD, % change Inflation rate change YTD, % YTD* • All currencies devalued relative to the USD year to * Positive reflects weakness vs USD date – least in East Region 17.4 3.0 • Inflation relatively subdued despite currency 14.8 weakness – some upward pressure in Ghana and Angola • Interest rate cuts in almost all markets 2.7 • Expect 2020F real GDP to decline in 12 of our 20 0.1 Africa countries S&C West East • SA, Botswana and Namibia expected to be worst -0.2 S&C West East impacted • All East Africa countries expected to remain positive Policy interest rate change YTD, % Local real GDP, % change YOY
2019 6.0 2020F** 2.3 1.6 0.8 -1.2 -1.2
-2.0 -2.0 South & Central (S&C) includes Botswana, Lesotho, Malawi, Mozambique, Namibia, Eswatini, -4.5 Zambia, Zimbabwe; East includes Ethiopia, Kenya, South Sudan, Tanzania, Uganda; West S&C West East includes Angola, Ghana, Nigeria. Statistics excl. Zimbabwe, Cote d’Ivoire, DRC, South Sudan & S&C West East Ethiopia. Detail as at 8 September 2020 ** 2020F is median outlook PAGE 17 LOOKING FORWARD
PAGE 18 STANDARD BANK GROUP - FY20 KEY PERFORMANCE CONSIDERATIONS WITHDRAWN MEDIUM-TERM TARGETS
Known positives Known negatives Known unknowns
• Activity levels recovering from 2Q20 • Covid-19 impact on customers, • Timing of peak and reaction to threat lows employees and third parties of a second wave • Strong capital levels to support • Markets sensitive to news flow • Timing and shape of recovery – recovery • Balance sheet growth to moderate globally, in Africa and in South Africa • BCM embedded and working well in 2H20 • Risk management tested • Lower interest rates • Robust regulatory environment • Credit performance subject to macro developments
Scenario analysis remains key to ensure sufficiently prepared for stress
PAGE 19 STANDARD BANK GROUP - IMMEDIATE PRIORITIES FOR 2H20 CONTINUE TO NAVIGATE A DIFFICULT AND UNCERTAIN ENVIRONMENT
Continue to Accelerate Allocate capital and Manage costs Manage the pandemic support our clients, digitisation to better liquidity judiciously tightly in the face of fallout and limit the employees and enable our clients and in support of the ongoing revenue impact on earnings communities employees recovery pressures and ROE
PAGE 20 STANDARD BANK GROUP - PURPOSEFUL IN DRIVING AFRICA’S GROWTH REMAINING RELEVANT FOR ALL OUR STAKEHOLDERS
Well positioned to weather the storm Compelling competitive advantages
• Record 1H revenues, R56bn • Purpose-driven organisation
• Good operating performance despite Covid-19 headwinds • Unrivalled African-focused capabilities
• Strong provision levels +30% since FY19 and significantly • Established, fit-for-purpose franchise with modern digital core above GFC levels • Modern IT backbone, focus on accelerating digitalisation • Robust customer deposit growth +19%, supporting liquidity • Diversified client base, service offering and revenue streams • Substantial capital capacity1, can absorb >6.5x 1H20 credit charges • Robust capital and liquidity position
• Well regulated industry and experienced management team • Resources and appetite to support the post-Covid-19 recovery
1 Based on CET 1 capital above the SARB CET 1 regulatory minimum (7.0%)
PAGE 21 QUESTIONS
PAGE 22 APPENDIX I – AFRICA REGIONS LEGAL ENTITIES
PAGE 23 STANBIC HOLDINGS PLC (KENYA) INCOME STATEMENT FINANCIAL RESULTS 1H20
1H20 1H19 Change Key takeouts KESbn KESbn % Net interest income 6.3 6.7 (6) • NII reduction ‒ Driven by margin compression Non-interest revenue 5.0 6.1 (19) ‒ Partly offset by early repayment of Total income 11.3 12.8 (12) expensive debt Operating expenses (5.2) (6.0) 15 • NIR impacted by regulatory changes on Pre-provision profit 6.1 6.8 (10) fees Credit impairment charges (2.0) (1.2) (61) • Costs well managed • Credit impairment charges increased due Tax (1.6) (1.5) (5) to an increase in stage 3 loans (NPLs) Profit After Tax 2.6 4.1 (37)
Customer loans 161.0 161.9 (1) Customer deposits 256.7 201.6 27
Net interest margin, bps 410 480 Credit loss ratio, bps 250 150 Cost-to-income ratio, % 45.7 47.1 ROE, % 10 18
PAGE 24 STANBIC IBTC HOLDINGS PLC (NIGERIA) INCOME STATEMENT FINANCIAL RESULTS 1H20
1H20 1H19 Change Key takeouts Nbn Nbn % Net interest income 37.5 39.3 (4) • Growth in loans partly offset by depressed asset yields Non-interest revenue 69.8 54.9 27 • NIR supported by increase in trading Total income 107.3 94.2 14 income Operating expenses (48.5) (50.1) (3) • Strong cost containment Pre-provision profit 58.8 44.1 33 • Credit impairment charges normalised following a recovery in 1H19 Credit impairment charges (6.4) 0.6 (>100) Tax (7.2) (8.5) (14) Profit After Tax 45.2 36.2 25
Customer loans 573.9 455.1 26 Customer deposits 769.3 693.5 11
Net interest margin, bps 320 490 Credit loss ratio, bps 220 (30) Cost-to-income ratio, % 45.2 53.2 ROE, % 28.3 28.5
PAGE 25 STANBIC UGANDA HOLDINGS LTD INCOME STATEMENT FINANCIAL RESULTS 1H20
