Standard Bank Group
Standard Bank Group ANNUAL INTEGRATED
ANNUAL INTEGRATED REPORT 2020 REPORT 2020
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STANDARD BANK GROUP Annual integrated report 2020 1 Our reporting suite Contents
Introduces the group, our competitive advantages, and our approach to integrated thinking, which Our integrated report 2 Who we are Our primary report to stakeholders, frames our value story. 4 Our approach to integrated thinking providing a holistic view of our ability to create sustainable shared 6 About our report value in the short, medium and long term. Our leaders discuss the dynamics in our markets and how these are influencing our strategic 10 Chairman’s statement priorities and our progress in achieving them. We produce a full suite of reports to cater for the diverse needs of our stakeholders. 14 Group chief executive officer’s review Our integrated report contextualises and connects to information in the following reports, which provide additional disclosure and satisfy compliance reporting requirements: Connects the emerging trends affecting our Governance Annual Environmental, Report to Subsidiary business and our continent, and the issues that Risk and 22 Our operating context and capital financial social and society annual reports matter most to our stakeholders, to how we 30 Our material issues remuneration management statements governance (RTS) Our subsidiaries are accelerating our strategy and organising 32 Our strategy report report Sets out the (ESG) report Assesses the provide an account the group to deliver sustainable shared value. to their 34 Our delivery model Discusses Sets out group’s full An overview of the group's social, stakeholders 38 Our strategic outcomes the group’s the group’s audited annual group's processes economic and through their own governance approach to risk financial and governance environmental 40 Allocating our resources annual reports, approach and management. statements, structures, (SEE) priorities, as including the including task force impacts. available on their well as the report of the on climate-related respective Our progress for the year and prospects remuneration group audit financial disclosures websites. for the year ahead in relation to our 44 Client focus policy and committee. (TCFD). • The Standard strategic value drivers. implementation Bank of South 66 Employee engagement report. Intended Africa (SBSA) 74 Risk and conduct readers • Liberty 86 Financial outcome Our clients, • Other subsidiary 100 SEE impact Intended readers employees reports, including and broader Our shareholders, debt providers and regulators legal entities in society Africa Regions. Describes our approach to good governance and how we reward our leaders. 112 Governing value creation 128 Rewarding value creation We urge our stakeholders to make use of our reporting site The invitation to the annual general meeting (AGM) at https://reporting.standardbank.com/. All our reports and notice of resolutions to be tabled is sent and latest financial results presentations, booklets and separately to shareholders and is also available online. SENS announcements are available here, along with a glossary of financial and other definitions, acronyms and 142 Pro forma financial information abbreviations used in our reports. 142 Standard Bank Group Limited credit ratings 143 Bibliography AIR GOV/REM RCM AFS ESG RTS IBC Contact and other details Key frameworks applied
The International Integrated Reporting
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2 STANDARD BANK GROUP Annual integrated report 2020 3
GROUP HEADLINE EARNINGS (%) Compelling competitive advantages Who we are 2019 South Africa 59 2019 Africa Regions 30 The key attributes that differentiate us from our peers and protect Wealth International 4 us from competitors are outlined below. We are an African-focused, client- Liberty 7 centric, digitally enabled, Other 0 integrated financial services Purpose-driven organisation GROUP NET ASSET VALUE (%) group with compelling We are committed to driving sustainable, inclusive growth across Africa. competitive advantages. 2019 Significant proven reach South Africa 59 2019 Africa Regions 24 Unrivalled, African-focused capabilities Our on-the-ground presence Wealth International 4 Our on-the-ground capabilities across 20 countries in sub- Valued people Valued clients and relationships across Africa, Liberty 7 Saharan Africa, links to international capital and funding pools with networks in international Other 6 and a unique partnership with the Industrial and Commercial finance hubs position us well Bank of China (ICBC). 50 115 14.8 m to solve client problems and satisfy their needs in BANKING REVENUE (%) GROUP PERMANENT ACTIVE CLIENTS a fast-changing environment. EMPLOYEES 2019: 14.6 million Established, fit-for-purpose franchise with modern 2019: 50 691 We provide integrated 2019 digital core South Africa 65 banking, insurance, Our franchise strength is underpinned by our strong brand, 2019 Africa Regions 32 investment and advisory excellent people, fit-for-purpose physical distribution network Modernised International and other 3 solutions that drive the and digital platforms. Strategic banking platforms SUPPORT financial wellbeing of partnership ACCELERATING our clients and our with ICBC DIGITISATION continent. Diversified client base, service offering and revenue Africa Regions contributed 58% streams Our businesses and revenue streams are well-diversified of banking activities’ headline earnings across client, sector, product and geography, which provides Well capitalised protection in times of volatility. 13.3% Robust capital and liquidity position Branches COMMON EQUITY East Africa Our strong and liquid balance sheet provides flexibility to TIER 1 (CET 1) RATIO manage uncertainty, change, innovation and growth. 2019: 14.0% 7 South Sudan 8 Ethiopia 1 124 (representative Strong growth prospects 2019: 1 114 office) Market Our prospects for future growth are driven by regional capitalisation 9 Uganda economic fundamentals and increasing financial inclusion and 10 Kenya penetration providing opportunities to increase our market 1 2 3 8 ATMs* 7 share, particularly in some of the large markets in which we 11 Tanzania US14 bn operate where we have relatively small market shares. West Africa 9 10 4 East Africa 6 774 Recognised South & 11 2019: 8 976 Central Africa Appetite to invest, deliver and partner brand West Africa 5 16 We have the resources and appetite to expand on our own and 12 Namibia 14 * ATMs – automated 1 Côte d’Ivoire through partnerships and alliances. teller machines. 17 13 Botswana South & 15 18 2 Ghana 12 Central Africa 13 14 Zambia Standard Bank 3 Nigeria 20 15 Zimbabwe 19 South Africa Stanbic Bank 4 Democratic 6 Republic of 16 Malawi Congo (DRC) 17 Mozambique 5 Angola 18 Mauritius 19 Lesotho Presence in International 6 South Africa 20 eSwatini international financial markets: services: As an established African-focused group we have: On-the-ground presence in • Beijing • Isle of Man • Dubai 20 countries in sub-Saharan Africa • Jersey • London • Mauritius • New York Trusted Client Digital assets Established Africa Deep sector • São Paulo brand community and data partners knowledge expertise MENU INTRODUCTION
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Our approach to integrated thinking
Our approach to integrated thinking is dynamic and evolves as we respond to ORGANISING OUR BUSINESS the challenges of the present while preparing the group for the future. Our delivery model We secure the inputs required to transform, grow, innovate and compete effectively and through our business INFORMING OUR THINKING activities we deliver the outcomes for the benefit of all our stakeholders.
Our operating context Our material issues Read more on page 34. The Covid-19 crisis is compounding the forces Shaped by the expectations of our stakeholders and impacting financial services and changing prevailing economic, social and environmental trends, stakeholder expectations of value, challenging our material issues are those that have the potential MEASURING OUR STRATEGIC PROGRESS us to deepen our resilience and re-imagine our to substantially impact on our commercial viability, relevance to our clients and our continent in the our social relevance and the quality of our short, medium and long term. relationships with our stakeholders. Our value drivers We track the progress we make in executing our strategy through our strategic value drivers.
Read more on page 22. Read more on page 30. Read more from page 38.
We are aligned to the UN SDGs. EXECUTING OUR STRATEGY
Our strategy We are accelerating our strategy to become a truly human and truly digital financial services organisation.
Our purpose Our vision Our strategic priorities ALLOCATING OUR RESOURCES Africa is our to be the leading financial services We have updated our home, we drive organisation in, for and across Africa, strategic priorities to clarify Our resource allocation framework her growth. delivering exceptional client experiences what we need to do to and superior value. deliver our purpose. We have updated the formal decision-making framework we use to allocate resources, to better deal with the volatility, uncertainty, complexity and ambiguity of the environment we operate in. We use scenario planning in our resource allocation and adapt these as appropriate. SHORT TERM MEDIUM TERM LONG TERM Read more on page 40. Transforming Responding to and A truly human, truly Africa’s leading for the future recovering from the digital group, providing digital financial Covid-19 crisis. a comprehensive range services business. of services. OUR ACCOUNTABILITY TO STAKEHOLDERS
Read more on page 32. Our approach to good governance promotes strategic decision-making that reconciles the interests of the group and society in our pursuit of sustainable shared value in the short, medium and long term. Our governance framework supports ethical and effective leadership, corporate citizenship and sustainable MANAGING OUR RISKS AND OPPORTUNITIES organisational and societal outcomes.
Our risk management model Read more on page 112. We align our risk appetite to changes in our operating environment, instil a risk-aware culture throughout the group and proactively enhance our risk management capabilities. OUR VALUE CREATION Read more on page 74. We aim to deliver inclusive and sustainable growth, and create value for all our stakeholders.
DIRECTING OUR CONDUCT
CLIENT EMPLOYEE RISK AND FINANCIAL SEE Our values Our culture Our code of ethics Our leadership identity FOCUS ENGAGEMENT CONDUCT OUTCOME IMPACT are the behaviours is underpinned by guides our behaviour describes the attributes that define us. the principle of doing commitments we require to achieve VALUE FOR the right business, and standards of our strategy and shift VALUE FOR OUR VALUE FOR OUR VALUE FOR ALL OUR VALUE FOR OUR CLIENTS EMPLOYEES STAKEHOLDERS SHAREHOLDERS SOCIETY the right way. professional conduct. our culture. Delivering relevant Shaping a workforce that Doing the right Striving to generate Driving positive and complete digital is ready to meet our business, the right way. sustainable returns. SEE impact. Read more on pages 66 and 74. solutions to our clients’ needs, now and in clients. the future. MENU INTRODUCTION
6 STANDARD BANK GROUP Annual integrated report 2020 7
About our report
We report on the progress we have made in the period Banking (CIB) and Wealth. Our Wealth financial results and prospects. Where appropriate, the reporting audited consolidated annual financial statements, 1 January 2020 to 31 December 2020 to achieve our are largely included in those of PBB for the current and boundary also assesses the risks, opportunities and on which an unmodified audit opinion has been strategic objectives. We evaluate our financial and prior years. Our banking activities also include central outcomes that affect our ability to create value, arising expressed by the group’s external auditors, KPMG Inc. non-financial performance against our strategic value and other group activities, which include group hedging from entities and stakeholders, but which are not related and PricewaterhouseCoopers (PwC). Similarly, it drivers. This report includes material information up activities, capital instruments, surplus capital and to the financial reporting entity by virtue of control or includes information extracted from the RTS and ESG to the date of board approval on 10 March 2021. strategic acquisitions. Where specified, banking activities' significant influence, but rather by the nature and reports on which assurance on selected information has data also distinguishes between our South Africa and materiality of the risks, opportunities and outcomes. been provided by PwC. The scope of information presented is largely medium Africa Regions operations. term. It assesses the opportunities, risks and impacts Financial information has been prepared on an IFRS We have continued to deepen how we measure our influencing our ability to create sustainable shared value Liberty Holdings Limited (Liberty), our life insurance and basis, unless otherwise specified, and therefore includes strategic progress by refining our metrics. Our strategic as we begin to realise our medium-term vision, while investment management subsidiary (54% interest) and the consolidation of all entities in the group. Any value drivers form the basis for how we report our delivering on our purpose. our associate ICBC Standard Bank Plc (ICBCS) (40% restatements of comparable information are noted. progress and priorities to the board, through our board interest), are not included in the data relating specifically and management subcommittees, on an ongoing basis. Details of our restatements can be found in our annual Our reporting boundary to our banking activities and are shown separately in our financial statements available online. Our material issues are reviewed annually to take into financial results. account the changes in our operating environment and The data in this report – both financial and non-financial evolving stakeholder expectations. – pertains to the Standard Bank Group (the group or Our strategic relationship with our 20.1% shareholder, Process disclosures SBG) as the reporting entity, although certain metrics ICBC, the world’s largest bank by assets, allows us to We apply a combined assurance model to assess and The process for 2020 is disclosed in more detail on page 30. relate to specific categories of activity only and are facilitate investment flows and commercial relationships assure aspects of the group’s operations, including the indicated as such. The integrated reporting boundary between Africa and China. The financial outcome of this internal controls associated with elements of external The members of the group leadership council (GLC), includes all entities over which we have control or relationship is included as part of our business activities. reporting. Our approach to the assurance of our annual previously the group executive committee, are significant influence. reports incorporates and optimises all assurance services accountable to the board for preparing the integrated The reporting boundary includes the strategic narrative in and risk functions, to enable an effective control report. Interviews with senior leadership and the board Our banking and wealth management activities are this report and pertains mainly to our banking activities environment that supports the integrity of information through its chairman, together with internal sources of consolidated and defined as ‘banking activities’ in our across the continent and internationally, and it also used in decision-making and reporting. information and relevant external research papers, have annual financial statements. For the 2020 financial year, includes our subsidiary and associates (including Liberty been used to prepare this report. this comprises the financial results of Personal & and our other banking interests) where they are relevant While this report is not audited, it contains certain Business Banking (PBB), Corporate & Investment to the group’s business model and strategy, performance information that has been extracted from the group’s
REPORTING BOUNDARY FOR THE INTEGRATED REPORT (risks, opportunities and outcomes) Statement of the board of Standard Bank Group Limited The board acknowledges its responsibility to ensure the integrity of the integrated report. The group audit FINANCIAL REPORTING BOUNDARY committee reviewed and recommended this report to the board of directors for approval. The board considers the preparation and presentation of this report as being materially in accordance with the International
Thulani Gcabashe Sim Tshabalala Chairman Group chief executive officer
CLIENT EMPLOYEE RISK AND FINANCIAL SEE FOCUS ENGAGEMENT CONDUCT OUTCOME IMPACT
VALUE FOR OUR VALUE FOR OUR VALUE FOR ALL OUR VALUE FOR OUR VALUE FOR CLIENTS EMPLOYEES STAKEHOLDERS SHAREHOLDERS SOCIETY
The six capitals defined in the International
8 STANDARD BANK GROUP Annual integrated report 2020 9
LEADERSHIP INSIGHT
Our leaders discuss the dynamics in our markets and how these are influencing 10 14 our strategic priorities and our progress in achieving them. Chairman’s Group chief statement executive officer’s review MENU LEADERSHIP INSIGHT
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Chairman’s statement
The discipline of good governance becomes even more valuable during periods of great stress and uncertainty. Far from slowing things down, it The pandemic has starkly reinforced our awareness of ensures that work happens faster and more efficiently, and that outcomes humanity’s global interdependence on each other, and of are significantly better. our dependence on the natural world. Environmental sustainability was already one of the most pressing global issues in 2019. It has become even more pressing now. If in the past we were not as clear as we should have been about the group’s positions on environmental Women on Women in Achieved good sustainability, or about how we see these in relation to the board executive governance our commitment to promoting inclusive and sustainable positions outcomes by development in Africa, we must be now. The publication embedding the of our first report on climate risk, our 2020 TFCD interim 35.3% principles of report is an important first step in this regard. It represents a critical milestone in our journey to address Achieved target 33.6% King IV climate risk comprehensively in our business. of 33% by 2021 2019: 32.3% THULANI GCABASHE – GROUP CHAIRMAN The group published its fossil fuel policy in 2020, which sets parameters for our lending in this area, and complements the coal-fired power finance policy and the thermal coal mining finance policy adopted by the group Leading issues in 2020 in 2019. By early March 2020, the board had become seriously The board expects the executive to continue to correct concerned about the Covid-19 pandemic. By the end of Operating context the weaknesses we have identified in this area during March, it was clear that it would be necessary for the 2021. Good governance includes The South African economy shrank by 7% in 2020 (Stats SA). group to implement its disaster management and careful and balanced attention This is its worst performance in a century – in fact, since the business continuity protocols, including much more As described in more detail in the group chief executive officer’s review, and elsewhere in this report, the to the interests of all influenza pandemic of 1919-20. The economy of the sub-Saharan frequent communication by the executive with employees Africa region proved more resilient, contracting by only 2.6%. and the board. executive took the view that it was essential to continue stakeholders, the scrupulous to modernise and to increase the competitiveness of the observance of the law and of As I write this early in 2021, there is good reason to hope that With hindsight, it has become ‘obvious’ that modern group during 2020. In the first few weeks of the good practice guidelines, 2021 may be better. digital technology would make it possible to run a large pandemic, this seemed an implausible ambition. However, multinational financial services firm indefinitely with detailed attention to the facts, We expect the region’s economy to grow at around 3% this year, as discussed above, it soon became clear that the group around 75% of employees working from home and with calm and logical deliberation making back much of the ground it has lost. We also expect that was entirely stable and – by moving to dispersed working the remaining 25% working under strict hygiene and on the choices to be made, South Africa will rebound by around 4.6%, depending on the and by creating a range of new services to support our physical distancing requirements. This was far from clients through the pandemic – it proved itself capable of and above all – ensuring that extent to which further progress is made in relieving the electricity obvious at the time and the board was pleased when the very rapid and successful change even under the accountability is enforced. supply constraints, and in implementing other structural and governance reforms. group’s business continuity plans unfolded successfully. conditions of 2020. During this most difficult of years, However, our forecasts for 2021 remain highly uncertain since we The next concern facing the board as a result of the This being so, the board was pleased to support the the board of the Standard Bank cannot predict the future trajectory of the pandemic, nor the pandemic was whether it would be possible to maintain launch of new people and brand promises in 2020, not Group has aimed to ensure that extent to which vaccines may enable a return to a more normal the security of our information systems with such a large least because we had identified the effectiveness and each of these good governance life this year. proportion of employees working away from the office. relevance of the group’s marketing as cause for concern disciplines have been maintained. Again, the answer was that we could. There have been no during 2019. The pandemic has given South Africans a dramatic and powerful material cybersecurity incidents in 2020. We have worked hard to provide the demonstration of the shortcomings of our current political It is clear that our clients now expect us to provide executive team with guidance and a economy. The outcomes of slow reforms, of tending to favour It was very important to the board that the group was seamless, increasingly bespoke and increasingly sounding board whenever they insiders as opposed to merit, has proved to be impoverishing, doing everything it could to support our clients through comprehensive services, mostly online, but also in person have needed it. We have aimed to tragic and even destabilising. The need for faster, more the extremely sudden and deep economic downturn when they choose. People and corporations are not ensure that the group’s clients have transparent, more inclusive and more accountable economic and created by the pandemic and the necessary public health looking for products and services, but for solutions. The been supported to the greatest industrial policy execution in South Africa has never been more responses. In the board’s view, the group’s fee reductions, pandemic has only accelerated and intensified these extent possible. We have been pressing. debt restructuring and additional credit extension changes. Therefore, after careful discussion, board adamant that we must do programmes were well-designed. In particular, we had to training took place on the digital economy and on the everything in our power to protect be sure that the group’s sustainability would not be accelerating digitisation of the financial sector, and the safety and health of our people. placed at risk by such interventions. Our support having consulted with relevant independent experts, the programmes have been well-judged in those important board wholeheartedly supported the significant changes respects, as is evidenced in more detail in the sections of to the group’s internal structure, and to its ambitions, this report on risk and conduct and financial outcome. that are described in this report. MENU LEADERSHIP INSIGHT CHAIRMAN’S STATEMENT CONTINUED
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Voices of resilience Covid-19 has created an unprecedented global economic and humanitarian crisis, but it will also be remembered as a moment when governments, businesses, NGOs and citizens around the world rallied together behind a common cause to save lives and livelihoods. In that sense, there is a story of hope, Governance and risk management developments in 2020 evidence of Africa’s remarkable resilience in the face of adversity. Businesses across Africa have stepped up to help their employees and communities. We have curated stories of hope from across the continent The pandemic has been the largest single shock to the The board is honoured to be joined by Paul Cook, Xueqing to shine a light in this time of challenge. world economy and to human society in recent times. As Guan and Nonkululeko Nyembezi and we welcome them this report shows, our financial and human resources to the board. These voices of resilience are collected in four categories and can be accessed online here at: were very well able to withstand the shock. Nevertheless, https://www.standardbank.com/sbg/standard-bank-group/whats-happening/voices-of-resilience/overview. it is clear that the trends of the pre-Covid period have Hao Hu and Priscillah Mabelane stepped down and Peter been disrupted – some stopped, some reversed, and Sullivan retired from the board during the year. André some accelerated. We therefore concluded that it was Parker will retire from the board at the conclusion of the wise to undertake a formal scenario planning exercise to 2021 AGM. I am grateful to each of these very reorient ourselves. This exercise concluded that, distinguished people for the time and wisdom they have Putting people first whichever ‘future’ transpired, it was likely to include a lent to our board and thank each of them for their more online world, shorter and more robust supply contribution. For large organisations, the Covid-19 pandemic has about and responded to the people impact of Covid-19 would be chains that could create new opportunities for African been a test of the extent to which they have really embedded critical for the group. We have done everything in our power I remain satisfied that the board is appropriately balanced firms, and an increasingly important role in the world digital in their ‘DNA’ – reflected in their infrastructures, to protect our people including splitting teams, restricting the and contains the skills required to ensure that the group economy for the China-Africa corridor. capabilities and the ability of their people to rapidly adapt to number of people in our branches, insisting on physical is well-governed, and that the interests of our different leadership practices and ways of working. Adopting distancing and distributing sanitiser and personal protective It was also reassuring to conclude that our allocation of shareholders, other stakeholders, and the societies in new ways of working in a matter of days is no mean feat for a equipment (PPE) across our branches, call centres and offices. capital and other resources was likely to remain which we do business are well-served. We are pleased multinational organisation, but with our clear strategic focus Nevertheless, it has taken a lot of courage and dedication to go appropriate: Africa remains a very promising long-run that the board’s gender balance has improved and we on becoming digital in recent years, coupled with our to work every day at the height of the pandemic, and we are growth story and, if anything, the changes imposed by continue to look for opportunities to improve its age investment in technology and future skills, the transition for enduringly grateful to all the Standard Bank people who have continued to work on the frontline to support our clients the pandemic have reinforced our certainty that Africa structure and the representation of people from Africa the group ran smoothly. will continue to develop rapidly throughout this century. beyond South Africa. We will also continue to improve the through this very difficult time. As an employer that has always placed a premium on employee depth and breadth of digital skills on the board, and to More on how we have put people first can be accessed online here at: The board was pleased that the stability of the group’s engagement and the crucial role our people play in delivering to https://www.standardbank.com/sbg/standard-bank-group/ ensure that the board has the expertise it needs to whats-happening/voices-of-resilience/people-first. systems was very much higher in 2020 than it had been our clients, we understood from the outset that how we thought in 2019, when it had been an area of particular concern. support, govern and communicate our ESG obligations As we aim to become a business that is connected to a and our commitment to sustainable and inclusive wider range of partners, we will also need to be very alert development in Africa. We are working to ensure that the to the risks that third parties can introduce into our group meets the South African Prudential Authority’s Clients showing their resilience systems and services. requirements on director independence. Charting a new path We took extraordinary steps to assist our clients from the early days of the crisis and are shifting our focus to the Covid-19 has clearly demonstrated that recovery phase and the road ahead. As we do this, we will companies cannot achieve long-term success if continue to work with our clients to find suitable solutions that the societies in which they operate are not enable them to participate meaningfully in the economic recovery. We prospering. Corporates in all sectors have had provided temporary relief to retail and small- and medium-sized to revisit their purposes, and ESG APPRECIATION AND LOOKING AHEAD enterprises (SMEs) clients amounting to R129 billion. Moreover, our considerations have come to the fore. To protect I am very grateful to my fellow directors for their excellent work this year. short-term and life insurance businesses paid out R1.1 billion (excluding Liberty) in insurance claims in the first half of 2020 and provided more than against future shocks, and to ensure long-term The stakes have never been higher, and the decisions never more difficult. R50 million in fee waivers and moratoriums. The foreseeable future will value creation, all companies must tie I am equally grateful to the group’s employees, many of whom have undoubtedly be challenging, but Africa’s people are tenacious, resourceful, performance to the wellbeing of society and the demonstrated immense courage, and all of whom have worked with and resilient. We will work closely with our clients to ensure that they natural environment. If we succeed at making a extraordinary discipline and dedication. Thank you all. achieve their dreams, and that Africa reaches her true potential. positive contribution to the societies in which we operate, and help to mitigate the impact of More on how we are supporting our clients, and on their experiences of the impact of We mourn the colleagues, family and friends we have lost during this Covid-19 can be accessed online here at: https://www.standardbank.com/sbg/ the pandemic, we will grow the continent’s standard-bank-group/whats-happening/voices-of-resilience/customers-show- pandemic. We miss them. We pray for their loved ones. We honour their their-resilience. economy. Aside from the ethical case for being memory by striving every day to support economic and social development a responsible corporate citizen, there is clearly a on our continent, as embodied in our purpose: Africa is our home, we drive strong commercial case for operating with all her growth. Forging human solidarity stakeholders in mind. The pandemic also presents new opportunities Covid-19 has exposed and intensified deep inequalities for corporates to play a vital role in expediting across Africa as unemployment has risen and gains in Africa’s Covid-19 recovery by working with gender equality are under threat as women government to support inclusive growth, disproportionately shoulder the burden of the pandemic. However, financial reform and policy stability, responding this has also been a time for Africa’s people, governments and to the increased demand for re-shoring and businesses to demonstrate that they can work quickly and effectively localisation, and putting small businesses at the together for the common good. This knowledge, along with the new front and centre of recovery efforts. These capacities built over the past year, position Africa to not only recover actions will build resilience and promote more from the pandemic but emerge stronger and more united. stable economic prospects, as well as More on partnerships and how we have mobilised our resources can be opportunities for growth. accessed online here at: https://www.standardbank.com/sbg/ standard-bank-group/whats-happening/voices-of-resilience/ More on how we are charting a new path can be accessed online forging-human-solidarity. here at: https://www.standardbank.com/sbg/standard- bank-group/whats-happening/voices-of-resilience/ charting-a-new-path. MENU
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also need a considerable degree of respect for expertise, Group chief executive officer’s review for institutions, and for the law. Cognitive inclusion, it turns out, can be just as important as economic inclusion. During the most unusual and difficult year in living memory, the people of the In a similar way to previous global crises, the Covid-19 pandemic has speeded up social, technological and Standard Bank Group demonstrated courage, determination and self-discipline. economic change. To take only the most obvious They adapted very fast and worked extremely hard. examples, the pandemic has vastly accelerated biotechnology research and production and has expanded public support for comprehensive health systems – both trends having important consequences for asset and insurance markets. The technology that enables most office-based jobs to be Group headline Group done remotely has existed for more than a decade, but it earnings ROE was being adopted quite slowly until working from home was abruptly forced upon us in the first quarter of 2020. We cannot predict how much of this change will be R15.9 bn 8.9% permanent. But we do expect that considerably less business travel will be necessary and that many people 2019: R28.2 billion 2019: 16.8% will prefer to work away from the office for much – SIM TSHABALALA – perhaps most – of their working time. This will have a GROUP CHIEF EXECUTIVE OFFICER complex and wide-ranging pattern of effects on areas including management styles, tax policy, road and commuter rail usage, and the future development of cities. It is certainly my hope and expectation that commuting times, other transport delays, and business However, despite the worst economic conditions in a As at 7 March 2021, 39 of my colleagues have died of Beyond that, the pandemic could perhaps fade quite travel will all be permanently reduced, with positive century, the group’s pre-provision operating income Covid-19. Every death has been a terrible blow. There is quickly from public memory and from the minds of effects on people’s stress levels, on the environment, and declined by just 6%. The decline in group headline no greater reminder of our humanity and mortality than policymakers, like the pandemic of 1919-20. Or it might on many businesses’ cost structures. death There will be more illness, and more deaths, in earnings, therefore, was very largely driven by credit become a permanent reference point, like the great 2021. I hope and pray that we are over the worst and that impairment charges increasing by approximately plagues of the Middle Ages or like the World Wars and Standard Bank’s responses to the pandemic the mourners may be comforted. 2.6 times compared to 2019, with a credit loss ratio (CLR) Great Depression of the 20th Century, shaping attitudes As discussed throughout this report, the group’s of 151 bps (2019: 68 bps). This reflects the extraordinary and influencing economic and social policy for decades. approach to the pandemic is organised into three phases: During the most unusual and difficult year in living strain on households and firms imposed by the What is already clear is that the pandemic has Respond, Recover, and Re-imagine. memory, the people of the Standard Bank Group pandemic, especially in South Africa. heightened our awareness of existing problems and demonstrated courage, determination and self-discipline. sharply accelerated some existing trends. RTS Further detail is available in our annual RTS and special Voices More detail on the group’s financial performance in 2020 is available of Resilience report. They adapted very fast and worked extremely hard. They in the financial outcome chapter starting on page 86. did everything in their power to protect our colleagues For instance, the pandemic has forcefully reminded us of Our first response to the pandemic was to do everything and our clients from the virus. They did an enormous our dependence on the environment, and on each other, The group’s CET 1 capital adequacy ratio was 13.3%, worldwide. It has provided many – often tragic – in our power to protect the health, safety and wellbeing of amount to support Africa’s households and businesses. 180 bps above the upper end of the board‑approved illustrations of the costs of social and economic our employees, and by extension their loved ones and our They maintained and reinforced the soundness and target range of 10.0 to 11.5%. Throughout the year, the exclusion. The pandemic has highlighted the serious clients. sustainability of our business. Despite working under group maintained liquidity buffers in line with regulatory, disadvantages and dangers that follow from allowing highly stressful and uncertain conditions, they ensured Guided by the World Health Organisation and the relevant prudential and internal stress testing requirements. As at public sector capacity and private sector competitiveness that we remained a consistently excellent, and ferociously national authorities, by medical and occupational health 31 December 2020, the group’s liquidity coverage ratio to decay. Equally, though, it has shown that capable competitive, financial services group while also making (LCR) was 134.8% and its net stable funding ratio (NSFR) and safety professionals, and in dialogue with our trade states, great research universities, strong corporations unions, we immediately implemented the necessary good progress towards offering a wider range of related was 124.8%, well above the required level of 100%. In and vibrant markets can achieve near-miracles. Readers services. I am proud of our people and very grateful to other words, despite the pressures of the year, we ended health and safety protocols. From March 2020, 75% of may recall that, in early 2020, many people were certain our employees across the group have worked from home them. 2020 highly liquid, well-capitalised and ready to support that it would take at least five years, if not a decade, to the recovery we foresee in 2021 and beyond. and will continue to do so until it is safe for us to return to The group’s financial results are much worse than anyone produce effective vaccines. Some people are now equally the office. certain that it will take many years to vaccinate enough could have expected before the pandemic – but they are RCM The group’s risk management is described in more detail in our risk and conduct chapter starting on page 74 of this people to enable a return to normal life, or that new We have worked hard to ensure that all our colleagues not disappointing. Along with our other value drivers, they report and is discussed in full in the risk and capital continued to feel connected to their teams, their are, in fact, a reason to celebrate the immense resilience AIR management report. variants will permanently ‘escape’ vaccine technology. In my view, such a degree of pessimism is not warranted by managers and the group’s leaderships. We have placed and capacities of our group. the data before us. equal emphasis on reinforcing people’s links to the group Group headline earnings for 2020 were R15.9 billion, Learning from the pandemic as a caring community, and to our goals as a competitive, In this vein, the pandemic, and associated political and customer-centred and purpose-driven business. To 43% lower than in 2019. Group return on equity (ROE) It is important not to be glib or overconfident about what social developments, have shown us the value – and achieve this, we have provided ongoing employee was 8.9%, 790 basis points (bps) worse than the prior the enduring consequences of the pandemic will be. For surprising fragility – of a shared sense of reality. In order education, guidance and support, introduced special year. Banking activities’ headline earnings fell by 42% to one thing, the pandemic is still very much with us, and will for societies, states and economies to function well, we leave and benefit provisions (including parental leave for R15.7 billion, and generated a ROE of 9.6%, 850 bps lower probably continue to dominate our lives and our thinking for at least another year. There are, no doubt, major need agreed ways to determine the facts. We therefore school closures and leave for self-quarantine). Interactive than the prior year. surprises and shocks ahead in 2021. 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16 STANDARD BANK GROUP Annual integrated report 2020 17