1H20 1H19 Change Key takeouts UGXbn UGXbn % Net interest income 250 215 16 • NII supported by strong balance sheet growth Non-interest revenue 173 183 (6) • NIR impacted by low activity levels and Total income 423 398 6 client relief measures (transaction fee waivers) due to Covid-19 Operating expenses (214) (201) (3) • Strong cost containment Pre-provision profit 209 197 6 • Uptick in credit impairment charges as Credit impairment charges (39) (14) (>100) the deterioration in the economic Tax (42) (49) (14) environment impacted our clients’ ability to service their loans Profit After Tax 127 134 (5)
Customer loans 3 419 2 758 24 Customer deposits 5 207 4 114 27
Credit loss ratio, bps 220 100 Cost-to-income ratio, % 50.6 50.5 ROE, % 21.6 27.6
PAGE 26 SBN HOLDINGS LTD (NAMIBIA) INCOME STATEMENT FINANCIAL RESULTS 1H20
1H20 1H19 Change Key takeouts N$bn N$bn % Net interest income 630 659 (4) • NII decrease due to 275bps decline in repo rates as announced by the Bank of Non-interest revenue 587 608 (4) Namibia Total income 1 217 1 267 (4) • NIR impacted by reduction in transactional volumes during lockdown in Operating expenses (743) (689) 7 2Q20 Pre-provision profit 474 578 (18) • Strong cost containment Credit impairment charges (151) (178) (15) • Credit impairment charges declined following a significant one-off provision raised in 1H19 Profit After Tax 227 282 (20)
Customer loans 22.4 23.2 7 Customer deposits 26.4 26.2 7
Credit loss ratio, bps 130 160 Cost-to-income ratio, % 61.0 54.4 ROE, % 21.6 27.6
PAGE 27 APPENDIX II – 1H20 RESULTS
PAGE 28 CLIENT FOCUS
PAGE 29 CLIENT FOCUS SUPPORTING OUR CLIENTS WHEN IT MATTERED MOST
Helping you We’re open keep in touch for business and here for you Helping you to connect and continue operating
Consumer & High Net Worth clients Business & Commercial clients Wholesale clients • Expanded our client support • Focused on keeping our business • Helped clients manage their risk, through capabilities to manage the increased clients in business: ECM and DCM advisory services customer relief requests − Provided client relief, liquidity and • Enabled our clients to continue to trade • Delivered real value in difficult times working capital solutions through volatile time, leveraging our deep understanding of African dynamics through fee and premium reductions / − Waived certain fees for businesses not waivers and free value-add offerings operating • Provided client-specific relief solutions - payment holidays, term extension, covenant • Put money back in our customers’ • Provided online support, advice and tools pockets through insurance premium cash- waivers, amongst others • Supported various industry initiatives back and lower reward programme criteria • Provided ongoing and enhanced client e.g. South Africa SME Guarantee Fund access to global investors and capital • Paid out on customer claims – loss of and South Africa Future Trust income and retrenchment cover
PAGE 30 CLIENT FOCUS DELIVERING NEW AND CONVENIENT DIGITAL SOLUTIONS
New features and improvements on mobile app and internet banking SimplyBlu is a simple, cost-effective “ecommerce in a box” solution to make self-service easier help clients start and run an online business My360 provides clients with a full view of their balance sheet, regardless of institution or geographic location BizFlex is a short-term lending solution, providing businesses with the flexibility to repay loans as revenue is earned at a cost guaranteed Contactless payment solutions and virtual cards enable clients to upfront transact with merchants without their card or purchase safely online
entrepreneurs InstantMoney transfers on mobile app and InstantMoney Bulk Payments allow clients to safely transfer money without using cash Solutions for SMEs and and SMEs for Solutions OneFarm platform provides lending, insurance and agronomy support to farmers, helping them to increase their crop yields @Ease in Nigeria is an electronic wallet to meet the needs of the informally served and under- and multi-banked
LookSee is our free online property guide which helps clients to make an TradeClub is our B2B matchmaking platform, connecting trusted informed decision before they purchase a home businesses across the African continent with China and other markets Digital escrow service launched reduces the risk of fraud when buying globally themselves serve clients our Helping or selling online
QuantumTrade is an end-to-end digital solution on an online platform Standard Bank Mobile provides clients with much more than a mobile
Trade solutions Trade for clients to obtain guarantees and letters of credit network, rewarding them with airtime or data
PAGE 31 EMPLOYEE ENGAGEMENT
PAGE 32 EMPLOYEE ENGAGEMENT KEEPING OUR EMPLOYEES SAFE & CONNECTED
PAGE 33 EMPLOYEE ENGAGEMENT RESPONSIBILITY TO EQUIP OUR EMPLOYEES FOR THE FUTURE
PAGE 34 RISK AND CONDUCT
PAGE 35 PORTFOLIO RISK MANAGEMENT DIVERSIFIED ACROSS PRODUCT, SECTOR & GEOGRAPHY
Key takeouts Gross loans and advances to customers
• Book diversified by product and sector and geography Mortgages – leading South Africa market share, • Staying close to our customers portfolio LTV1 of 88% and BTV2 of 55%, Africa • Expert teams monitoring risk Regions portfolio largely in Namibia • Sectors will recover at different rates • Much uncertainty remains, and will Vehicle and asset finance (VAF) – leading require ongoing diligent monitoring of commercial franchise and growing retail business developments against expectations R1 193bn Personal unsecured lending – leading card business in South Africa, with sophisticated risk scoring supporting digital origination Intl CIB Business lending – established South African AR client base, Africa Regions’ risk managed through ecosystem approach PBB SA Mortgages VAF Corporate and Investment banking – diversified Personal unsecured Business lending portfolio of domestic and MNC clients; Oil & Gas CIB % Gross loans to % Gross loans to (8%), Real Estate (15%), Hotel & Leisure (1%) customers customers 1 Original loan to value 2 Outstanding book to value
PAGE 36 COVID-19 CLIENT RELIEF PBB CLIENT RELIEF (R118BN)
PBB credit portfolio mix PBB SA by product type Key takeouts
PBB South Africa R597bn Total portfolio • Client relief provided represents 18% of 597 the portfolio • Mortgages make up the largest part of the 107 Client relief R107bn client relief portfolio by value, but in line with overall portfolio Mortgages VAF • Higher proportion of client relief in VAF – Card Personal unsec. principally to small enterprise customers Business who were up to date at the end of Mar-20
490 PBB Africa Regions by region PBB Africa Regions • Client relief provided represents 12% of the portfolio 89 Total portfolio R89bn 11 • Most of the relief, by value, provided in 78 the East Region
Rbn 1 2 • Most impacted sectors - Tourism, PBB SA PBB AR Client relief R11bn Transport, Agriculture, Mining, Oil & Gas Industrials, Telecoms Media & Technology Infrastructure and Floriculture Client relief portfolio Base portfolio South & Central East West
1 PBB SBSA portfolio is as at 30 June 2020, excluding loans to banks of R3bn 2 PBB Africa Regions portfolio as at 30 June 2020
PAGE 37 COVID-19 CLIENT RELIEF CIB CLIENT RELIEF EXPOSURES (R48BN)
CIB total portfolio mix1 CIB relief by sector2 Key takeouts
• Initial flurry of client requests in March Real Estate and April but slowed in May and June Consumer • Certain pre-Covid-19 risks aggravated – 15% Industrials Zimbabwe, Zambia, South Africa R48bn Power & Infr. • Countries impacted by Covid-19 and oil Mining & Metals price decline - Angola, Nigeria and Ghana Telecom & Media • Real Estate sector under strain – 70% monitoring valuations, cashflows and debt maturities. CIB RE portfolio splits: 2 CIB relief by geography − South Africa / Africa Regions / International split – 73% / 14% / 13% − Retail / Industrial / Office / Residential 15% split – 42% / 32% / 16% / 10%
% 1H20 South Africa • Relief provided differs by client – liquidity, R48bn capital and interest waivers, covenant Africa Regions waivers and tenor extension Vulnerable - discretionary supply chain Mixed - infrastructure, financial & sovereign supply chains • 2H20 outlook by sector, country, region Unaffected - essential consumer supply chain • Diversification is a key risk mitigant
1 Based on internal risk assessment, total portfolio R487bn 2 Based on exposure
PAGE 38 1H20 FINANCIAL OUTCOME
PAGE 39 STANDARD BANK GROUP INCOME STATEMENT CREDIT IMPAIRMENT CHARGES A DRAG ON RESULTS
1H20 1H19 Change Change Key takeouts Rbn Rbn % CCY % • Strong loan and deposit growth, offset by Net interest income 31.2 31.2 0 (2) margin decline driven by lower average Non-interest revenue 24.6 23.1 6 4 interest rates Total income 55.8 54.3 3 1 • NIR growth driven by strong trading revenues; more than offsetting a decline Operating expenses (31.5) (31.0) 2 0 in fees due to lower consumer activity Pre-provision profit 24.3 23.3 4 2 and transactional volumes Credit impairment charges (11.3) (4.2) >100 >100 • Costs were tightly managed, resulting in positive jaws, despite additional business continuity expenses Banking activities headline earnings 7.7 12.8 (40) (41) • Credit impairment charge increase Other banking interests 0.5 (0.3) >100 >100 reflective of the challenging macro- Liberty (0.7) 0.9 (>100) (>100) economic environment, continued strain on corporates and the consumer and SBG headline earnings 7.5 13.4 (44) (44) provisions raised on the client relief portfolio Net interest margin, bps 387 444 Credit loss ratio, bps 169 76 Cost-to-income ratio, % 56.4 57.0 Jaws, bps 100 110 ROE, % 8.5 16.2
PAGE 40 PERSONAL AND BUSINESS BANKING NEGATIVE ENDOWMENT, LOWER ACTIVITY AND ELEVATED CREDIT CHARGES ALL HEADWINDS