meetings hosted on Microsoft Teams grew from 20 000 There is a perception that the SME loan guarantee to 500 000 meetings a month on average across scheme has been disappointing and unsuccessful. One Executing our strategy in 2020: progress the group. possible reason for this is that even a very large loan guarantee scheme could only partly counteract the despite the pandemic For those colleagues who had to work in our branches, effects of the deepest and most sudden contraction in a A majority of our energy and resources in 2020 were call centres and offices to maintain essential services, we century. Some disappointment may also have arisen focused on the ‘Respond’ and 'Recover’ phases of our arranged safe transport during the most intense phases CLIENT FOCUS because the scheme was often referred to as the approach to the pandemic, maintaining our services and of lockdowns, provided PPE, implemented increased (value for our clients): ‘R200 billion’ loan scheme, as if there had been a ensuring that we would emerge from the pandemic able hygiene, temperature and symptom testing protocols delivering relevant and commitment to lend that much. That was never the case. to support the immediate recovery. across all bank premises, used multiple sites and shifts, complete digital R200 billion was the scheme’s maximum capacity, not a and set limits on branch occupancy and on physical solutions to our clients. However, thanks to the success of our business continuity target. proximity in branches, protecting both our employees and plans and our risk management systems, it was possible our clients. We also granted a special National Service It is also important to emphasise that this is a loan also to spend a considerable amount of time on the Appreciation Award to all employees who worked outside scheme – and therefore not a grant scheme. This has two Re-imagine phase of our response. We started this by undertaking a formal scenario-planning exercise for the the safety of their homes during Level 5 lockdowns. consequences. First, banks cannot oblige SMEs to apply EMPLOYEE for these loans. Good business people are never keen to post-pandemic world. As mentioned, we certainly do not As the chairman writes, the group’s disaster management ENGAGEMENT take up a loan unless they are confident about their think it is possible to know in any detail what the future and business continuity plans were highly successful. We (value for our employees): capacity to use the funds productively and about their will be like. But careful scenario planning can detect have therefore been able to offer our full range of digital shaping a workforce that ability to repay the loan. In addition, in this instance, given trends, clarify probabilities and identify ‘no regret’ and in-person services (usually in online meetings) is ready to meet our the favourable lending terms of this scheme, there are actions. Our scenario planning work reinforced our views throughout the pandemic. Just as importantly, we have clients’ needs, now and certain conditions that businesses may prefer to avoid, that it will be necessary to be as agile and fast-moving as done so without experiencing any material cybersecurity in the future. including, for example, that no further loans may be possible given the acceleration created by the pandemic; incidents or any significant failures in our digital granted until these facilities have been repaid. Second, that companies such as Amazon and Alibaba will infrastructure. even when a company decides to apply for a loan, we still dominate large parts of the world economy over the next In June 2020, we conducted a survey which asked all have to be confident that this loan will not actually reduce several decades; and that both our clients and the our colleagues how we could better support them as a business’s chance of survival by creating over- RISK AND CONDUCT authorities will be more risk averse for several years to the pandemic became a semi-permanent state of indebtedness. Further, as a deposit-taking institution, our (value for all our stakeholders): come. This last probability will increase demand for doing the right business, affairs. 95% of employees reported that they were first duty is always to our depositors: we have to be sure high-quality assets. It may also create new opportunities the right way. adapting well to the new circumstances and that that their money is safe, which means that we have to be for Africa’s manufacturing and services sectors as 89% of employees expressed their pride in the confident that almost all loans will be paid back. governments and corporations worldwide aim to create measures we are taking to support our employees shorter, more robust and more diversified supply chains. There has been some discussion about whether it would and clients during the pandemic. be appropriate to change the structure of the scheme to To compete successfully in a world that demands greater improve uptake or to convert the loans made under the agility, in 2020 we completed a programme that has The group’s financial support to our clients during the FINANCIAL OUTCOME scheme into grants. We are entirely open to discussion given more autonomy to our country businesses, ‘respond’ phase of the crisis has included payment (value for shareholders): about the former possibility and entirely reject the latter. including SBSA. Having made these geographical holidays for qualifying individual clients and SMEs; striving to generate Apart from the unfair burden that a conversion to grants changes, and in order to remain competitive in an waiving of transaction fees; short-term moratoriums on sustainable returns1. principal and interest; loan restructuring for severely would place on our depositors and investors, and on economy shaped by the ‘BigTech’ companies we impacted clients; and reduced banking fees. During 2020, taxpayers, we think that converting loans into grants designed, launched, and made substantial progress on we provided cumulative client relief worth R129 billion to would set a very undesirable precedent. We also believe changing our internal structure from a functional personal and SME clients; and approved R24.8 billion to that the opportunity cost of foregoing the payment of this perspective. relieve corporate clients, mainly for clients in the real R17 billion would be too high at a time when South Africa SEE IMPACT 2020, therefore, is the last year in which we will (value for society): estate, retail, hospitality, industrial and power and is under extreme fiscal stress and is in urgent need of report on the performance of the CIB, PBB and driving positive infrastructure sectors. In South Africa, Standard Bank resources to spend, for instance, on vaccines and other Wealth business lines, each of which has had many SEE impact. participated, on a scale more than commensurate with medical supplies. It is also relevant that the huge decline characteristics of a separate firm. From 1 January our market share, in the National Treasury/South African in economic activity South Africa experienced in the first 2021, we are primarily organised into three client Reserve Bank/Banking Association SME loan guarantee half of 2020 was mostly in response to the lockdowns segments (Consumer & High Net Wealth; Business & scheme along with all the other members of the Banking that were necessary to try to control the pandemic. By Commercial; and Wholesale) each equally supported Association. As at December 2020, over R17 billion had contrast, under the current set of public health measures, 1 Reviewed from prior year due to retraction of medium term guidance as a result of Covid-19. by our Client Solutions business, by a specialised been loaned by South Africa’s banks to almost 13 000 most of the South African economy is able to function at Innovation capacity, and by our Engineering businesses under the scheme. close to 2019 levels. infrastructure. 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18 STANDARD BANK GROUP Annual integrated report 2020 19
My colleagues and I know that large businesses can Towards the end of the year, we surveyed our people donations, including the provision of PPE, hospital Bank Namibia provided PPE to informal settlements become dangerously self-absorbed. To prevent this, we again in our regular annual employee engagement survey. infrastructure, and humanitarian support. Stanbic Kenya, and assistance to government in disbursing Namibia’s have been very clear that we have made this sequence of We were delighted to find that the group’s overall for example, donated 192 ventilators to Kenya’s Ministry emergency income grant. In Ghana, we donated internal changes in order to serve our clients better and employee net promoter score (eNPS) was +44 for 2020, of Health, almost doubling the number of ventilators USD225 000 to help battle Covid-19, of which our more efficiently, generate larger revenues and wider significantly improved from +18 in 2019, and better even available countrywide, and facilitated acquisition of PPE employees contributed USD56 570 by donating a margins, and fulfil our purpose. than +23 in 2018. 94% of our people said that they were from China for the government; Standard Bank Lesotho percentage of their salaries for three months. proud to be associated with the Standard Bank Group, funded the construction of an ICU unit; and Standard It is significant, therefore, that 2020 has also seen a lot of and 96% said that they understood their contribution to rapid and concrete progress towards these goals. For the group’s purpose. example – and as discussed in last year’s report – it was urgently necessary to reinforce our brand strength and I share my colleagues’ strong sense of our purpose. refresh our marketing, which we did by launching our new But I also share the chairman’s sense that we have not brand promise, payoff line and associated campaigns. communicated as clearly as we should about how the PRIORITIES FOR 2021 AND FOR THE MEDIUM TERM group understands the closely linked imperatives of We think that the economy of sub-Saharan Africa will recover relatively quickly during 2021, growing at around inclusive and sustainable human development and 3% this year and making back much of the ground that the region lost in 2020. We are optimistic about the South environmental sustainability. We launched new digital solutions and enhanced African economy too, expecting that it will grow at around 4.6% this year, depending on the extent to which further existing ones. These include: As we see it, there is no conflict between these goals. We progress is made in releasing the electricity supply constraint and in implementing other structural and governance reforms. We are moderately hopeful that progress will indeed be made in these areas, and that South cannot hope to achieve lasting improvements in people’s • BizFlex – a short-term lending solution, Africa will emerge from the pandemic with a somewhat more capable and accountable state, and with better lives unless additional income and assets are created providing businesses with the flexibility to repay relationships between government, business and organised labour. It is very important to stress, however, that our – and are created in an environmentally and socially loans as revenue is earned, at a cost guaranteed forecasts for 2021 remain highly uncertain, and depend to a large extent on the future trajectory of the pandemic, upfront. responsible way. Equally, though, it would be unfair and and on the pace at which vaccines enable a return to more normal life worldwide and in Africa. • TradeClub – our B2B (business-to-business) unrealistic to ask Africans to put human development on hold. We will continue to balance these perspectives, matchmaking platform, connecting trusted Our immediate priorities for 2021 are to: businesses across Africa with China and other guided by our purpose, by our membership of the UN markets worldwide. Principles for Responsible Banking, by our commitment • Keep our employees safe, healthy, connected and motivated, and then to return to more normal ways of to advancing the UN SDGs, and by the Paris Agreement’s working as soon as safely possible, while retaining the new capacities, faster pace and increased • QuantumTrade – an end-to-end digital solution target to limit warming to well below 2 degrees above flexibility we developed in 2020. for clients to obtain guarantees and letters of pre-industrial levels, in the context of a just transition. • Support our clients as they recover, rebuild and explore new opportunities. credit. • Continue to improve client experience and operational efficiency. • OneHub – a platform that unites all of CIB’s RTS More detail on our SEE impacts is to be found on page 100, offerings, solutions and information – all and online in our RTS. accessible with a single login. Here I will highlight just two of our achievements in • Unayo – a versatile digital wallet for clients harnessing the power of finance to promote inclusive and Over the medium term, we will continue to: across Africa. sustainable development. First, working, in partnership • Ensure that we offer our clients a comprehensive range of financial solutions, increasingly supplemented • SBG mobile app – enhanced and evolved our with UN Women, we have collaborated with local farmer by ancillary and additional services. customer experience with a help centre and an associations and cooperatives, aid agencies, national and • Execute with excellence using technology and data to better serve and protect our clients, reduce costs add-one store, and with a personalised home local governments, local private sector partners and and scale our businesses. screen that enables our users to configure their NGOs, to empower 50 000 women farmers in Malawi, • Generate market-beating, sustainable returns for our investors. app as they choose. Uganda, Nigeria and South Africa, through modern, • Create economic, social and environmental value for the communities and countries where we do climate-smart agricultural practices. This includes business, making Africa – our home – a better place for everyone who lives here. working to negotiate equitable market terms and to We also continued to extend our partnerships with establish business and social contracts with leading international digital businesses – partnerships sustainability-focused retailers. Second, we issued our Read about our strategic priorities on page 32. that will be central to achieving our ambition of being inaugural USD200 million green bond, via private Africa’s leading digital financial services business. placement with the International Finance Corporation Throughout 2020, the strength of our institution has been matched by the strength of our people’s character. The ICBCS delivered a much-improved performance in 2020, (IFC). This is Africa’s largest green bond to date, and depth of our resources has been mirrored by the depth of our people’s courage. We will emerge from the pandemic providing a positive basis for engagement with ICBC South Africa’s first offshore green bond issuance, and will stronger than ever, more competitive than ever, and more determined than ever to drive Africa’s growth. regarding the full structural and operational integration be used to finance eligible green assets aligned to our of ICBCS into ICBC. Sustainable Bond Framework. In the Corporate Knights Global 100 Most Sustainable Corporations in the World, Liberty’s performance in 2020 reflects a significantly we ranked 53rd overall, and are the only African company worse morbidity and mortality experience, the downward in the top 100. pressure on asset prices created by the pandemic, and the handicaps placed on a business that thrives on Our responses to the pandemic show that, as always, we in-depth and in-person engagements. We expect Liberty’s make by far the largest part of contribution to society in performance to recover as the pandemic and its after- the course of our business. That being said, we are proud effects recede. We continue to see the capabilities of this of our corporate social investment (CSI) contributions. In business as central to our medium- and long-term goals addition to our business-as-usual CSI spending of providing a comprehensive range of financial services (R97.2 million in South Africa), the group spent an and solutions, increasingly supplemented by other additional R27 million in South Africa responding to services. Covid-19. Our other businesses also made substantial MENU
20 STANDARD BANK GROUP Annual integrated report 2020 21
OUR VALUE STORY
Connects the emerging trends affecting our business and continent, and the issues that matter most to our stakeholders to how we are accelerating 22 30 32 34 38 40 our strategy and organising the group to deliver sustainable shared value. Our operating Our material Our Our delivery Our strategic Allocating our context issues strategy model outcomes resources MENU OUR VALUE STORY
22 STANDARD BANK GROUP Annual integrated report 2020 23
Our operating context
The Covid-19 crisis has compounded and accelerated the dynamics changing our sector, our continent and our world. The group’s prosperity depends on how well we embrace, anticipate and manage change, with the wellbeing of our clients and SOCIETY AND POLITICS our continent at the centre of our responses and aspirations for the future.
biggest economy and a major growth opportunity for the group. The IIAG scored South Africa and Nigeria on Globalisation, supported by digital the same deteriorating trajectory.6 Other African markets innovation and the rise of the digital Introduction developmental credentials or face pressure from regulators like Angola, Ghana, Kenya and Uganda have all improved and citizens. economy driven in part by BigTech, has over the ten-year period. The Covid-19 pandemic has had a starkly unequal impact. exposed consumers across the world On one end of the socioeconomic scale, extreme poverty is It is in this context of the digital transformation and the Economic and socio-political risks will remain until 1 to convenient low-cost solutions. expected to rise for the first time in 20 years. On the other, SEE imperative that the group finds itself. These themes South Africa shows investors that it is serious about good stock markets across the world averaged 11% growth in are even more relevant to Africa, where measures of human Organisations that effectively leverage governance at government level, protection of property 2020.2 In the wake of unprecedented job losses and flourishing lag the rest of the globe. Over the coming years globalisation, innovation and digital rights and rationalisation of cash-depleting state-owned failing small, medium and micro enterprises (SMMEs), the group will be buffeted by the forces of technological technology will succeed in creating enterprises. There is evidence that these are being governments and global financial institutions have stepped advancement and increased competition from technology long-term value. addressed, with government pushing back against public in, spending USD10 trillion in Covid-19 relief as world players. It will navigate an evolving regulatory environment sector wage demands, drafting a more business-friendly economic output dropped sharply.3 and geopolitical shifts, social and environmental threats and Expropriation Bill7 and adopting a Recovery Plan in economic trends, whereby globalisation and the rise of keeping with economic best practice.8 The big winner in all this has been technology, as the China are key. RELATED RISK Fourth Industrial Revolution (and digital adoption by people A successful ransomware attack on South Africa sourced rapid relief funding from the and companies alike) accelerates. The market value of There have been significant opposing forces to the IT systems that impact our critical International Monetary Fund (IMF). In Nigeria, falling the five biggest Silicon Valley firms rose 46% in 2020 liberalisation of trade, notably: the financial crisis, the 2 payments process value chain. oil prices and a Covid-19 knock to the economy saw it to USD7.2 trillion.2 China-American trade war and now Covid-19. However, the benefits of the interconnectedness of globalisation are too sourcing an IMF loan for the first time. This could be The socioeconomic crisis in the wake of Covid-19 has also inarguable. The election of Joe Biden as the United States positive for Nigeria as it plans to float the naira and shifted attitudes and values. Citizens have an increased of America’s (US) president will help ease China-American unify the exchange rate. The crisis caused by Covid-19 and expectation of government assistance and business relations; and the digital interconnectedness and the falling oil prices will encourage much-needed reforms, thus leadership in addressing socioeconomic and environmental pervasiveness of consumer culture will further potentially improving the business environment in Nigeria, ills. The spotlight is on big corporations to prove their support globalisation. The territorial integrity of nation-states on our continent as well as in other resource-rich west African countries. is well established and mostly legitimate. Further, the establishment of the African Continental Free Trade Socio-political risks remain a threat. The IIAG reported Agreement (AfCFTA) area is a sign that countries in that 2019 saw the first year-on-year weakening in African Africa are committed to multinational collaboration in the governance. The trend shows an improvement in OUR TOP ENTERPRISE RISKS economic opportunity and human development, while FORCES SHAPING FINANCIAL SERVICES The enterprise risks process takes place annually to determine interests of “…greater unity and solidarity between 4 participation, security and rule of law worsened.6 Technological risks for the group that require additional management focus. African countries and their people,” as stated by the Environmental Africa’s increasing reliance on China for trade and advancement Enterprise risks are selected from a list of identified prevalent African Union. and social infrastructure development is part of a broader trend threats and emerging risks, across all risk categories and time With digital technology, comes the increased risk of whereby the collectivist values of Asia (as opposed to the horizons. These risks have a material impact, based on their cyber‑attacks. In Africa, governments that collaborate individualistic values of the West) are viewed as more estimated severity and likelihood, and are included in our with business to enhance transparency and credibility in compatible with African culture. The Covid-19 knock to stress testing scenarios and strategic and budget planning. their financial systems can benefit from improved African economies may mean that some governments Our top enterprise risks for 2021 are: economic development. may have trouble repaying loans to China and this could • BigTech domination of financial services “Good and inclusive governance is imperative for Africa’s lead to tensions, undermining China-African cooperation. Economy future”.5 The Ibrahim Index of African Governance (IIAG) Regulatory • Ransomware attack The greatest socio-political force is demographic. defines governance as, “the provision of political, social environment • Extreme weather events Sub-Saharan Africa’s population is growing at rates faster and economic public goods and services that every • Third-party non-performance than other parts of the world and it is also urbanising citizen has the right to expect from their government, and as swiftly. By 2050, over two billion people will call Africa • Slow pace of implementation. that a government has the responsibility to deliver to its Political and home, with 1.3 billion of those living in urban settings.9 geopolitical citizens.”6 shift AIR Read more on pages 30 and 80. It is estimated that by 2025 there will be over 100 cities Competitive In relative market size, South Africa and Nigeria present in Africa with a population of at least a million landscape We have linked our top enterprise risks to our operating the greatest opportunity and potential risk. South Africa inhabitants.9 This will drive commerce and increase context and identified related opportunities for the group in is our most mature market, while Nigeria is Africa’s financial interactions. the narrative that follows.