Pre-provision operating Headline earnings Cost-to-income ratio •Keyto sell takeouts its 20% stake in ICBCA to ICBC profit 1H20: 62.6% • Business performance drivers: 1H19: 60.6% 1H20: R13.1bn 1H20: R2.9bn − Lower volumes drove fee pressure 1H19: R14.0bn 1H19: R7.3bn Return on equity − Higher impairments driven by current 6% 60% 1H20: 7.5% market conditions, deteriorated 1H19: 20.1% outlook and pro-active staging of client relief portfolio − Uplift from higher cover and higher Geographic split premium insurance products South Africa Africa Regions Wealth International • Geographic performance: − South Africa impacted by negative 1H20: R1.9bn 1H20: R0.5bn 1H20: R0.4bn endowment, elevated impairments, low transactional volumes and a
1H19: R6.1bn 68% 1H19: R0.49bn 3% 1H19: R0.7bn 34% slowdown in disbursements in 2Q20 earnings Headline Headline − Africa Regions supported by its expanding client franchise, balance sheet and AUM1 growth in Nigeria and 1H20 7.1% 1H20 7.4% 1H20 10.9% sub-inflationary cost growth
− International decline was driven by equity
Return on 1H19 23.0% 1H19 7.4% 1H19 22.6% lower average UK and US interest % % % rates 1 Assets under management
PAGE 41 CORPORATE AND INVESTMENT BANKING STRONG TRADING PERFORMANCE AND TIGHT COST MANAGEMENT
Pre-provision operating Headline earnings Cost-to-income ratio •Keyto sell takeouts its 20% stake in ICBCA to ICBC profit 1H20: 49.6% • Business highlights: 1H19: 52.7% 1H20: R10.8bn 1H20: R5.7bn − Sustained client revenue growth in a tough operating environment 1H19: R9.1bn 1H19: R6.1bn Return on equity 1H20: 15.1% − Focus on cost management delivered a 19% 7% cost-to-income ratio below 50% and 1H19: 19.2% positive jaws − Increased capital utilisation as a result Product split of client rating downgrades • Product performance: Global Markets Investment Banking Transactional Products − Global Markets - strong trading and Services performance driven by client flows − Investment Banking - strong balance sheet growth driven by client 1H20: 1H20: 1H20: drawdowns on unutilised facilities and R4.4bn R0.2bn R1.2bn revolving facilities as well as new 1H19: R2.3bn 1H19: R2.0bn 1H19: R1.8bn origination, margin pressure, negative
equity revaluations and impairment
Headline Headline earnings 88% 91% 36% pressure − TPS - adversely impacted by lower interest rates, regulatory changes and elevated impairments
PAGE 42 1H20 PROVISIONS AND CREDIT CHARGES
PAGE 43 BALANCE SHEET – PROVISIONS SIGNIFICANT INCREASE IN PROVISIONS AS BEHAVIOUR SCORES AND CLIENT RATINGS DETERIORATED AND DEFAULTS ROSE
Balance sheet provision movement Balance sheet provision split Key takeouts
Stage 3 • Provisions increased as net provisions Stage 2 raised exceeded write-offs. ZAR +31% Stage 1 46.3 weakness drove other adjustments • Stage 1 – growth driven by balance sheet (3.8) 3.0 growth and CIB client risk downgrades 11.8 35.3 • Stage 2 – growth driven by the deterioration in the existing environment and the outlook (driving forward-looking 5.17.5 29.6 provisions) as well as provisions on the +31% 22.6 client relief portfolio • Stage 3 – a higher number of client defaults resulted in: 10.5 +40% − Existing stage 1 and 2 provisions 7.5 rolling into stage 3 35.3 46.3 5.2 +20% 6.2 − An increase in provisions raised on Rbn Rbn those exposures 1 Jan 20 Net Write Other 30 Jun 20 1 Jan 20 30 Jun 20 provisions offs • Coverage increased raised
1H19 Total 36.7 5.1 (6.2) 0.9 36.5 2.9% 3.3% Rbn coverage
PAGE 44 BALANCE SHEET – GROSS LOANS AND PROVISIONS PROVISIONS INCREASED SIGNIFICANTLY MORE THAN LOANS
Stage 3 Group PBB CIB Stage 2 +14% Stage 1 64 +2% +30%
123 1 89 46 47 89 37 39 50 14 63 87 36 61 9 28 26 8 1 088 1 080 1 202 620 635 619 641
advances 526 499 Gross loans and and loans Gross Rbn Jun-19 Dec-19 Jun-20 Rbn Jun-19 Dec-19 Jun-20 Rbn Jun-19 Dec-19 Jun-20
+31% +27% +45%
29.6 24.4 5.2 23.3 22.6 4.9 18.4 19.3 3.3 10.5 1.3 7.1 7.5 6.0 8.9 1.1 1.1
Provisions 6.4 6.1 5.2 6.2 4.9 3.8 4.1 1.2 1.3 1.8 Rbn Jun-19 Dec-19 Jun-20 Rbn Jun-19 Dec-19 Jun-20 Rbn Jun-19 Dec-19 Jun-20 Total coverage 3.0% 2.9% 3.3% 4.1% 4.0% 5.0% 1.3% 1.1% 1.2% 1 Based on gross loans and advances and provisions per page 52-57 of the 1H20 financial analysis booklet. Group net of interdivisional balances. The CIB portfolio increase driven by a large increase in loans to banks. Group includes the central provision of R500m, split stage 1, R185m and stage 2, R315m
PAGE 45 CREDIT IMPAIRMENT CHARGES SIGNIFICANT INCREASE IN CREDIT IMPAIRMENT CHARGES
Credit impairment charges, Rm1 Key takeouts
Multiple • Credit charges were 2.5x the prior CLR 99 bps 105 bps 96 bps 62 bps 76 bps 169 bps of 1H19 period, driven by: 2.5x − A deterioration in the macro-economic 500 Centre conditions as well as the outlook CIB, 2 161 − Additional provisions raised on the 2.7x client relief portfolio − An additional central provision raised due to the considerable uncertainty • Credit loss ratio increased to 169bps PBB, • CIB charges 2.7x 1H19, driven by: 8 610 2.3x − Corporate and sovereign risk rating changes and an increase in watchlist and NPLs 5 032 5 815 5 155 3 344 4 467 11 271 • PBB charges 2.3x 1H19, driven by:
Rmbps 1H15 1H16 1H17 1H18 1H19 1H20 1H20 − Increased customer strain, protracted legal and foreclosure processes and Credit charges on financial investments and guarantees, Rm (220) 20 lower collections in lockdown • Average analyst credit loss ratio Total credit impairment charges, Rm 4 247 11 291 expectation for FY20 is 163 bps (min:154 bps, max:236 bps)
1 Graph and CLR represents credit impairment charges on loans and advances
PAGE 46 CAPITAL & LIQUIDITY
PAGE 47 SARB DIRECTIVE AND GUIDANCE NOTES
Overview • Temporary reduction in regulatory minimum ratio from 100% to 80% - effective 1 April 2020 • Phase back to 100% post market normalisation to be determined by PA Key Implications LCR • Results in lower minimum requirements providing temporary liquidity relief to banks during this time, in line with the intention of the Basel II LCR framework
Overview • Temporary relaxation of the Pillar 2A (P2A) capital requirements held for systemic risk SARB • Banks permitted to use conservation buffers subject to distribution prohibitions Key Implications Directives/ CAR • Current 0.5% CET1, 0.75% Tier 1 and 1% Total capital buffers reduced to 0% • Results in lower minimum requirements, lower requirements for AT1/T2 redemptions on call dates and larger buffers to Guidance conservation levels • Reduced buffers are not intended to support distributions Note
Overview • Guidance notes on impairment treatment for IFRS 9 COVID -19 driven restructures IFRS 9 Key Implications • No requirement to move Covid-19 restructures to Stage 2 or 3 (in the absence of other credit risk concerns) • Ring fencing of portfolio to distinguish between longer term credit and temporary Covid-19 challenges
PAGE 48 CAPITAL AND LIQUIDITY ROBUST BASEL III COMPLIANT CAPITAL AND LIQUIDITY POSITIONS
Capital1 Capital adequacy1 Liquidity
Net stable funding ratio 205
184 30 172 22 8 13.9 Basel III 153 20 14.0 146 8 122% minimum 6 13.5 17 13.5 (1H19: 119%) 20 100% 7 13.8 4 12.6 13.1
12.5 167 Liquidity coverage ratio 146 154 123 130 SBG target ratio 10.0%-11.5% SARB minimum >7.0% Basel III 136% minimum3 (1H19: 124%) 80% Rbn Dec-16 Dec-17 Dec-18 Dec-19 Jun-20 % Dec-16 Dec-17 Dec-18 Dec-19 Jun-20
Tier 2 Tier 1 CET1 CET 1 (phased-in) CET 1 (fully-loaded)2
1 Including unappropriated profits 2 Including full IFRS 9 transitional impact 3 Based on temporarily revised SARB requirement PAGE 49 CAPITAL CAPITAL LEVELS REMAIN WELL IN EXCESS OF REQUIREMENTS, PROVIDING CAPACITY TO SUPPORT THE RECOVERY
CET 1 ratio drivers1 RWA movement YTD Credit risk 1 325 +20% 0.3 (0.8) 24 29 11 58 +11% 0.1 0.1 16 (7%) 0.3 1.2 1 100 28 134 178 (2.6) +76% driven by +8% 52 17 increased repo 86 +14% 166 +9% +35% driven by trading in Africa 56 +76% deterior- increased client Regions and 75 ation of exposures, credit higher South 32 portfolio ratings migration Africa period-end and and LGD exposures due to Capacity Rbn Multiple of 1H20 balance changes, as well ZAR weakness 3 credit charges growth as ZAR weakness +23% SBG target ratio >10% R35bn 3.1x 931 758 SARB minimum >7.0% R75bn 6.6x
14.0 12.6
% Dec-19 Profit for Sale of FCTR Growth in Dividends Other RWA Jun-20 Rbn Dec-19 PBB CIB Centre Counterparty Other Jun-20 the period ICBC NCI paid 2 growth credit risk Argentina Credit Counterparty credit Market Operational Equity risk Financial entities
1 Including unappropriated profits and IFRS 9 transitional impact 2 Dividend paid related to FY19 final dividend paid in April 2020 3 Multiple based on 1H20 credit impairment charges of R11.3bn PAGE 50 MARKET CONTEXT – SA MARKET OVERVIEW 2020 YTD TIMELINE AND MARKET EVENTS IMPACT ON USD/ZAR AND R186 GOVERNMENT BOND YIELD
19.5 12.0 19.0 7 11.5 5 18.5 8 5 11.0 18.0 10.5 17.5 9 17.0 10.0 15 10
16.5 4 9.5 % 13 14 16.0 3 11 9.0 15.5 2 8.5 15.0 12 8.0 14.5 14.0 1 7.5 13.5 7.0 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
USD/ZAR R186 YTM
2020 Events
1 16 January: SARB cuts the Repo rate by 25 bps 8 9 April: President Ramaphosa extends the nationwide lockdown by a further 2 weeks
2 26 February: 2020 Budget speech 9 14 April: SARB unexpectedly cuts the Repo rate by a further 100 bps
3 5 March: First COVID case reported in South Africa 10 29 April: S&P downgrades South Africa to BB-
4 19 March: SARB cuts the Repo rate by 100 bps 11 30 April: South Africa expelled from the world government bond index
5 25 March: SARB initiates bond buyback programme 12 21-May: SARB cuts the Repo rate by 50 bps