References: 4 African Union, 2020 7 On 9 October 2020, the South African Government published a draft 5 Mbaku, 2020 Expropriation Bill as part of the process to create space in South Africa’s legal A detailed bibliography is included on page 143. 6 Mo Ibrahim Foundation, 2020 system for expropriation of land without compensation in certain circumstances deemed in the interests of the country. 1 The World Bank, 2020 8 Landman, 2020; Full name: The Economic Reconstruction and Recovery Plan 2 The Economist, 2020 9 Shepard, 2019 3 The Economist, 2020 Note: In 2020 output is expected to be 7% less than what it otherwise would have been. MENU OUR VALUE STORY OUR OPERATING CONTEXT CONTINUED
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SOCIETY AND POLITICS continued ECONOMY
Africa’s burgeoning urban population will place African For precious metals, the index estimates an increase governments under pressure to deliver opportunities for of 28.4% in 2020 and 10.4% in 2021.13 material advancement. In addition, urban protests may In its most recent World Economic 13 As the AfCFTA gains traction it will improve intra-Africa increase across Africa as those locked out of economic Outlook (WEO) , the IMF estimates trade and competitiveness and give Africa more relevance opportunity vent their frustration. (An IMF study showed unrest that global GDP contracted by 3.5% in global trade negotiations. Trading under the AfCFTA peaking 24 months after the outbreak of a pandemic).10 in 2020, and is forecast to recover in was meant to start in July 2020 but was postponed As a countervailing measure, business and government will 2021 with growth of 5.5%. For because of Covid-19 and the need to complete certain collaborate to widen access to digital services and integrate sub-Saharan Africa, it estimates a technical work, and was formally launched in citizens – via banking – into the formal economic system. 2.6% contraction for 2020, with January 2021.15 Opportunities will arise for business to offer their digital growth of 3.2% expected in 2021. For The World Bank projects that the AfCFTA will solutions in service of enhanced B2G (business-to-government) 2020, South Africa’s GDP contracted boost Africa’s income by USD450 billion by 2035. and citizen-to-government interactions. And using sustainable around 7% (per Stats SA), with 2021 Currently, intra-African exports account for only a technologies, Africa can build cleaner, smarter cities, ones fifth of African trade, whereas for Asia it is around that are attractive to international investment, expertise growth estimated at 2.8%, and 60% and almost 70% for Europe.16 Our footprint in and tourism. Nigeria’s GDP contracted by 3.2% in 2020, with growth of 1.5% countries across sub-Saharan Africa means we are While businesses across the world prioritise the building of well-placed to benefit from greater African integration. OPPORTUNITIES estimated for 202113. East Africa digital platforms as a key part of their digital transformation, Few countries in sub-Saharan Africa have a reliable the distinction between different types of digital platforms and fared better. Kenya’s GDP grew 1% in • The AfCFTA will continue to remove electricity grid. This is a key inhibitor to growth. The solutions will become more blurred as BigTech leverage their 2020, and may grow by 4.7% in non-trade barriers that currently solution is as likely to be driven by bottom-up consumer scale to offer ever more services to their billions of customers. 2021; with Uganda’s GDP contracting inhibit the cross-border movement of demand in tandem with new technology, as it is by goods. Thus, Africa’s socio-political risks will be more than offset by by only 0.3% for 2020, with growth top-down big infrastructure projects. Africa still of 4.9% expected for 2021. • Africa has vast sources of power and the opportunities for business to provide services of value to an underspends massively on infrastructure. access to renewable energy. urbanising population. Notably, urbanisation rates are high for Fortunately, Africa can deliver middle-class lifestyles to its • Our on-the-ground presence and the countries where the group has significant operations.11 people without necessarily matching infrastructure spend extensive African footprint provides an Where once economists boldly asserted, “The business of While most emerging markets and developing in more developed regions. Mobile phones leapfrogged unrivalled capability to deliver future business is profit”12, the sentiment – accelerated by Covid-19 economies will struggle, the outlook is positive for the need for landline infrastructure and likewise growth prospects. – has since moved in the opposite direction. The SEE impact of China, which the IMF estimates grew by 2.3% in innovative systems like pay-as-you-go solar, delivered • Our expertise in sustainable finance business will become important criteria by which capital is 2020 and is forecast to expand by 8.1% in 2021. In through mini-grids, could help satisfy electricity demand. and infrastructure finance will allow us accessed, talent is sourced and government licence to operate 2020, China’s economy was already about a sixth Indeed, it is already doing so, with the biggest share of to benefit from future investment in is granted. The notion of just capitalism, where prosperity is bigger than America’s in terms of purchasing power future mini-grid projects planned for Africa.17 infrastructure across the continent. achieved equitably, will impact decision-makers in business and parity (USD24.2 trillion to USD20.8 trillion)14; and The promise of the Fourth Industrial Revolution is that • African consumers are projected finance, as we have already seen with the integration of the UN this gap will widen in the next few years. As ever the Internet of Things (IoT) will exponentially improve to spend USD2 trillion by 2025, with SDG goals into corporate business strategies. more Chinese people move into upper middle-class the utility of infrastructure and physical assets. As economic growth prospects supported consumption patterns, opportunities will be created the digital revolution advances, it will mitigate Africa’s by one billion people with rising for African producers, particularly in high-value infrastructure shortfall. Clearly, there is an opportunity purchasing power. agricultural items. • International trade is still driven OPPORTUNITIES for digital businesses to drive efficiency in utilisation of China is the biggest trading partner to almost all assets. In Africa, this drive has the added import of by paperwork and investment major economies,14 and is Africa’s biggest trade shifting its people into more dignified circumstances. in digitisation is expected to • The group interacts with governments directly and reduce costs by up to USD6 billion through various associations, advocating for enabling partner. Many African countries will become more In terms of debt, there are serious risks for the continent. reliant on China for infrastructure development, and boost trade revenues by 10% policy environments that promote national and The IMF’s Debt Service Suspension Initiative (DSSI) saw within five years. regional objectives and beneficial socioeconomic loans, trade deals and investment. Africa is already rich countries suspend debt repayments from poor ones outcomes. China’s top foreign destination for construction firms in the wake of the pandemic, allowing many sub-Saharan • We leverage our knowledge of the different laws, and there are over 10 000 Chinese businesses African countries some fiscal breathing space until regulations and legislation in the countries in which we operating throughout the African continent. mid-2021. Multilateral initiatives like the DSSI will become operate to assist clients to manage their regulatory According to recent research, the value of Chinese increasingly important in our globalised world, ensuring and compliance risk profiles. business in Africa since 2005 is more that Africa enjoys some protection against the • Meeting the UN’s SDGs could generate several than USD2 trillion, with the potential to grow a disproportionate burden of climate catastrophe and other 9 market opportunities and create jobs globally. further USD300 billion. risks. However, many sub-Saharan African countries’ debt • Protecting the health and rights of women and young Aside from South Africa’s more sophisticated burdens will crimp public spending. Governments will look to public private partnerships to produce public people drives equity, equality and inclusive growth. manufacturing capacity, sub-Saharan Africa is goods and buffer the fiscal shortfall. However, it will take • The group published its first TCFD disclosures during primarily an exporter of raw commodities and will a few years to establish the regulatory and legislative 2020. We continue to work on improving our climate- continue to be so for the foreseeable future. Oil framework for such partnerships to flourish and for related reporting. producers are facing challenges, with the price per private players to redeem the opportunity. • Smart cities are the future of urbanisation, combining barrel expected to hover around the mid-forties in infrastructure and technology to improve quality of life. 2021. The situation is brighter for metal producers. The IMF annual base metal price index is forecast to increase 0.8% for 2020 and 3% for 2021.
10 The Economist, 2020) Note: the 11 Center for Strategic & International Studies, 2018 13 International Monetary Fund, October 2020 15 Ighobor, 2020 article cites the IMF study. 12 Harvard Law School of Corporate Governance, 2017 and January 2021 update 16 Shao, 2019 14 Allison, 2020 17 Phakathi, 2020 MENU OUR VALUE STORY OUR OPERATING CONTEXT CONTINUED
26 STANDARD BANK GROUP Annual integrated report 2020 27
COMPETITION
In the US, Google has partnered with Citibank to offer But regulation will be a challenge should clients smart checking accounts; while Apple and Competition in the banking sector is being governments insist on extending their Goldman Sachs have teamed up on their credit card driven by technology advancements in geographic borders into the virtual world. offering, the Apple Card.19 In late 2020, Facebook – in artificial intelligence (AI), IoT, distributed Business will need to work closely with response to a regulatory backlash – changed course on ledgers and cloud computing. Strategic policymakers to build trust in benefits its global stablecoin to instead launch multiple partnerships are being sought with BigTech of distributed data. Meanwhile, adoption of stablecoins (under the brand ‘Diem’), each linked to its cloud and SaaS (software as a service) will own flat currency, e.g. the euro or US dollar.20 and third parties. AI and IoT, possibly reduce capital costs for banks and give them powered by quantum computing, will drive more flexibility and responsiveness in meeting Where Facebook plans to go, Asian giants Alibaba (via Ant progress as digital becomes ever more customer needs, promoting inclusivity for the Group) and Tencent have already arrived. Between Ant sophisticated at satisfying customer needs. unbanked.18 Group’s Alipay and Tencent’s fintech offerings (notably Distributed ledgers and cloud computing will WeChat Pay) they control 90% of China’s trillion-dollar Traditional banks find themselves fending off payments business, with Alipay in the lead.21 Alipay and help banks reduce friction in their processes competition on three fronts: BigTech seeking Tencent are broadening their offering of financial services, and protect data. to leverage their scale and broaden their client either directly or with third-party institutions via their offering; fintechs focusing on a discrete part app.22 The US and Europe will be slow to shift away from of the banking value chain; and digital-only the traditional banking model but in other parts non-bank RELATED RISK banks unencumbered by the costs of legacy payment platforms and QR codes will increasingly OPPORTUNITIES infrastructure. dominate payments. Includes: • Accelerating our strategy As financial services become more digitised • the threat of BigTech monopoly swallowing Notably, in May 2020 Ghana became the first African and partnering with fintechs and and commoditised, non-bank players will financial services and becoming too big to country to implement a universal QR code. Other African other third parties will improve increasingly offer discrete services – fail and regulate. governments will follow suit, seeking the benefits of the speed and execution of particularly payments – to customers. Banks improved revenue collection for their fiscus and financial • third-party failure or non-performance, delivery and allow us to build a will also start to look less like banks as they convenience for citizens. The big prize for Africa will be which may result in failed strategic low-cost portfolio of solutions leverage their client base, data, and continent-wide financial and monetary regulation in the initiatives or poor client service. made available digitally. relationships to build digital businesses that wake of AfCFTA, allowing business to operate at scale and • The use of AI, predictive • the opportunity cost of under-formulated intermediate value-enhancing interactions. pass on cost-savings to consumers. concepts and inefficient or protracted Given that they manage customer identity, analytics, process automation implementation of innovation. financial services companies have an edge in While Alipay has around a billion users, M-Pesa – Africa’s and cloud computing to leverage the digital business. How they use this largest payments platform – has only 40 million spread vast pools of data will drive advantage will separate winners from losers. across numerous countries. Given the complexity of competitive differentiation, operating in a multinational environment it will always be ensure compliance and provide more difficult to scale financial services in Africa. Thus, clients with a simplified and for now, it is unlikely BigTech will sweep into Africa and personalised experience. make banks redundant. Further, competition from non-banks in Africa is being more than offset by the opportunity created by the digital revolution to bank the COMPETITORS ENTERING FINANCIAL SERVICES unbanked. Nigeria alone offers an opportunity for 60 million potential new clients23, with potentially hundreds of millions across Africa. Fintechs This competition will be good for African consumers, operating in one BigTech and giving them better, cheaper financial services. aspect of banking non-banks Businesses that are optimally digitised, client- value chain focused and agile will profit in this environment.
Digital only banks
Those involved Startups, inside incumbent born digital banks
18 Chuard, 2020 19 Pitter, 2020 22 Klein, 2019 20 Ha, 2020 23 GlobalData, 2019 21 Liao, 2020 MENU OUR VALUE STORY OUR OPERATING CONTEXT CONTINUED
28 STANDARD BANK GROUP Annual integrated report 2020 29
CLIMATE CHANGE AND AGRICULTURE The adoption of continent-wide trade regulation and financial practices will be positive for the continent. All countries will Urban food sales in Africa are worth somewhere between benefit from having a bigger home market and more consistent USD200 and USD250 billion, with 80% of this sourced approaches should encourage foreign investment. According to the World Meteorological from local suppliers. A 2020 AGRA (Alliance for a Green Organization (WMO), 2019 was one of Revolution in Africa) report sums up the situation: China’s support in establishing the AfCFTA is evidence of its Africa’s three hottest years.24 The “the combination of growing urbanisation, rising incomes, pivotal role in Africa’s rise. There are other factors too. The Food and Agricultural Organization and changing diets is collectively fuelling rapid growth in sheer number of Chinese consumers mean that opportunities urban food markets, making this arena the single most abound for Africa to grow food they consume, package holidays (FAO) reports: “in the drought-prone they enjoy, and create goods and services they will buy. sub-Saharan African countries, the important commercial opportunity available to African farmers and agribusiness over the coming decades.”27 However, the model of infrastructure-led growth in Africa has its number of undernourished people has limits. It is being driven by Chinese construction firms, using 24 There are claims that Africa has between 480 million and 28 increased by 45.6% since 2012”. CONCLUSION goods procured in China, paid for with Chinese loans. New and According to various commentators, 840 million hectares of unused land that can be better railways, roads, ports and power stations will help Africa. converted into agriculture. The truth is that “only about given its dependency on agriculture Socio-political uncertainty remains a The real opportunity for Africa is urbanisation, underpinned by 25 20 million to 30 million hectares of additional cropland in and its economic fragility , Africa is sub-Saharan Africa, primarily in nine countries, is readily concern. South Africa remains the thriving local agriculture. Growth in the region will be as much the most vulnerable to climate cultivable today.”26 The opportunity is not in clearing only upper middle-income country in bottom-up as top-down, driven by urban consumption, change. indigenous forest for farming, but in intensifying current sub-Saharan Africa of substantial adoption of better farming techniques, solar mini-grid solutions operations. and smart digital solutions that optimise the allocation of population, while Nigeria is the goods, capital and labour. It is incumbent on governments, city Smoother intra-Africa trade and improved infrastructure continent’s biggest economy. South authorities and business to help small-scale African farmers RELATED RISK (thanks in large part to China’s involvement) will see Africa’s legitimate political system intensify their operations and meet rising urban demand and Increasing frequency of extreme African farmers from South Sudan to South Africa enjoy and constitutional integrity may help changing tastes. The compounded benefits to livelihoods, weather events causing food better access to markets. Not only that, but digital it weather socio-political storms and health, productivity and social upliftment are virtually limitless. insecurity, water scarcity and technology will also level the playing field for smaller nudge decision-makers to adopt Covid-19 has shifted the moral ground on which we stand, creating climate refugees. farmers, helping them make better decisions and access markets. rational policy to grow the economy. reminding us of the benefits and risks of global In spite of some worrying trends in interconnectedness and challenging us to rethink our priorities. According to the World Bank, only 20% of beneficiaries of Nigeria, the aspirational demands of Business will have to deal with complex trade-offs and leaders agricultural payments in Africa received the money in an a large, youthful population, which is will be called on to communicate a simplified vision that account. There is an opportunity for business to partner resolves this complexity. Africa needs to invest in “an emerging Climate change constitutes a real threat to the group, at least 50% urbanised, will add with sub-Saharan Africa’s tens of millions of family digital ecosystem”, which will act as a multiplier for growth.29 amplifying the risk of stranded assets, business farmers and small-scale commercial farmers, particularly pressure to liberalise trade and adopt There are other multipliers…not only of economic growth, but disruption and growing insurance claims. There is a those near burgeoning urban centres. These tend to be reforms that attract investment. also of social and environmental good. Climate-smart further reputation risk for banks invested in oil or coal. under-capitalised and not always optimally served by intensification of farming is one such multiplier; sophisticated Increased environmental awareness is a global trend food markets. Research indicates that “Africa could be urban food markets is another. Urban consumers will drive to hold organisations to account in how they respond two to three times more productive if it intensified its economic growth and socio-political change in Africa. 27 to SEE threats. agricultural productivity.” Businesses that can serve this sector, delivering the goods and services they aspire to, will capture valuable market-share in a While Africa will become more industrialised it will still continent whose burgeoning population and budding trade rely heavily on agriculture, which currently employs unification present exciting opportunities for growth. around half of sub-Saharan Africa’s workforce and constitutes almost a fifth of GDP.26 The continent can Historian Niall Ferguson writes about the “…importance of legal, ill-afford the climate change threat to farming OPPORTUNITIES financial and administrative institutions such as the rule of law, productivity, which will affect different countries and credible monetary regimes, transparent fiscal systems and in corrupt bureaucracy in encouraging cross-border capital regions differently. For example, climate change in • The growth rate for renewable energy is flows.”30 Over the coming years government and business in Nigeria and South Africa is projected to be only mildly expected to be seven times higher than the 24 Africa will increasingly reach out to each other in consolidating disruptive to agricultural output. average for other fuels by 2050. Renewable this institutional capacity. While climate change will negatively affect farming energy is vital to meeting global carbon reduction productivity there are other forces at play. History has goals and is becoming the cheapest form of shown that improved farming practices have more power generation. than compensated for growing populations and loss • The potential exists for climate-smart solutions Africa provides significant opportunity for the group, with our competitive of farmland. Science, technology and better to improve the output of underutilised advantages strongly rooted in the continent. By ensuring that our strategy application of capital, will continue to improve yields agricultural land in Africa up to three times. is responsive to the forces in our operating context, the group can convert in Africa. As will urbanisation. Africa’s opportunities to create sustainable shared value for our stakeholders. cities constitute “the largest and most rapidly growing agricultural markets in Africa.”27
24 World Meteorological Organization, 2020 28 Pairault, 2020 25 Chakamba, 2020 29 B. Chakravorti & R.S. Chaturvedi, 2019 26 Goedde, 2019 30 Ferguson, 2004 27 AGRA, 2020 MENU OUR VALUE STORY
30 STANDARD BANK GROUP Annual integrated report 2020 31
STAKEHOLDER PRIORITIES AND RELATED ENTERPRISE RISKS 2020 MATERIAL ISSUES Our material issues Focusing on our clients SBG executives: economic impact of Covid-19; appropriate responses to client needs; ability to transform our business in current economic climate; behavioural • Deliver client value through Our material issues are those that matter most to our stakeholders and have and cultural shift required to transform our business. competitive digital solutions. an impact on our ability to create value in the short, medium and long term. Clients: impact of Covid-19 on finances; increased reliance on digital channels; • Ensure fair outcomes for clients. information and cybersecurity; value for money; personalised solutions; customer • Support clients during difficult service; allegations of racial bias in allocation of Covid relief in South Africa. times. We consider an issue to be material if it has the potential to substantially impact on our commercial viability, our social Investors: competitiveness in crowded market; speed and efficiency of digitisation relevance and the quality of our relationships with our stakeholders. Our material issues are informed by the journey. expectations of our stakeholders and the economic, social and environmental context in which we operate and therefore Regulators: fair treatment of customers; affordability of and access to services; measures to relieve financial distress arising from Covid-19; efficiency of relief encompass the global and African trends and opportunities facing the business. measures and allegations of racial bias in relief allocation; management of customer complaints. Enterprise risk: slow pace of implementation.