6 27 March: National Lockdown begins 13 23-July: SARB cuts the Repo rate by 25 bps 23-July: IMF Approves US$4.3 Billion in Emergency Support to South Africa to address the 27 March: Moody’s downgrades the sovereign to sub-investment grade 14 COVID-19 Pandemic
7 3 April: Fitch downgrades South Africa to BB 15 18 Aug: South Africa enters level 2 of nationwide lockdown
PAGE 51 Source: Bloomberg LIQUIDITY CONDITIONS AND WHOLESALE FUNDING PRICING – SA MARKET SIGNIFICANT IMPROVEMENTS IN REGULATORY LIQUIDITY RATIOS DRIVING PRICING IN FUNDING MARKETS
SBSA NCD pricing Key takeouts 165 Key SBG liquidity ratios 145 As at Jun-20 liquidity ratios were above target ratios driven by strong deposit 125 growth across all sectors and slower than expected Covid-related asset growth 105
bps 85 • SBG LCR: 136.1% vs minimum requirement of 80% (2Q20 average) 12 months 65 36 months • SBG NSFR: 122.2% vs minimum requirement of 100% (30 Jun 2020) 45 60 months Market pricing moves 25
NCDs have seen unprecedented pricing decreases to post-GFC lows:
06-Jul-20 20-Jul-20
13-Apr-20 27-Apr-20
08-Jun-20 22-Jun-20
02-Mar-20 16-Mar-20 30-Mar-20
03-Aug-20
11-May-20 25-May-20 • 12m : 80 bps reduction
• 36m : 60 bps reduction SARB liquidity management in context
• 60m : 58 bps reduction The SARB have begun to reduce measures to ease liquidity strains in domestic financial markets, but remain ready to support the markets in need Senior bonds pricing levels have reduced significantly since Mar-20 • Monetary policy has been loosened to stimulate the economy • 3 -15 year having decreased by an average of 54 bps • At the peak of the crisis, an additional R45bn of liquidity was provided to the • Continued two way flow of senior debt in secondary markets money market system. This has since lowered back to normalised levels • The SARB has indicated that it will continue to maintain a shortage based Strong liquidity conditions could remain as loan growth expectations remain system, targeting historical levels of R56bn (no structural accommodation muted for the economy into 2021 provided though this mechanism)
PAGE 52 SOCIAL, ECONOMIC AND ENVIRONMENT
PAGE 53 SEE IMPACT UNDERPINNED BY OUR PURPOSE & STRATEGY
Focus areas Existing, underway and planned Timing
Strategy • A purpose-driven organisation – driving Africa’s growth Purposeful in the allocation of • Ongoing • Recognise the importance of E, S and G1 resources
Risk management and • ESG embedded in existing client onboarding and transaction screening • Well embedded governance as well as ongoing portfolio management and deal monitoring processes internally Policies and procedures • Developing an overarching ESG Framework • FY20 / FY21
• Sustainable finance business unit • FY19 Sustainable finance • Recognised as a leader in Africa2 – arranged 40% of all green bonds • FY20 Helping our clients’ transition issued in Africa in 2019
Transparency • Published our various group policies3, ESG report, Sustainability Bond • Initial TCFD1 – 3Q20xx Framework Focused on expanding our • Fossil fuel policy – disclosures • Focused on expanding our disclosures and committed to TCFD1 YE20
Standard Bank is a founding signatory of the UN Principles for Responsible Banking and the chair of the UNEP FI4 Banking Committee 1 Environmental, social and governance, in line with the Paris Agreement and Equator Principles. We recognise and support the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures 2 Recognised as the Best Global Investment Bank for Sustainable Finance by Global Finance – delivered the 1st Green Bond in East Africa and the 1st Green Infrastructure Bond in West Africa and pioneered Sustainability Linked Loans 3 Published polices available on Standard Bank Group’s ESG website: https://sustainability.standardbank.com/esg-policies/ 4 United Nations Environment Programme Finance Initiative PAGE 54 APPENDIX III – CREDIT & PROVISIONS
PAGE 55 EXPECTED CREDIT LOSS DRIVERS IFRS 9 APPROACH
IFRS 9 categorises financial instruments into three stages based on credit risk, Key takeouts these stages determine how expected credit losses are measured PBB • Driven by internal client behaviour reviews e.g. income and spending Stage triggers Initial Significant increase Credit-impaired (e.g. recognition in credit risk defaulted) positions patterns and external data e.g. bureau data CIB Drivers of expected Stage 1 Stage 2 Stage 3 • Provisioning driven by individual client credit losses risk ratings
Largely driven by macro-economic Driven by • Ratings dependent on sector and assumptions idiosyncratic factors geography risk assessment as well as specific client risk profile
South Africa and Africa Regions client relief • Client risk rating downgrades can trigger move from stage 1 to stage 2
Forward-looking assumptions
Period for expected 12-months Lifetime of financial instrument credit loss measurement
PAGE 56 FORWARD-LOOKING ECONOMIC EXPECTATIONS IFRS 9 CREDIT MODEL PARAMETERS AND SCENARIOS
Scenario weighting1 and parameters