How we determine our material issues Engaging our employees SBG executives: employee safety and wellness; need for more flexible ways of Engaging working while retaining organisational identity and productivity. • Deepen diversity and inclusion We view the materiality determination process as a business tool that our stakeholders Employees: safety, wellness, resilience; juggling multiple responsibilities while working within the group. facilitates integrated thinking. from home; need for ongoing skills development; gender equity in senior and top • Build the skills and workforce for Our stakeholders are those management; employment equity in South Africa. an evolving world. individuals, groups and We undertake an annual review of our material issues to take into account the changes Regulators: business continuity and safety of employees; reskilling for digital age; • Support employee health and organisations that materially in our operating environment and evolving stakeholder expectations. Our material gender equity; employment equity in South Africa. wellbeing. affect or could be materially issues continue to evolve in response to changes in our operating environment and Investors: ESG performance in relation to diversity of board and management; • Ensure that employees feel affected by our business diversity and anti-discrimination policies; access to appropriate skills and talent; connected to, and motivated by, stakeholder expectations, although the broad themes tend to be relatively stable. activities, products and services, availability of specialised knowledge and skills. our group purpose. Together with our material issues process, the group undertakes an annual process to and associated performance. Our identify the risks that are expected to have a material impact on the group in the stakeholders provide us with the short, medium and long term – key prevalent and emerging risks. The list is then resources and relationships we refined and those which require additional focus are elevated and referred to as need to achieve our strategy and purpose; influence our operating enterprise risks. These directly inform our material issues. The material issues are, Managing our risk and conduct however, broader in their scope in that they take into account the expectations and environment and confer legitimacy on our business SBG executives: cybersecurity; risk of breach at third-party impacting the group; priorities of a diverse set of stakeholders. information risk in the context of people working remotely. • Protect and maintain the integrity of activities. Our business activities our data and information assets. directly and indirectly impact on Clients: disruption caused by system outages. Investors: governance; ethics; market conduct; internal controls. • Ensure the stability, security and our stakeholders’ own wellbeing Regulators: fraud and cybercrime; third-party risk. speed of our IT systems. and success. • Manage third-party risk as we Industry associations: cybersecurity; financial crime; regulatory developments Identify In 2020, the group identified an initial long list of 55 potential issues, drawing accelerate our strategy. information from: We are committed to building impacting cross-border banks; digital finance; sustainable finance; climate risk; evolving human capital governance; stakeholder capitalism. • Manage risk across geographies with constructive partnerships with different regulatory frameworks. Desktop research to identify Review of internal developments Enterprise risk: ransomware attack, third-party non-performance. our stakeholders, minimising the • Effective business continuity in face stakeholder concerns • Internal reports and surveys, including harmful impacts and optimising of emerging risks. • Media, national and regional strategy documents, the Enterprise the positive impacts of our developments, stakeholder Risks report, and ‘Are you a fan’ and business activities on them. We publications and trends reports. ‘How are you feeling’ employee surveys. engage with our stakeholders on • Comparative review of material issues • Prior year material issues and reporting a range of diverse issues and identified by a range of global and suite. strive to respond to their legitimate concerns in an regional banks and large corporates • Quarterly stakeholder engagement appropriate and timely manner. operating in Africa. reports. Proactive engagement with our • Analysis of guidance and research from Achieving our financial outcomes stakeholders provides us with supervisory and standard-setting Internal stakeholder engagement SBG executives: staying relevant and competitive; adapting fast enough insights that help inform our to a rapidly changing landscape. • Deliver sustainable value bodies, including reporting standards • Internal survey with group executives. material issues, shape our Investors: revenue pressure from competition; poor macro outlook; ESG to shareholders. and frameworks. • Discussion at group social and ethics business strategy and operations performance and associated reputational impact. • Maintain the resilience • Civil society communications and management committee. and minimise reputational risk. Enterprise risk: BigTech domination of financial services. campaigns. of our balance sheet. Our decentralised stakeholder • Drive sustainable revenue growth. engagement model means that different teams within the group Prioritise In considering issues for inclusion, Approve The top material regularly meet with their stakeholder inclusiveness, sustainability context, issues were shared with the stakeholders on matters of materiality and completeness of the potential group social and ethics mutual interest. Material Driving positive SEE impact issues were considered. A priority list of 18 material committee for approval and stakeholder engagements are SBG executives: role in driving economic recovery; expanding sustainable finance issues was then identified, grouped by value driver then shared with the group reported to the group social and offering and managing climate risk balanced by need for critical infrastructure • Deliver sustainable finance and prioritised according to potential impact on board, responsible for ethics committee, and material development across Africa, including development of fossil fuel industries; solutions across Africa. the group and importance to stakeholders. The top finalising and approving issues and concerns are financial inclusion; employment practices that drive equity; support for education • Demonstrate positive impact and skills development. 18 issues were then presented to group executives management’s bases for incorporated into the group’s through our seven SEE impact Clients and regulators: solutions for SMEs, entrepreneurs and the informal and the social and ethics management committee determining materiality. annual assessment of material areas. sector; impacts/potential impacts of severe weather events; sustainable finance for discussion and approval. issues. • Effective management of ESG products. risk, with an emphasis on Investors: ESG performance, transparency on climate-related risk exposure and climate risk. ESG impacts; TCFD; sustainable finance products. Communities: social and environmental impacts of fossil fuel projects, ESG Read more about how we engage with our stakeholders in our ESG report online. perceptions around limited disbursements of Covid-19 loans (South Africa). Enterprise risk: extreme weather events. MENU OUR VALUE STORY
32 STANDARD BANK GROUP Annual integrated report 2020 33
The aspirations and objectives associated with the accelerated execution of our strategy, and the Our strategy expected timeframes are reflected below. HORIZON 1 The short term Our strategy remains unchanged, but we are accelerating its execution. Responding and recovering
Evolve our response to Facilitate a return to Anticipate and adapt to operating conditions Technology has changed the way we live and work, and We are strengthening our digital capabilities and the prevailing threats growth coming out of and trends with focus and urgency. financial services are no different. The expectations integrating our business to transform client experiences associated with Covid-19. the crisis. • Accelerate digital adoption, keeping our clients at our stakeholders have of us are changing radically and and to drive operational efficiency for a radically • Implement rapid response • Continue to support the centre of what we do. quickly, and our strategy needs to respond to these different world. strategies that have our clients and • Reshape our operations, infrastructure and expectations. positive societal impacts. economies to recover resources to become more human and more digital. from the crisis. • Manage the transformation and renewal of the group.
Our purpose Our vision The reason we exist What we aspire to be HORIZON 2 Africa is our home, we drive her growth. To be the leading financial services organisation A truly human, truly digital group providing The medium term in, for and across Africa, delivering exceptional client experiences and superior value. a comprehensive range of services
Transform client experience Transformed operational efficiency • Deliver exceptional client experiences. • Efficient, stable, robust, secure technology In executing our group strategy our key focus areas for 2020 were: • Meet clients’ needs with optimal solutions. processing, mostly in the cloud. • Modular, agile, reusable optimised Leveraging digital to Co-creating capabilities and services.
Delivering Aspirations Aspirations drive engagement and integrated, personalised and • Strong data analysis and data monetisation efficiencies, and platform-based exceptional client capabilities. CLIENT DIGITISATION predictive decision- INTEGRATION solutions in selected CENTRICITY experiences. making. client networks.
• Reinvent our client value proposition using a • Build a simple and accessible data We have updated our strategic priorities to align to our accelerated strategy, clarifying what we need to do to data-powered understanding of each client’s needs, environment supported by fit-for-purpose deliver our purpose. to provide them with personalised and complete data governance, providing a consolidated solutions. client view to enhance client-centric and From 2021, these are: Objectives Objectives Transform client Execute with Drive sustainable • Scale and grow carefully chosen client networks value driven decision-making. experience excellence growth and value by integrating our value proposition and those • Deliver our medium-term ambitions of our partners. through new growth vectors, and • Serve clients by providing a wider range of services optimised planning, resource allocation and solutions to meet their needs. and cost management. Our strategic value drivers, now deeply embedded within the group, track our performance in delivering value • Equip our people for a new world of work with to all our stakeholders. We continue to develop the associated metrics, ensuring they are simple, understandable advanced capabilities, supported by a streamlined and credible. organisational structure and re-imagined culture.
EMPLOYEE CLIENT RISK AND FINANCIAL SEE FOCUS ENGAGEMENT CONDUCT OUTCOME IMPACT HORIZON 3 The long term Africa’s leading digital financial services business We will provide We will ensure our We will do the We will deliver We will drive consistently people feel deeply right business, superior value to Africa’s growth by exceptional client connected with the right way by shareholders. delivering experiences in all our purpose and adhering to our sustainable shared Features of the future Standard • We will engage and serve • We will earn higher revenues and our markets. are empowered risk appetite value. Bank Group our clients digitally. margin premiums, underpinned and recognised. metrics. • We will combine financial • We will grow and scale the client by integrated and predictive risk products and services, and networks that centre on the management and resource ancillary services, into complete complete fulfilment of a allocation that drives value for solutions for our clients. all our stakeholders. In transforming the group, we will become: client’s need. • We will be closer to our clients • We will innovate, and collaborate • We will be deliberate in driving than ever before, understanding with partners, to focus on the the sustainable development Truly human Truly digital them in all their complex needs we can best fulfil. aspirations of Africa in those Providing services, solutions and Serving clients predominantly online, humanity through rich data and areas most crucial to her people opportunities that our clients and processing in the cloud, embracing insights. and an inclusive, prosperous employees need to achieve growth, open innovation underpinned by and sustainable Africa. prosperity and fulfilment. data and insights. Our inputs 34 responsibly to deliver the best outcomes for ourstakeholders. Our business modelenables usto manage ourresources andrelationships Our delivery model Resources and relationships per strategic value driver OUR VALUESTORY • • • • • CLIENT FOCUS • • • • • EXTERNAL ENVIRONMENT
Key constraints
Dedicated innovation capability. range of fintech innovators. that include ICBC, BigTech and a Strong strategic partnerships operational efficiency. client solutions andhigher supporting digitally enabled Modern banking platform capability. Omni-channel distribution Over 14.8 millionclients. regulatory environment. Fragmented and unequal Africa. Reliability of infrastructure in stable, secure andreliable. advantages and remaining Maintaining our competitive relevant. change needed to remain Intensity of investment and and growth prospects. impacting our clients’ aspirations socioeconomic hardship Macroeconomic and Read more on page 22.
• • • • • • • • EMPLOYEE ENGAGEMENT • • • •
Key constraints
our clients. aligned to our promise to A compelling people promise, our culture. behaviours we needto shift A leadership identity that defines teams, anddeepsuccession pools. Strong executive andleadership transformation of thegroup. aligning culture to support the workforce of the future and Significant investment in purpose. culture, deeplyconnected to our High-performance, ethical Covid-19. Supported ourpeoplethrough of ourpeople. Responsive leadership Over 50000group employees. environment, in-person, collaborative work fatigue aspeople miss the our people and increased online on theemotional wellbeing of Continuing impact of Covid-19 increasing digitisation. impact of skillsredundancy and socioeconomic andreputational Managing the human, focused andurgent delivery. inculcating resilience to support Managing change fatigue and transformation. to support the group’s Availability of theright skills • • • • • • RISK ANDCONDUCT • • • • • Key constraints
potential cost of Covid-19. capital allocation andthe scenario planningsupporting Sophisticated credit modelsand across Africa. regulators and governments Strong relationships with indicators. measurement of conduct-related Responsiveness to ongoing capital management framework. Well-developed financialriskand ethics policies. framework, includingprogressive culture and governance underpinned by values-driven Reputable and ethical brand responsive partner to business. digital solutions to beamore non-financial risks, leveraging digital approach to managing Forward-looking, integrated and non-financial risks. and AI to effectively manage Ability to leverage technology management of including monitoring and with dependency on third parties, Managing the risks associated large andcomplex group. Retaining conduct riskacross a business models. non-traditional services and Managing riskandcompliance in risk appetite. pursuit of higher growth within expectations andinterests in Balancing stakeholder contracts. • • • • • • • FINANCIAL OUTCOME Key constraints
longer-term growth. retention of capital for term returns against balancing short- providers of capital by Retaining thesupportof our Africa Regions. in highergrowth markets in while increasing investment Managing regulatory capital and efficiency. capital to growth, change balanced allocation of requiring focused and Scarcity of resources change withurgency. versus thenecessity to needed for ourstrategy Managing theinvestment (2019: R324 R325 billion Policyholders’ liabilities – (2019: R1.4 Deposits –R1.6 trillion R171 billion) R176 billion (2019: Net asset value – trillion) billion)
• • • • • SEE IMPACT • • •
Key constraints
Banking. Principles for Responsible Signatory to the UN sustainable investment. finance unit to drive Dedicated sustainable manage ESG risk. Working with clients to strategy. business asacommercial SEE embedded into impact areas. Investment in our seven and data assets. environmental impact of IT Mitigating the direct risks. and interconnected ESG financial impact of complex assess and and reporting systems to Implementing measurement economic development. in balance with Africa’s to climate-smart economies Achieving ajust transition mitigate the MENU
Our outputs STANDARD BANK GROUP solutions to ourclients: deliver relevant andcomplete changing ouroperating modelto To achieve ourstrategy, we are outcomes. achievement of good governance Our approach supports the Embedding good governance relation to our environment. We proactively manage riskin opportunities Managing ourrisks and we execute our strategy. Our capability modeldefines how Implementing ourstrategy OURSELVES HOWORGANISE WE capability modelon page 45. Read aboutourchanges to our Read more on page 112. Read more on page 74. Read more on page 32. Annual integrated report 2020 safeguard protect and Insurance – partners group orour provided by the servicesancillary services – Beyond financial earn andgrow Investment – and borrow spend, transfer Banking – 35 MENU OUR VALUE STORY OUR DELIVERY MODEL CONTINUED
36 STANDARD BANK GROUP Annual integrated report 2020 37
OUR BUSINESS ACTIVITIES SHARED VALUE OUTCOMES (How we make money) (How we create value)
What this means for the group What this means for stakeholders
Business activities Financial impact and associated risk Financial value created Socioeconomic value created
Net interest income Individuals and business clients can borrow money to fulfil their current needs Interest earned on loans granted to clients Lend money to our clients Interest income and credit and future ambitions, supporting employment and inclusive economic growth less loans not repaid. impairments in Africa.
Costs incurred on funds raised from Source funding from client Depositors earn a return on the funds they place with the group, a safe haven Interest expense depositors and other funders, used to lend deposits and other funders Clients for their money with a stable and reputable institution. to clients who need finance. R103 bn Provide transactional 2019: R126 billion Transactional banking facilitates the movement of money, providing clients banking facilities and Net fee and commission Fee and commission revenue earned for with convenient access to their funds. Our knowledge-based services allow knowledge-based services to revenue services provided. Value of Covid-19 support measures our clients to benefit from our experience and track record on the continent clients provided temporary relief to: and connects them to global pools of capital. • Cumulative client relief of Fees earned from clients who use our R118 billion in South Africa Market access enables businesses to grow, providing a conduit for investment Provide market access and INFLOWS platforms to access and trade foreign and R11 billion in Africa Regions into Africa, helping economies monetise resources and diversify. Risk risk mitigation solutions to Trading revenue exchange, commodity, credit, interest rate provided to individual and mitigation products enable financial protection and diversification through risk businesses and equity instruments. business clients. transfer. • Cumulative relief of R24.8 billion for corporate clients. Revenue earned from other sources, Revenue from other sources • Paid R1.1 billion, excluding Liberty, Strategic investments support inclusive economic activity and enable wealth including income from property, private linked to core businesses Other revenue in insurance claims. creation, while also contributing to investments that drive Africa’s equity and investments in fintechs, as well and strategic investments socioeconomic development. as growing non-banking revenue streams. • Provided R50 million in fee waivers and moratoriums.