2 2 Base: 50% Dec-19 base scenario Jun-20 base scenario weight Updated baseline scenario2 2020 2021-2024 2020 2021-2024 Real GDP growth (annual, % South Africa1 1.3 2.2 (8.5) 3.3 change) Africa Regions3 3.7 4.6 (0.6) 6.2
Inflation (annual, %) South Africa1 4.6 4.9 3.4 4.5 Africa Regions3 7.6 7.1 8.2 7.5
Interest rate (%) South Africa (prime rate)1 9.75 10.03 7.25 9.25
Africa Regions (policy rate)3 9.40 8.80 8.71 8.67
Employment growth rate (%) South Africa1 0.5 0.9 (2.6) 0.7
Bull: 15% Prevailing crisis accelerates structural reforms and supports post-pandemic recovery, driving infrastructure spend, investment weight flows and employment in South Africa
Bear: 35% Assumes a deeper and more protracted economic contraction, lack of structural reforms and worse fiscal outlook weight
1 Scenario weighting changed with updates to new macro-economic assumptions. As as 31 December 2019, the SA Base scenario weighting was 55%, Bull 25% and Bear 20% 2 Full list of macro-economic factors included in the Base, Bull and Bear scenarios are included in the 1H20 financial analysis booklet. 3 Based on average, excluding Zimbabwe, AR scenario weightings set at a country level PAGE 57 PBB SA CLIENT RELIEF – CREDIT TREATMENT FOR RETAIL PRODUCTS1 BASED ON IFRS 9, COVID-19 CLIENT RELIEF AND RESTRUCTURES GUIDANCE NOTES AND INTERNAL MODELS
1 Do the terms meet SARB client relief conditions2 Covid-19 client relief decision tree • Relief granted post 6 April 2020 Has the loan been • Loan was performing as at 29 February 2020 restructured? Yes 2 Assess if Covid-19 impact is permanent/ high risk Do the terms of the • Assess if relief is considered permanent distress e.g. unemployment, No Account for the loan as a restructure meet the SARB restructure full loss of income, retrenchment “client relief” conditions 3 If not permanent, then assess if medium or low risk Yes • Determine if counterparty is considered medium or low risk Has the customer been Yes retrenched, received zero High risk – account for the • Customer score cut offs defined to establish staging at a customer turnover or experienced a loan within stage 3 level and applied per product permanent loss of income • Balances classified as Stage 2 – temporary / medium risk: No − If in Stage 1, reclassify as Stage 2 and raise provisions Has there been a Yes Medium risk – account for − If in Stage 3, leave in Stage 3 deterioration in the the loan within stage 2 customer’s risk profile? 4 Other – follow existing restructure treatment 3 No • Distressed restructures classified as Stage 3 accounts Low risk – account for the • Monitor payments over 6 months before considering reclassifying loan within stage 1
1 Business lending is is scoped out of the temporary / permanent assessment as their scorecards take various factors into account e.g. turnover. This adequately captures the risk of the customer. This combined with the forward-looking provision raised at an industry level adequately captures the appropriate coverage for these accounts 2 D3 / 2020 – SARB Directive regarding temporary treatment of restructures related to client relief granted due to Covid-19 3 D7 / 2015 – SARB Directive regarding restructures granted in the ordinary course and / or prior to Covid-19 and associated debt review process PAGE 58 BALANCE SHEET – PBB SA GROSS LOANS AND PROVISIONS1 COVERAGE INCREASED ON BASE PORTFOLIO, CLIENT RELIEF PORTFOLIO LOWER COVERAGE DUE TO NATURE THEREOF2
PBB SA Loans and advances, Rbn Dec-19 Jun-20
1 Base Client Total Total portfolio relief Stage 3 34 44 43 1
Stage 2 54 76 54 22 advances Stage 1 507 480 396 84 Client relief portfolio is Gross loans and and loans Gross Total 595 600 493 107 18% of the PBB SA Rbn Jun-19 Dec-19 Jun-20 portfolio
Stage 3 Stage 2 Provisions, Rbn Coverage, % Stage 1 Dec-19 Jun-20 Dec-19 Jun-20 Base Client Base Client
3 Total Total Total Total portfolio relief portfolio relief Stage 3 17.0 21.2 20.9 0.3 50.7 48.3 48.9 26.8
Stage 2 5.2 7.4 5.7 1.7 9.7 9.7 10.5 7.7
Stage 1 3.2 3.3 2.7 0.6 0.6 0.7 0.7 0.8 Provisions Total 25.4 31.9 29.3 2.6 4.3 5.3 5.9 2.5 Rbn Jun-19 Dec-19 Jun-20
1 Based on SBSA PBB gross loans and advances and provisions per pages 76-83 of the 1H20 financial analysis booklet 2 Loans included in the PBB SA client relief portfolio were performing as at 31 March 2020 3 Total provisions as at 30 June 2020 include R2.0bn for forward looking and R2.6bn for client relief portfolio PAGE 59 PBB SA GROSS LOANS AND PROVISIONS BY PRODUCT BASE PORTFOLIO AND CLIENT RELIEF PORTFOLIO1
Loans and advances, Rbn Provisions, Rbn Coverage, % Dec-19 Jun-20 Dec-19 Jun-20 Dec-19 Jun-20 Base Client Base Client Base Client Total Total Total Total Total Total portfolio relief portfolio relief portfolio relief Mortgages 357.2 359.1 293.3 65.8 10.1 12.4 11.5 0.9 2.8 3.5 3.9 1.3 VAF 84.9 85.4 60.6 24.8 3.1 4.1 3.6 0.5 3.7 4.8 5.9 2.3 Card 34.0 33.6 28.2 5.4 2.6 3.3 2.8 0.5 7.6 9.7 9.7 9.5 Personal 44.8 45.7 41.3 4.4 6.1 7.7 7.2 0.5 13.6 16.9 17.6 10.8 Business 74.1 76.5 70.4 6.1 3.5 4.4 4.2 0.2 4.7 5.7 6.0 3.0 Total 595.0 600.3 493.8 106.5 25.4 31.9 29.3 2.6 4.3 5.3 5.9 2.5
1 Based on SBSA PBB gross loans and advances and provisions per pages 76-83 of the 1H20 financial analysis booklet. Total forward-looking provisions have been included in the base portfolio and are therefore, not explicitly allocated to the client relief portfolio
PAGE 60 CREDIT IMPAIRMENT CHARGES – PBB SOUTH AFRICA INCREASE DRIVEN BY CUSTOMER RISK PROFILES, DETERIORATING OUTLOOK AND CLIENT RELIEF
Credit impairment charges Key takeouts Stage 3 impairments • Customers impacted by job losses and 2.6x 2 055 income reductions • Constrained collections environment driven by lockdowns 676 • Protracted legal foreclosure process due 4 915 (319) 161 to slow down in the courts under lockdown regulations • Deterioration in customer risk profiles Forward looking provision change1 • Deterioration of economic outlook and impact of industry specific concerns Covid-19 client relief provision2 186 16 7 690 2 990 4 959 7 690 4 959 • Certain clients have been provided with Rmbps 1H19 1H20 - pre FL 1H20 Rm relief e.g. payment holidays
& client relief bps Other
1H20 • Staging and provisions raised on the
relief
Stage 1 Stage 2 Stage 3 Stage
update client relief portfolio are driven by the
Covid-19
1H20 - pre - 1H20 client & FL
client relief client Recoveries CLR 106 bps 169 bps 261 bps looking Fwd customer risk and outlook
1 Total balance sheet forward looking provisions increased R676m from R1.3bn to R2.0bn; stage 1 R150m, stage 2 R272m and stage 3 R254m 2 Additional provisions raised on the loans now classified as the client relief portfolio amounted to R2.1bn resulting in total balance sheet provisions held of R2.6bn; stage 1 R68m, stage 2 R1 704m and stage 3 R283m PAGE 61 BALANCE SHEET – PBB AR GROSS LOANS AND PROVISIONS COVERAGE INCREASED ON BASE PORTFOLIO, CLIENT RELIEF PORTFOLIO LOWER COVERAGE DUE TO NATURE THEREOF
PBB AR Loans and advances, Rbn Dec-19 Jun-20 Base Client Total Total portfolio relief Stage 3 5.3 6.8 6.8 0.0 Stage 2 8.7 10.5 8.7 1.8
Gross loans and and loans Gross Stage 1 64.0 71.5 62.4 9.1 Client relief portfolio is Total 78.0 88.8 77.9 10.9 12% of the PBB AR advances to customers to advances Rbn Jun-19 Dec-19 Jun-20 portfolio
Stage 3 Stage 2 Provisions, Rbn Coverage, % Stage 1 Dec-19 Jun-20 Dec-19 Jun-20 Base Client Base Client Total Total Total Total portfolio relief portfolio relief Stage 3 2.5 3.4 3.4 0.0 47.1 50.0 50.0 50.9
Stage 2 1.1 1.5 1.3 0.2 13.0 14.4 15.3 9.9
Stage 1 0.8 0.9 0.8 0.1 1.2 1.2 1.3 0.9 Provisions Total 4.4 5.8 5.5 0.3 5.6 6.5 7.1 2.6 Rbn Jun-19 Dec-19 Jun-20
PAGE 62 CREDIT IMPAIRMENT CHARGES – PBB AFRICA REGIONS SIGNIFICANT STAGE 3 PROVISIONS RAISED FOLLOWING SPECIFIC DEFAULTS
Credit impairment charges Key takeouts
Stage 3 impairments (331) 880 • Charge driven by provisions in Kenya, 1.3x 109 Mozambique, Tanzania and Uganda 141 Recoveries 302 • Notable recoveries in Malawi and Nigeria Forward looking provision changes1 • Increase in impairment charges to align with the macro-economic outlook deterioration Covid-19 provisions2 • Client-specific reviews led to pro-active staging amendments; including on the 75 client relief portfolio 704 633 883 9 633 633 883
bpsRm 1H19 1H20 - pre 1H20 Rm FL & client bps 1H20
relief
Stage 1 Stage 2 Stage 3 Stage
update
Covid-19
provisions
updates
Recoveries Fwd looking Fwd
CLR 187 bps 148 bps 206 bps Covid-19 & 1H20 - pre FL pre - 1H20 1 In 1H20, the PBB Africa Regions forward-looking provision increased by R141m to R554m on the back of the deteriorating macro-economic outlook. 2 Additional stage 2 and stage 3 provisions raised in 1H20 on specific clients impacted by Covid-19 amounted to R109m; these provisions are included in the base and the client relief portfolios PAGE 63 CREDIT IMPAIRMENT CHARGES – CIB INCREASE LARGELY DRIVEN BY HIGHER DEFAULTS
Credit impairment charges1 Key takeouts
(11) 11 Credit impairment charges • Significantly higher than prior period – 2.7x forward looking embedded in process • CLR to customers elevated Stage 1 impairment charges • Increase due to client rating downgrades, 1 631 sovereign risk pressures, and PD deterioration across the performing portfolio, particularly in those sectors most vulnerable to the economic impact of Covid-19 downturn 36 Stage 2 impairment charges 494 • Appear muted due to increased client 794 2 161 2 161 defaults and migration into stage 3
bps Rm 1H19 1H20 Rmbps Stage 3 impairment charges 1H20
Other • An increase in provisions raised on stage
Stage 2 Stage 3 Stage Stage 1 Stage 3 exposures due to default and higher
CLR to Recoveries 40 bps 88 bps execution risk on work-outs customers
1 Relates to credit impairment charges on loans and advances
PAGE 64