Brokerage fees and underwriting profits Provide long- and short-term Income from investment generated from wealth offerings provided Insurance, investment and advisory services enable clients to build, diversify insurance, investment management and life to clients and commission earned on and protect their wealth (including inter-generationally) and offer protection products and advisory insurance activities Liberty and STANLIB risk and investment from loss of income due to illness, retirement and death. services products held by clients. – Cost of the people we rely on to Employees consistently deliver exceptional client Employees derive value from new, more appropriate reward structures, our Invest in our people Staff costs experiences, and the cost of reskilling and enabling innovation mindset, and training that equips them with relevant skills upskilling our people to deal with a R34 bn for the future world of work within or outside of the group. changing world of work. 2019: R35 billion
Suppliers and third parties Cost of our day-to-day operations, both Through our local procurement activities, we sustain businesses and job Invest in our operations Other operating expenses internal and partnerships in our supply retention and growth in local economies. chain. R48 bn 2019: R47 billion
Governments Direct and indirect taxes to Cost of operating in the various Various forms of taxation enable governments to earn revenues in our OUTFLOWS Direct and indirect taxes governments and regulators jurisdictions in which we do business. R5 bn countries of operation. 2019: R13 billion
Shareholders Shareholders earn a return on their investment in a growing, African-focused Payment to shareholders for their Returns to shareholders Dividends group with compelling competitive advantages, in the form of dividends and investment in the group. R10 bn capital appreciation. 2019: R17 billion = Reinvest in the business Reinvested to sustain and Capital reinvested to support our strategy Capital retained to deliver the group’s strategic transformation and long-term Retained equity grow our business and business growth. R6 bn sustainable shared value. 2019: R15 billion REINVEST
Associated risks: Credit risk Interest rate risk Insurance risk Business and reputational risk Liquidity risk Market risk Operational risk, including compliance, environmental and social risk MENU OUR VALUE STORY
38 STANDARD BANK GROUP Annual integrated report 2020 39
Our strategic outcomes
Our strategic value drivers measure our strategic progress and allow us to focus on the value we aspire to create for all our stakeholders. We aim to deliver superior value to shareholders.
Actual We continue to improve the coverage, accuracy, depth and consistency of the metrics we use to measure our Measure Metric 2020 2019 2018 strategic progress against our defined targets for the medium term. FINANCIAL Shareholder value ROE 8.9% 16.8% 18.0% OUTCOME Dividend per share 240c 994c 970c We provide consistently exceptional client experiences in all the markets in which we operate. Headline earnings R15.9 bn R28.2 bn R27.9 bn Cost-to-income ratio 58.2% 56.4% 57.0% Actual Medium-term Medium-term targets were withdrawn due to the uncertainty created by Covid-19. New targets will be announced later in 2021. Measure Metric Progress 2020 2019 2018 target CLIENT Read more on page 86. FOCUS Client PBB South Africa channel net 72 67 70 Continually improve experience promoter score (NPS) SEE PBB Africa Regions NPS 33 25 25 Continually improve IMPACT We drive Africa's growth through delivering shared value. Wealth NPS 68 70 68 Continually improve Our SEE management approach is guided by our purpose, drivers that support Africa’s growth, our core CIB customer satisfaction 8.2 8.1 8.0 Continually improve business and the needs of African societies. We continue to work on identifying metrics to measure our direct index (CSI) contribution to society. Our ESG performance is measured by our inclusion and position on reputable sustainability indices, and we have prioritised six that we track. Read more on page 44. ESG PERFORMANCE
We ensure our people feel deeply connected with our purpose and are empowered and recognised. Measure 2020 2019 2018 RobecoSAM Corporate Out of 100, 60% 51% 46% Actual Benchmarks and Sustainability Assessment higher is better (above industry Measure Metric Progress 2020 2019 2018 targets score average of 39%) EMPLOYEE Employee eNPS +44 +18 +23 +17** FTSE4Good Sustainability Index Included Included Included Included ENGAGEMENT engagement MSCI ESG rating AAA to CCC AA (stable) AA AA Employee Voluntary regrettable turnover 1.4% 2.3% 2.3% 9%* CDP climate score A to F C B- B- retention (in line with Employee Overall employee turnover 6.0% 10.8% 8.3% 13%* industry average) diversity Women in executive positions 33.6% 32.3% 32.2% >40% by 2023 Sustainalytics ESG risk rating Out of 100, 25.5 med risk 29.9 med risk 32 med risk African senior management 23.2% 21.0% 18.6% lower is better (226 out (339 out (226 out representation (South Africa) of 975 banks) of 943 banks) of 975 banks) Corporate Knights Global 100 Out of 100, 53rd 51st n/a * Gartner financial services benchmarks: 2019. ** Pure Survey for South African financial services: 2019. most sustainable corporations lower is better
Read more on page 66.
We ensure we do the right business, the right way by adhering to our risk appetite metrics. Relevant UN SDGs Our SEE impact areas and relevant UN SDGs Actual Medium-term Measure Metric Progress 2020 2019 2018 target Financial Job creation Infrastructure Africa inclusion and enterprise trade and RISK AND growth investment CONDUCT Responsible risk CET 1 ratio 13.3% 14.0% 13.5% 10.0% – 11.5% taking Total capital adequacy ratio 16.1% 16.7% 16.0% LCR 134.8% 138.4% 116.8% Minimum >80% NSFR 124.8% 119.5% 118.6% Minimum >100% Conduct index Compliance training 98.0% n/a n/a Climate change Education Health 1 and sustainable completion rate finance 1 Introduced as a measure from 2020.
Read more on page 100. Read more on page 74.
Key Achieved On target Not met MENU OUR VALUE STORY
40 STANDARD BANK GROUP Annual integrated report 2020 41
Allocating our resources
We have revised our approach to resource allocation to support the acceleration of our strategy.
Balancing value outcomes Our resource allocation framework As an outcome of the scenario process, the group identified the following areas requiring deliberate attention and resource allocation. 1 Client strategy and supporting business model Significant investment in transformational initiatives across the group Read more on pages 34 and 45. is needed to accelerate the delivery of our strategy. Increased investment in change to transform the group We need to prioritise the investment we make in digital Investment portfolio shape engagement and distribution channels and capabilities. This includes managing the impact of transformational 2 We will focus on developing our digital and innovation capabilities and invest our change on our operations and our workforce, as we capital in higher growth opportunities and markets. Our scenario planning develop the capabilities and the infrastructure to effectively originate and distribute our solutions digitally, With uncertainty and and grow and scale our client-defined networks. The KEY FEATURES: Decision-making framework instability compounded by expectations for short-term returns by our providers of Covid-19, the group has capital will need to be managed against the need to retain • Based on detailed 3 We have revised our decision-making framework to align to our strategy. Resources are adopted a process of scenario scenario-based thinking finite and allocation is subject to filters and availability. capital to invest in growth, change, innovation and thinking and planning. This and planning, at board and efficiency. process challenges leaders to executive management Capability Value think clearly about the levels across the group. Strategy Opportunities Our vision and Our risk appetite Our financial ranked present and creatively about • Facilitating purposeful and purpose and capability aspirations Increased capital allocation to non-banking 1 2 3 Preparing possible future scenarios. It is accelerated resource activities for the informed by leading research allocation to higher growth • Does the • Is it within risk • Is the ROE • All filters met We will focus our investment in higher growth and capital and scenario planning from opportunities. opportunity add appetite? sustainably Invest future efficient activities that add to and diversify our revenue value to our clients • Can we use greater than the some of the world’s most • Filter(s) streams, while maintaining our incumbent competitive • Protecting our incumbent evidenced by available cost of equity? through prestigious institutions. This competitive advantages. measurable resources to not met advantages and mitigating the impact of competition on Exit scenario structured process stretches value and growth If deliver? If our core banking franchise. • Continuing to transform metrics? yes yes planning thinking, challenges our cost base. Filters • Is it driving growth conventional wisdom and • Lifting our growth in Africa in a better informs decision- manner that is trajectory and driving scalable for the making. Increased integration with and dependency on capital efficiency. group? strategic partners The relevance of the group's • Seeking to create value for As we develop our digital business and seek to provide strategic focus areas is tested all stakeholders in the long services in those of others, we will partner with other against the selected term. providers. These networks of third-party relationships will scenarios. The strategy is Targets and metrics need to be carefully understood, aligned and governed to adjusted to ensure it remains ensure that the associated dependencies, risks and We continue to develop, refine and track metrics that are easy to understand and measure, effective and our resource 4 complexities are well-managed, there is seamless actionable and aligned to our strategy. Target ranges set for each metric are realistic, allocation is optimal. achievable and timebound, and are directly linked to reward incentives to ensure balanced fulfilment of our clients’ needs and that protect the outcomes across our strategic value drivers. group’s reputation as a trusted provider and responsible corporate citizen is protected.
Risk appetite 5 We regularly review and amend our risk appetite across segments, products and Increased investment in new business models and countries. higher growth markets Our ongoing strategic transformation will require increased investment in business models that are different to traditional banking. This will require us to Rolling forecasts understand and accept certain risks inherent in these 6 Our approach to resource allocation is agile, real-time and focused on making decisions business models not previously considered. that have the most positive impact for our clients. We use scenario planning as the basis for decision-making. We dynamically adjust our resource allocation, targets and forecasts for each of our strategic value drivers as the environment and circumstances evolve. MENU
42 STANDARD BANK GROUP Annual integrated report 2020 43
DELIVERING OUR STRATEGY
CLIENT EMPLOYEE RISK AND FINANCIAL SEE FOCUS ENGAGEMENT CONDUCT OUTCOME IMPACT
Our progress for the year and prospects for the year ahead in relation to our strategic value drivers. 44 66 74 86 100 Client Employee Risk and Financial SEE focus engagement conduct outcome impact MENU DELIVERING OUR STRATEGY
44 STANDARD BANK GROUP Annual integrated report 2020 45
How we organise ourselves The acceleration of our strategy has required a change in how we organise the group.
PBB SOUTH AFRICA CHANNEL From 1 January 2021, three core client segments, supported by Client focus dedicated group capabilities and functions focused on the design 80 and delivery of relevant, innovative and efficient digital solutions, will replace our traditional structure. Our new capability model Our clients are at the centre of everything 60 will improve coordination and enable us to accelerate the execution we do. We strive to understand their unique of our strategy. Our performance reporting for 2020 is still by 40 business line; however, forward-looking discussions and disclosures needs and aspirations, and to partner them relates to the new group structure. 20 in making their dreams possible. Read more about our looking forward priorities from page 62. 0 2016 2017 2018 2019 2020 53 66 70 67 2 Our traditional Shared Services structure to s GRES B n u io Governance U s t IT n i 31 December c 1 iv n PBB e e WEALTH n s u rs f Finance s 2020 a l l e c i t Human Capital a n a CIB p e MEASURING OUR STRATEGIC PROGRESS r a s o b p i 80 li r Marketing t o and Comms i e
C s Compliance Wealth 60 What success looks like and EDO2 CLIENT Risk SERVICE We provide exceptional client experiences. 40 TEAMS Liberty Internal Audit
20 Legal
S l o a How we performed u n th io How we measure progress 0 A at fr rn 2016 2017 2018 2019 2020 ic te We aim to continually improve client satisfaction, a In PBB South Africa PBB Africa Regions Africa Regions and thus retention, to grow active clients. channel NPS NPS 61 70 68 70
Le s gal trie PBB AFRICA REGIONS entities and coun 72 33 1 Group real estate services. Key metrics 2 Enterprise data office. 2019: 67 | 2018: 70 2019: 25 | 2018: 25 % NPS for PBB and Wealth 2017: 66 2017: 16 35 NPS indicates the likelihood of a client 30 CAPABILITY MODEL recommending Standard Bank to their friends, 25 family and others. It is calculated by subtracting from 1 January 2021 Wealth NPS CIB CSI 20 detractors from promoters. This value can range 15 from -100 (if every client is a detractor) to +100 (if International 10 every client is a promoter). Any score above zero Africa Regions 68 8.2 5 means there are more promoters than detractors. South Africa 2019: 70 | 2018: 68 2019: 8.1 | 2018: 8.0 0 Group CSI for CIB 2017: 70 2017: 7.8 2016 2017 2018 2019 2020 15 16 25 25 33 CSI measures the extent to which our clients are CONSUMER & HIGH BUSINESS & WHOLESALE satisfied with the service CIB provides. This is NET WORTH CLIENTS COMMERCIAL CLIENTS CLIENTS calculated using a ten-point rating scale. CLIENT SOLUTIONS CIB CSI BEYOND FINANCIAL SERVICES – BANKING – INSURANCE – INVESTMENTS
Accountability for client focus 10.0 Board subcommittees provide mandated oversight for governing our client focus value driver. Key to effective CLIENT SEGMENTSPLATFORM ENABLERS, DATA AND AI creation and protection of value relating to client focus are: 8.0 As the group is client led, our primary axis of organisation will be CLIENT SEGMENTS. The client segments will be responsible for designing and 6.0 • The group information and technology committee oversees how the group manages IT and the governance MODEL executing the client value proposition strategy. Client segments will own
processes that are in place to ensure the efficient delivery of technology strategies, effective cybersecurity, 4.0 the client relationship andCORPO createRA TEmulti-product FUNCTIONS customer experiences to ongoing cyber resilience and value creating technology investment that together offer better client service and address life events, distributed through our client engagement platforms. protection of their assets. 2.0
• The group remuneration committee oversees remuneration policy and its implementation throughout the 0 ABILIT Y group. This ensures that performance is measured against the value drivers and our people are rewarded 2016 2017 2018 2019 2020 CLIENT SOLUTIONS 7.8 7.8 8.0 8.1 2 appropriately. This in turn helps to drive greater client focus. A P Our CLIENT SOLUTIONSECOSYSTEMS teams willAND support PARTNE theR SHIclientPS segments and the
C group as a whole. The client solutions teams will work in partnership with Mandated executives who are part of the group leadership council are accountable for delivering our client focus the client segments in pursuit of the customer value proposition strategy. strategies. These GLC members are standing invitees to board subcommittee meetings to provide feedback on Client solutions teams will provide products and services for banking progress to board members. (spend, transfer and borrow),INN insuranceOVATION (protect and safeguard) and investment (earn and grow) and expand into non-financial services and Read more about the purpose and activities of all the board subcommittees here. solutions over time.
MENU DELIVERING OUR STRATEGY CLIENT FOCUS CONTINUED
46 STANDARD BANK GROUP Annual integrated report 2020 47
KEY TRADE-OFFS RECOGNISING OUR ACHIEVEMENTS Our integrated client approach was recognised in reputable industry Achieving our client focus priorities is contingent on managing the following trade-offs. awards during the year.
• Our response to Covid-19 resulted in a to manage additional non-financial risks beyond Private Banker International Awards temporary reallocation of resources to those related to traditional banking. • Winner: Outstanding Global Private Bank – Africa protecting our employees and providing relief • Our integration with partners facilitates our • Winner: Outstanding RM Training and Development Programme for clients impacted by the pandemic, increasing transition to a digital business, which is fundamental • Highly Commended Achievement: Outstanding Wealth Management Technology costs and provisions; however, our response was to protecting and growing our client franchises, but Initiative – Back Office well received and supports the group’s longer- increases the need to manage the associated term sustainability. dependencies, risks and complexities of third- and • Our digitisation strategy, centred on providing fourth-party relationships. Global Finance Awards ‘always on and always secure’ services, • Increasing capital allocation to higher growth • Winner: Best Private Bank in Africa and Ghana improves client experience and efficiency and is markets and new revenue streams accelerates our • Winner: Best Investment Bank in Africa, Angola, Botswana Mauritius, critical to our long-term competitiveness, but strategic transformation but requires that we Mozambique and South Africa increases our continuing investment in IT. mitigate the impact on clients by ensuring that we • Winner: Global Best Investment Bank for Sustainable Finance • We must invest in innovative new products and continue to offer competitive financial services. services respond client demand and improve • Developing new skill sets to deepen our PWM/The Banker Global Private Banking Awards client retention, albeit at the cost of traditionally understanding of clients and improve client • Winner: Best Private Bank in Nigeria higher yielding revenue streams. experience may have a temporary impact on • New business models such as mobile money the working environment and productivity. and ecommerce make it necessary for the group The Banker/Innovation in digital banking • Winner: Innovation award for Africa
Euromoney Awards for excellence • Winner: South Africa's Best Bank for Wealth Management • Winner: Best Investment Bank (Africa, Kenya, Malawi, Nigeria) 2020 KEY PRIORITIES ! CIB Intellidex SA Top Private Bank & Wealth Manager Awards • Winner: Top Wealth Manager for Internationally Wealthy Families • Digitise core client interaction processes, including PBB client onboarding. • Be proactive in developing solutions to resolve client Euromoney Best Private Bank and Wealth Management Survey • Winner: Capital Markets and Advisory, Africa • Scale and execute ecosystem banking to challenges. • Winner: Serving business owners, Africa deliver value chain solutions across • Implement a resilience programme for our top ten • Winner: Serving business owners, South Africa Africa. critical digital solutions to improve IT system • Be proactive in managing client stability. • Accelerate application programming interface (API) relationships and solutions to deliver Structured Products and Derivatives Awards 2020 what matters to clients. enabled infrastructure and intelligent automation. • Winner: Best House MEA (Middle East and Africa) • Connect relationships to deliver trade • Automate selected product transactions per country • Winner: Best Distributor MEA solutions to our Africa-China client base. to beat competitor benchmarks. • Winner: Best Performance South Africa • Fully digitise origination capability while • Leverage cross-functional teams and capacity to maintaining the human touch. deliver complete solutions to clients within their • Migrate clients to relevant and innovative value chains. South African Listed Tracker Awards (SALTA) 2020 digital payment and service capabilities. • 1nvest Top 40 ETF won the Tracking Efficiency award (three-years) for SA Equity ETFs 2019 and 2020 • Modernise outdated financial systems to leverage cloud and other new WEALTH technologies. Citywire Global Equity Sector Rating 2020 • Achieve ‘always on’ service access for • Respond to transformational trends in wealth • Melville Douglas Top AA‑rated fund manager clients. management, including a significant increase in • Address SBG mobile app user concerns insurance activity in Africa, more integration of International Investment Awards 2020 to further improve adoption and use. financial services in South Africa and an industry- • Winner: Excellence in Private Banking Offshore Group • Manage branch footprint proactively in wide focus on client centricity, efficient distribution response to client behaviour and channels and technology advances. demands. • Continue to capitalise on opportunities to grow Intellidex SA Top Stockbroker of the Year Awards • Upskill employees continuously to ensure earnings by offering clients an innovative value • Top Stockbroker of the year agile, flexible, cross-functional teams proposition that leverages the group’s strength to equipped to respond to the expectations position Wealth as the market leader, continually of our clients, and the demands of the new raises the bar on client experience and increases our BrandZ world of work. market share. • Placed second: Top Most Valuable South African Brands MENU DELIVERING OUR STRATEGY CLIENT FOCUS CONTINUED
48 STANDARD BANK GROUP Annual integrated report 2020 49
• Collaborated with other Covid-19 relief initiatives such portfolio partially supported growth in business lending as the Solidarity Fund, SASSA and South Africa Future new business origination, whereas other categories Personal & Business Banking Trust. reflected moderate declines for the year. We continue • Introduced pricing relief on relevant transactions and to manage this growth carefully within our credit risk CHIEF EXECUTIVE’S REVIEW provided higher rates on saving and investment appetite. Unsurprisingly, conservative liquidity solutions. management among our clients drove deposit ZWELI MANYATHI, Chief executive officer, Business & • Gave 25% cash back relief on car insurance premiums. growth during the period. Commercial Clients (previously Chief executive, PBB) • Through our comprehensive insurance offerings, We realised some early benefits of rebuilding our we protected clients from the impact of loss in income business banking team and intensifying our focus on in both personal and business capacity. business banking in the domestic market. We reviewed • For targeted groups, like students, we waived credit life our value propositions, with an emphasis placed on client premiums during the height of the lockdown. acquisition, renewed our focus on franchising and on the “A year of anticipated growth and opportunity was quickly overshadowed by the Covid-19 pandemic. • Launched a chatbot on WhatsApp to keep clients health and legal sectors, and enhanced our digital offering While we rapidly reordered our priorities to respond to the severe humanitarian implications of the updated on our services, debt relief offerings and other to SMEs. These improvements in the client experience pandemic, we were consistent in striving to provide exceptional client experiences. important Covid-19 related information. Online supported growth in business and entrepreneur clients. engagements between senior executives and clients Africa Regions, our fastest growing client franchise, has a We provided extensive support to our clients and employees during the period and accelerated our across Africa were particularly well received. digitisation strategy to expand and enhance our digital service solutions. We were rewarded with healthy and growing balance sheet. We have seen 31% • Continued to provide access to services through our growth in our client base, primarily by attracting new improvements in client satisfaction and retention, and 7% growth in active clients in Africa Regions. digital solutions, such as My360, Shyft, as well as clients through our digital channels and new solutions. online and mobile banking platforms which allow The accelerated adoption of digital services was reflected Our performance in the second half of the year reflected the benefits of higher productivity and growth clients to manage their banking needs and insurance in substantial growth in digital account origination (72% in main market clients across the continent, driven by the appeal of our suite of digital client solutions. claims, and enable businesses to continue trading of all origination), transactions (95% of all transactions Our ongoing, significant investment in both our people and IT infrastructure, to secure our relevance without risk of physical interaction. are now executed digitally) and lending services (42% of and competitiveness in a fast-changing world, underpinned this resilience.” loans are digitally originated). Our objective remains In our Africa Regions businesses, our clients benefitted focused on full digitisation of these services. from similar instalment and fee relief as required. At its peak in June 2020, cumulative payment relief provided to In addition to growth in our client base, client satisfaction PBB clients was applied to loan exposures of R11 billion. improved across the continent. We attribute this to our The health consequences of Covid-19, and the restrictions With the help of IT support teams, we equipped 4 200 strategic focus on consistently delivering what matters More broadly, our stable and consistent risk appetite and most to our clients, being proactive in providing support implemented in response, compounded socioeconomic (of a total of 4 500) contact centre employees to work strong balance sheet enables us to support our clients vulnerabilities in South Africa, home to our largest client from home, with priority given to vulnerable employees. when they need it most, enhancing our digital capability throughout economic cycles, without exposing the group to improve client engagement and efficiency, and franchise. Across the continent, our countries were While many of our front-line teams have returned to their to undue risk. Although we are carefully managing our impacted to varying degrees in line with the severity of offices subsequent to hard lockdown, we continue to leveraging our data assets to personalise our engagement exposure to clients and industries that were in financial with and offerings to our clients. government responses to the initial surge in infections. closely monitor branches in hotspot areas and proactively distress prior to Covid-19, our financial relief programmes This led to increased unemployment, loss of income and manage branch openings to adjust to the health risk and have supported the viability and sustainability of many Read more on pages 51 and 52. stalled transactional banking activities, while closed capacity implications of the pandemic. clients whose businesses experienced short-term shocks borders disrupted trade flows across the globe. Our response proved effective in limiting productivity due to the crisis. We continue to advance in servicing our clients within defined client experiences, an integrated approach that is While the shift from office to home working environments impacts, although reduced front-line employees led to We continued to focus on improving our operational well embedded in Africa Regions and gaining traction drove the adoption of digital banking, it further displaced lower origination and transaction levels during the peak efficiency by accelerating the digitisation of our services, branch activity. Digital lending by personal banking clients of the South African lockdown, in which regional branch in South Africa. reducing manual processes, streamlining the client increased as clients opted for our fully digital origination capacity was down up to 50% in peak periods. experience and lowering costs, which on average solution, but this was offset by a reduction in branch- Read about it on page 62. In South Africa, to support the financial survival of our remained below in-country inflation rates for the full year. originated unsecured lending during the lockdown period. clients, we introduced relief measures for qualifying In addition, leveraging our extended network of Despite the challenges, we maintained robust balance personal and business clients, which included: Recover relationships to assist our business clients to identify sheet growth with loans and advances up 7% and 1.4% • Discretionary instalment payment relief for personal During the respective lockdowns, the revenues earned by trade opportunities includes our support of the China growth in our active client base, even though headline banking clients on home loans, vehicle and asset our business clients fell an average of 28%, with small International Import Expo (held virtually in 2020) and our earnings declined 61% to R6.4 billion and ROE declined finance, personal loans and credit cards, and businesses and specific industries reflecting substantially Trade Club offering. to 8.9%. instalment and interest relief for full-time students higher reductions. We saw similar declines in the As expected, we saw elevated impairments as the during the period. consumer environment. Subsequently, albeit slowly, economic consequences of Covid-19 weighed heavily on Respond many of these have returned to pre-Covid-19 levels, • Three-month instalment relief on business loans for our personal and business banking clients. This pressure, At the onset of the pandemic, our immediate attention with notable exceptions in some industries. Nonetheless, SMEs with turnover below R20 million provided critical together with the effect of forward-looking expected loss was on managing the impact of the Covid-19 crisis on our pent-up demand and the recovery in economic activity support for businesses defined as non-essential service provisioning demanded by accounting standards, led clients, their businesses and our employees. Initial focus have supported steady improvement in transactional providers. to an increase of 2.5 times from the prior year in was on ensuring the safety of our clients and people, to banking volumes and lending activities across most asset • Applied and supported the government-initiated Loan impairments. Despite our healthy balance sheet and limit the spread of the virus. Our client and trade categories. Guarantee Scheme, introduced to support small client growth, revenue remained under pressure due to relationships enabled us to procure appropriate PPE for businesses; at December 2020, R7.1 billion in loans By year end, in South Africa, we had exceeded our the negative endowment effect of material interest rate our branch and other essential service employees. had been disbursed (of the R7.4 billion contracted) monthly pre-Covid originations in several asset classes. reductions and the substantial drop off in transactional Employee support extended to focused interventions to under this scheme. Year-on-year origination values were up 13% in activity during the lockdown period. These factors mitigate the impact of the crisis on their physical, mortgages while the government guarantee lending negatively impacted our financial results for the year. emotional and financial wellbeing. MENU DELIVERING OUR STRATEGY CLIENT FOCUS CONTINUED
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RE-IMAGINE
Our investments in digital systems and The extensive changes within our business PBB’S PERFORMANCE upskilling our employees are enabling agile cross-functional client service in recent years, particularly the As we strive to remain relevant to AGAINST STRATEGY teams to deliver innovative, cost- reconfiguration of our South African branch our clients, we will leverage our The following pages describe our effective and personalised solutions to network in 2019 and the shift to digital digital and human capabilities to: integrated response to the group’s all our client segments. This is being banking solutions, has affected all our • Deliver enhanced client segment strategic focus areas. underpinned by the ongoing employees to some degree. We continue to and sector value propositions. transformation of our organisation and invest in equipping our teams to deal with • Improve our clients’ experience culture to drive up client service and the rapid shifts in our markets and clients’ with personalised solutions efficiency levels. The momentum we expectations, specifically through our delivered through the channels have achieved has begun to show in extensive and fit-for-purpose learning and they choose, based on a deep Delivering improved client satisfaction scores and development offerings. understanding of their current new client acquisition across our South needs and future ambitions. exceptional client African and Africa Regions franchises. Noteworthy has been the extensive programme to • Increase operational efficiency by experiences train and transition 2 908 employees, whose ensuring that our technology is positions became redundant in the branch efficient, stable, robust and secure NPS reconfiguration, to universal banker roles, thereby and our processes are automated securing their employment and future and in the cloud. employability. The introduction of future-ready • Further grow and scale our digital training academies and programmes focused on services and solutions. strengthening our data science and behavioural 72 • Empower our people to partner South Africa – channel economics capabilities will continue to support the our clients in making their dreams Our ability to partner with our ability of our people to make the required changes possible, through well-embedded, personal and business clients on that the Fourth Industrial Revolution demands. agile ways of working and their life and business journeys is leveraging data to personalise contingent on transforming our client engagement and offerings. digital and human capabilities to 33 better understand and quickly Africa Regions respond to their needs, with solutions drawn from across the full spectrum of our services. To this end, continuously improving our application of new technologies, data We generate and analyse vast amounts and AI is fundamental to meeting our of client data to provide the insights that Besides adapting to a changing world and rapidly evolving client needs, and responding quickly objective to consistently deliver assist us in solving our clients’ financial and decisively to the first wave of Covid-19, our operations also prepared for a second Covid-19 exceptional client experiences while and, increasingly, non-financial needs. wave. With this materialising from December, our teams were well-prepared to respond with also transforming our operating During the year, we had more than a million personalised conversations with immediate off-site capability, digital capability and experience in managing the branch closures efficiency. our clients, with 30% of these and team capacity. converting into client action. As we 2020 was strongly coloured by a need for empathy and humane support, both within our business migrate to a single digital client and in our communities. We anticipate that the uncertainty and impact of Covid-19 will remain a engagement platform, our ability to feature of our operating environment during the first half of 2021, and its compounding effect on personalise our interaction with clients the socioeconomic vulnerabilities in our markets will last long into the future. and connect them efficiently to the solutions they need, will be significantly Our response to the pandemic has demonstrated our inherent resilience and confirmed the enhanced. This will enable our validity of our strategic direction. In this extraordinarily difficult year, we were able to revitalise our employees to unlock client value by client franchise, an achievement that augurs well for the accelerated execution of our strategy. applying and generating valuable data insights that will be available to client service teams across the group. MENU DELIVERING OUR STRATEGY CLIENT FOCUS CONTINUED
52 STANDARD BANK GROUP Annual integrated report 2020 53
Leveraging our digital capabilities to meet our clients’ needs We continue to focus on building scale and appropriate We continue to develop digital capabilities that give clients and employees access to client solutions for our main market clients. During the new service solutions that meet clients’ needs reliably, conveniently and seamlessly. Our Unlocking the potential of Africa’s year, we introduced several new digitally enabled modernised core banking systems enable us to deliver these solutions more quickly and solutions to service these clients, including PayPulse, agribusiness effectively than we did in the past. @Ease and MyMo Plus. These solutions have been Smallholder farmers in Africa contribute up to well received. Customer response and adoption 80% of the continent’s food production, but has been positive. supply chain and market access constraints Entrepreneurship is a major driver of economic growth, prevent them from reaching their full potential. CHANNEL/SERVICE 2020 achievements particularly when small businesses develop their Our OneFarm solution in Uganda helps farmers potential to expand and contribute to job creation. Our overcome these impediments by offering a • We expanded our digital solutions, adding new features and services Digital transaction volumes expanded digital solutions included a suite of complete digital marketplace that brings together that led to ten releases on our app and 31 releases on our internet increased by 29% in solutions to support SME growth. These include: suppliers, buyers and trade facilitators. The banking solution throughout the year. South Africa and 27% solution is being used by 500 small farmers and in Africa Regions. • Digitally active customers increased by 15% to three million has been proven to significantly increase the in South Africa. SimplyBlu, an innovative all-in-one payment solution quality and quantity of crop yields. • Quick and easy access to quotes on revolving loans, term loans and that enables small enterprises in South Africa to move credit cards (clients can see the amount they qualify for and monthly their business online, taken up by 526 businesses. repayments). • Management of devices and banking app access from internet Adding value through our client banking, management of savings and investments online (view, download and send) and origination of tax-free investments. networks BizFlex, a lending solution taken up by over 4 000 • New Flexible Funeral self-service function (clients can design the By understanding our clients’ businesses and funeral cover that best suits them). SMEs since its launch in mid-2019, with R826 million in loans disbursed. their value chains we can support them • Easy access to private and prestige clients’ private bankers. effectively and recommend solutions. An • Improved functionality for our reward programme. example of this relates to a logistics client, based • App rated 4.6 on Android and 4.7 on Apple app stores. in Nigeria, who needed to expand their fleet from 70 trucks to 100. This sizeable investment was BizConnect serves as an online repository of Following these enhancements, digital origination volumes increased originally anticipated to be met by international substantially with 51% of personal lending, 31% of savings and information resources in the form of articles, videos, suppliers who would provide the required investments and 37% of main market transactional accounts now toolkits and more to support businesses in their life vehicles. However, our team was able to connect originated digitally in South Africa. stages (start, manage, grow). this client to suitable local suppliers and fabricators within our client network, saving both time and cost. Secure online banking in rapidly changing digital environment We launched DigiMe multifactor authentication to provide extra security on high-risk online Business Lending on Internet Banking allows transactions. DigiMe offers: clients to apply for an overdraft facility online and receive funds within minutes. Security Convenience Client experience Leveraging our trade and Latest biometric and facial Fewer one-time PINS Simpler, faster, more networking capability during the recognition streamlined user experience pandemic Trade Club, a free service, is our exclusive platform that allows a business to explore new markets around The group leveraged its import solution, the the world or to find vetted buyers and suppliers from a Africa China Import Solution (ACIS), as well as • 95 000 new virtual cards were loaded to enable Cashless offerings wide range of countries. our client networks, to source and import PPE clients to safely shop online. from China for clients across the continent, and to secure donations for needy causes and for our employees during the height of global supply • 121% growth in subscriptions to over approximately 150 000. Standard Bank Mobile Enterprise Direct engagement model where, in line shortages and logistics restrictions in 2020. This with changing client preferences and the move quick response to ensuring the safety of our towards virtual relationship banking, teams of LookSee • 29% increase in unique visitors to over 684 200. people was also subsequently recognised by a business bankers have been established to support Global Finance Award for outstanding crisis • Helps property buyers, sellers or homeowners make informed their clients remotely with their business banking leadership. decisions when buying or selling property. needs.
* Unstructured supplementary service data – enables money services (checking account balances, airtime purchases, money transfers) on a mobile device with no internet connection. MENU DELIVERING OUR STRATEGY CLIENT FOCUS CONTINUED
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Corporate & Investment Banking CHIEF EXECUTIVE’S REVIEW KENNY FIHLA, Chief executive officer, Wholesale Clients (previously Chief executive, CIB)
While some oil and gas projects were delayed as a RE-IMAGINE result of the pandemic, we continued to support "We maintained a sound performance despite the significant challenges that disrupted our markets, transformational developments in the oil and gas sector The commitment of our client teams during a our clients, our operations and our people. Our focus on providing tailored funding, liquidity and risk in Africa. These included the financing of Africa Oil’s acquisition of a 50% ownership interest in Petrobras Oil difficult year consolidated the strength of our management solutions sustained and protected our clients without exposing the group to undue and Gas BV. We remain optimistic about the sector and client franchise. We continue to augment our risk. As we responded to Covid-19 and recovered from the initial surge and various government continue to support these important developments for long-standing product expertise, deep Africa responses, we focused on staying responsive to our clients’ evolving needs in a rapidly changing Africa’s longer-term growth. experience and strong, trusting client and uncertain world." relationships by partnering with our clients in In December 2020, the group published a Fossil Fuels co-creating digital solutions that help them Financing Policy to clarify our stance on achieving just manage and grow their businesses. These and sustainable socioeconomic development across engagements extend to consulting with our Africa. The policy outlines a range of strict conditions that clients to understand how they choose to engage must be met before we fund coal, oil and gas projects. with us and the services they need now and in Our energy finance portfolio is increasingly focused on future. Despite the severe economic and social impact of provided support to ensure they remained resilient and renewable energy projects, with 85% of energy lending Covid-19, we produced a resilient performance, which able to continue originating new business. since 2012 being to green energy projects. As we accelerate our strategy, we will continue to reflects the strength and diversity of our client franchise. leverage our human and digital capabilities to: Covid-19 exacerbated persistent economic weakness As the African leader in green bond issuance and Our strong relationships and consistent engagement with in many of our markets, impacting the financial position • Deliver tailored solutions in partnership with clients gives our teams the insights necessary to provide arrangement, with expertise in both the African and of clients and increasing impairments by 2.6 times. global green bond market, we arranged Africa’s largest our clients to meet their current needs and solutions that help clients protect and grow their Impairment levels were high in east Africa, west Africa green bond and South Africa’s first offshore green bond future growth ambitions. businesses in changing, and intensely challenging, market and South Africa. Our robust risk management process, in 2020. We received the Global Finance award for Best • Provide a frictionless client experience, environments. An important development was to clarify in tandem with the relief measures offered to clients Global Investment Bank for Sustainable Finance, as supported by the group’s adoption of a digital our policy positions on facilitating a just transition mitigated the losses incurred during 2020. endorsement of our leadership in this critical driver of client engagement platform that will enable to a climate smart African economy in balance with sustainable growth on the continent. our employees to deliver more precisely to the continent’s need to drive inclusive and sustainable Recover clients by using data insights shared across We assess and manage environmental and social risk at growth, especially as it recovers from the longer-term Our deep insights into our clients’ markets and the group. multiple points during transaction lifecycles, such as impacts of the Covid-19 crisis. businesses enabled our teams to differentiate between • Capitalise on growth opportunities across our when we take on new clients, assess pre-credit or credit clients experiencing a short-term Covid-19 related shock markets, remaining alert to the uncertainty of applications and in developing new products and Respond from which they would recover, and those that were Covid-19, the direct effects of which we expect services. Our sustainable finance team completed major The economic impact of Covid-19 and the lockdown vulnerable before Covid-19. We provided short-term to remain a feature of our operating transactions by partnering with our clients to better liquidity to support otherwise sustainable businesses environment in the first half of 2021, as well as measures implemented by many governments across understand their business and build seamless, through the lockdowns and accelerated measures such the longer-term ramifications of the crisis for Africa heightened operational and credit risk in our multidisciplined funding solutions for their sustainable as debt restructuring, asset sales and capital market our clients and markets, and for global trade portfolio and disrupted the running of our business. Our growth initiatives. immediate response to the pandemic was to support our transactions that were underway before the crisis hit, flows. clients, keep our employees safe while also ensuring that to help more vulnerable businesses reduce debt Our client-focused strategy enabled us to achieve • Identify and develop further opportunities to our systems remained stable and capable of supporting and recover. revenue growth in 2020. Global Markets delivered record expand our products and services and provide 28% revenue growth by responding effectively to complete solutions to our clients and their client engagement and the launch of new products and We focused on adjusting risk appetite to reflect changes increased client activity in volatile markets and managing value chain partners in our targeted sectors. services. These became more relevant as a result of in clients’ operating environments, including the impact associated risk. This was partially offset by the impact Covid-19 related dynamics. of Covid-19, and were selective in exposures to avoid • Continue to apply sound credit management of margin pressure and equity investment write-downs concentration in certain sectors. Unsurprisingly, our and cost control across our franchise. During the pandemic, we engaged proactively with our in Investment Banking and falling interest rates and clients in sectors classified as essential services, such • Support our employees as they deal with the clients to understand the support they required. We reduced client activity in Transactional Products and as financial institutions, consumer goods and impacts of the pandemic on their physical, Services (TPS). provided cumulative relief of R24.8 billion, and our client telecommunications and media, were more resilient mental and financial wellbeing. engagement teams stayed close to our clients as they during the Covid-19 lockdowns. These were the top We managed to contain cost growth to 2% for the year. navigated complex and abnormal operating conditions. performing sectors by revenue for the year. Our clients in However, as noted, we incurred significant impairments, We enabled over 90% of our employees to work from the hospitality, automotive and mining sectors were most which contributed to the 6% drop in headline earnings home, supported by the introduction of controls to negatively impacted by operational shutdowns and from 2019. We consider this to be an acceptable manage data security and operational resilience in their production interruptions during lockdown periods. The oil performance under the circumstances. Our ROE home office environments. In addition to investing in our and gas sector continues to offer significant opportunity, decreased from 19.0% in 2019 to 15.7% as a result of employees to equip them to provide exceptional client but we remain circumspect about sovereign and state- reduced headline earnings and higher capital utilisation service, we monitored their emotional wellbeing and owned entities, which are highly indebted. due to deteriorating client and sovereign risk ratings. MENU DELIVERING OUR STRATEGY CLIENT FOCUS CONTINUED
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CIB’S PERFORMANCE AGAINST STRATEGY The following pages describe our integrated response to the group’s strategic focus areas. Client satisfaction CIB’s client satisfaction index moved from 8.1 to 8.2 in 2020. Contributing factors included: Delivering exceptional client experiences • Strengthening client relationships through more frequent strategic interaction by relationship managers. • Proactive engagement on challenges faced by clients as a result of Covid-19. CIB’s mature client relationship model enables our coverage teams to partner our corporate clients, • Improvements in Global Markets and TPS Africa Regions, while Investment Banking remained consistent. and to employ their intimate understanding of their businesses, growth strategies and sectors to provide proactive and relevant solutions within ecosystems and across operating regions. • The highest CSI ratings were achieved in Ghana, Mozambique and Angola, with Mozambique and Angola showing significant year-on-year improvements. • Positive sentiment from South African clients was unfortunately dampened by continued online channel and foreign payment challenges. In the CIB space, creating valuable partnerships with our clients is contingent on the depth of skill, innovative thinking and entrepreneurial spirit of our coverage teams. This is underpinned by ongoing digitisation of our processes to improve our operational efficiency and the seamless fulfilment of client requirements. Key developments in 2020 were the piloting of innovative ways to automate and improve trade processes. Our progress in refining our client relationship model and deepening process automation over several years contributed to the slight improvement in client satisfaction for the year and was recognised by several awards that provide reputable Leveraging our digital capabilities to meet our benchmarks to assess our competitiveness. clients’ needs
Our strong client partnerships help us to understand, analyse and address areas of client Driving Africa’s Enabling Vodacom’s first sustainability-linked loan frustration across the spectrum of their financial needs. As we become more digitised and sustainable growth In a first for South Africa’s telecommunications, media and technology integrated, we are better able to address client financial services needs and match these with sector, the group facilitated a R2 billion sustainability-linked loan secure, personalised, relevant experiences, and a full range of solutions, in realtime, all the time. We continued to drive Africa’s facility for Vodacom that aligns the telecoms giant’s sustainability Our system modernisation and the digitisation of our processes provides more efficient client growth in 2020, serving the incentives with its financing structure. As the sole arranger, sole lender service at lower cost, and helps our clients execute their strategies. banking, finance, trading, and sustainability agent on the deal, we assisted Vodacom in meeting transactional, investment and its predetermined sustainability targets over a range of ESG metrics. advisory needs of a range of multinational companies, local We have introduced several services as a consequence of our engagement with clients focused on co-creating digital and regional businesses and solutions that help them manage and grow their businesses, while contributing to significant improvements in client financial institutions. Our Facilitating a shift towards sustainable finance solutions in experience and operational efficiency. These include: partnership with ICBC remains real estate key and is critical for us in the In partnership with Equites, we concluded a R1.6 billion sustainability- support of trade business linked loan facility agreement comprising two R800 million tranches. OneHub, provides a OneDeveloper, offers clients Digital client onboarding and account opening between Africa and China. This sustainability-linked loan is the first in the real estate sector in single digital and partners a ready secure improves efficiency and convenience. In South Africa. The interest rate is linked to Equites’ achievement of certain authenticated entry Africa, our clients benefit from the reduced effort CIB is a material provider of API test environment that pre-agreed ESG performance targets. These involve ESG integration, point for clients, mimics the production required to open a current account in real-time, foreign currency liquidity and which relates to green building certifications and other metrics; employees and environment, in which with growing adoption showing that they are risk management across our product governance, which partly relates to occupier satisfaction; partners (including business-to-business satisfied with the digital experience. The manual African footprint. We participate business ethics; and human capital, including gender pay equality. our BigTech and process previously took around four to seven days in financing trade flows that solutions can be fintech partners) to to complete, now it can be completed in a number strengthen regional and collaboratively developed. access the digital The solution is accessible of clicks. We introduced a number of self-service cross-continental trade links and assets we have through OneHub and will functionalities around the management of current facilitate trade and capital flows Issuing South Africa’s first offshore green bond created and co-create form a key part of our accounts, including account and signature within Africa, and between China We issued a USD200 million green bond through a private placement new solutions within strategy to partner our confirmation letters. We also digitised our Know and Africa. In South Africa, we by the International Finance Corporation. This is Africa’s largest green the marketplace your Customer (KYC) compliance requirements, have the largest market share of bond to date and South Africa’s first offshore green bond issuance. community – a wholesale clients on their which reduced the complexity and time spent by the issuance of letters of credit. Listed on the London Stock Exchange, the bond will be used to finance ‘shopping centre’ for digital journeys. clients in fulfilling these, by 66%. With our deep sector eligible green assets, such as renewable energy, energy efficiency, wholesale clients. specialisation, we offer extensive water efficiency and green buildings aligned to Standard Bank’s financial solutions that our sustainable bond framework. clients require across their value Improving client experiences with digital technology – QuantumTrade chains. Our comprehensive Our Quantum Leap programme provides client-led and digitally enabled transactional banking solutions for corporate financial services and products Issuing the first B-BBEEE performance incentive linked loan clients. QuantumTrade, the first offering in the Quantum Leap programme, provides digital trade solutions, which were meet the evolving needs of our globally launched in Uganda in 14 weeks and will be rolled out across the rest of the countries in which we operate. By automating clients, while our on-the-ground In March 2020, Isanti Glass completed the acquisition of Nampak trade processes, we can reduce the processing times for guarantees and letters of credit from days to minutes for clients specialist teams support clients Glass. We acted as the financial advisor, mandated lead arranger and with whom we have longstanding relationships, while increasing transparency of trade limits and the visibility of the in identifying opportunities that sustainability agent to Isanti Glass. The funding package included a underlying commodities. drive the development of their broad-based black economic empowerment (B-BBEE) performance broader value chains. incentive linked loan, the first of its kind, structured under the group’s Standard Bank was awarded the 2020 Innovation in Digital Banking Award (Africa) by The Banker magazine in recognition of the excellence and innovation of our Quantum Leap programme. An important feature of 2020 sustainable finance framework. The margin of the loan is linked to the was the progress we made in achievement of pre-agreed B-BBEE targets. Isanti Glass is 60% owned supporting our clients’ adoption by Kwande Capital Proprietary Limited, a black-owned investment of environmentally and socially company, and is 35% owned by SABSA Holdings Limited, a wholly owned subsidiary of AB InBev. Isanti’s purchase of Nampak Glass responsible practices. Funding creates the first and only black-owned and controlled glass container solutions in this regard included: manufacturer in South Africa. MENU DELIVERING OUR STRATEGY CLIENT FOCUS CONTINUED
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Many of our innovations are the result of more focused experiences, including complaint resolution and customer collaborations across the group, as well as our strategic engagement, based on rich data-driven insights. partnerships. For example, the group’s adoption of a global customer engagement platform has enabled us to Wealth find the right prospective clients and to personalise their RE-IMAGINE CHIEF EXECUTIVE’S REVIEW We expect Covid-19 to remain a feature of many of our • Access to a widespread client base and distribution MARGARET NIENABER, Chief executive officer, Client markets during 2021. As we continue to manage the capabilities through our integrated group. Solutions (previously Chief executive, Wealth) pandemic’s impact on our client base and employees, • Unrivalled African-focused capabilities, capturing a we are accelerating the implementation of our multitude of in-country opportunities. strategy to position the group in an evolving wealth • Investing in digital assets and capabilities to industry and a fast-changing world by leveraging our accelerate, with increased urgency, the transformation core strengths: of client experience and operational efficiency. “Our clients were at the centre of our response to constant change in the Wealth Management and Insurance industries, in a year dominated by immense global health and socioeconomic challenges. Despite these obstacles, we were able to protect our clients’ financial assets and support their aspirations by leveraging the group’s strength and our position as Africa’s Wealth leader. Our WEALTH’S PERFORMANCE AGAINST STRATEGY obsession with client satisfaction remains a key focus of our business. Our culture of excellence, thoughtfulness and ‘before the sun sets’ service enabled us to raise the bar on client engagement and capitalise on opportunities to grow our market share. In addition to hosting more than 250 virtual Delivering exceptional client experiences client events in 2020, we also garnered 22 industry awards, including the Euromoney Award for Best Bank for Wealth Management in Africa for the fifth year in a row.” As Africa’s Wealth leader, we believe in championing our clients’ aspirations and enabling their goals. Our key differentiators are our ability to seamlessly integrate offerings across our advisory, investment and insurance businesses, our nurturing client In addition to maintaining the stable foundation of our We engaged constantly with our clients across our South engagement philosophy and our commitment to delivering exceptional client franchise, we continued to expand and diversify our African, Africa Regions and International operations and experiences. presence across the continent. Market-leading introduced a number of measures to mitigate the impacts performances and consistently thoughtful client of Covid-19, including: engagement enabled us to retain and grow our client • A range of financial relief measures across our base during a tumultuous year. Although new client cash jurisdictions, including cash back on insurance We know that happy employees create happy customers, strategy, particularly during a difficult year that flows came under pressure, we saw significant premiums during the lockdown, premium payment and that happy employees are also more productive, required them to offer an extraordinary level of reinvestment from existing portfolios. relief on certain credit life, funeral and education policies, and proactive identification of distressed efficient and creative. We achieved a pleasing eNPS of empathy and support to our clients. Consistent implementation of our client-centric strategy +40, an increase of 60%, and employee regrettable clients and the restructuring of their loan facilities. To further strengthen employee alignment with our culminated in a resilient financial performance. Headline turnover improved substantially compared to the • More client interactions on innovative communication client base and diverse thinking, we promoted earnings contracted by only 13% and ROE remained previous year. This reflects well on our people’s strong channels, including WhatsApp Covid-19 chatbots. We diversity across our jurisdictions, achieving 56% strong at 29%. Excluding the impact of lower interest engagement and commitment to our client-centric also used virtual channels to provide economic and female representation. rates (negative endowment) on our business, overall investment updates, thought leadership initiatives and headline earnings improved by 13% year-on-year. educational webinars. Our performance was positively impacted by our • Participation in a revolving credit facility to support the market-leading Nigerian pension fund business, growth in Isle of Man Government’s Covid-19 response. The solutions we offer are clustered within the framework of Wealth Management (Advise and our high net worth client base, and stable performance by We supported our employees with continuous Invest) and Insurance (Insure). These core areas cover the following businesses: our insurance business. Our investment performance in engagement through regular connect sessions and chief managing clients’ money continues to be above the executive forums. We also initiated a mental health benchmark in international and domestic markets. campaign to alleviate Covid-19 related anxieties. ADVISE Advisory services through Wealth and Investment and Standard Bank We maintained a strong risk culture, underpinned by our Our operational resilience was maintained by Financial Consultants (SBFC), including fiduciary services. embedded risk governance and conduct structures. Our empowering our employees with technology to work from relatively low credit impairments reflect our proactive home, as we were committed to serving our clients, no management of risk and the operation of our businesses matter where the work took place. No major incidents or within their predetermined risk appetites. breaches were reported, illustrating the robustness of our business continuity and crisis management plans. We also continued to promote a culture of savings, with more than R1.3 billion of clients’ assets invested in We use our digital solutions to gather client insights that inform holistic, goal-based advice delivered in a low-cost online investment programmes. Nearly 10 000 Recover personalised manner. During the Covid-19 lockdown, we continued to serve our clients, no matter where the clients and their family members attended our Financial Despite the difficult operating conditions, we made work took place, with the launch of WhatsApp chatbots, digital onboarding and e-signatures, and the Fitness Academies, including a virtual session for Feenix strides in harnessing technology to drive more integrated accelerated rollout of our My360 app. students, and over 1 000 attended our Leadership solutions, backed by digital capabilities that allow us to Academies. evolve efficiently with changing client preferences. These Following the launch of Wealth and Investment’s Family Office conference in 2019, we conducted a virtual innovations form part of our drive to accelerate the Family Office conference, in partnership with Family Office Exchange (FOX), across all of our regions. One of The UN African Women Impact Fund (AWIF) was transformation of client experience and operational the largest and most respected family office institutions in the US, FOX provides integrated service offerings launched using the asset management expertise of efficiency. and advice on dealing with the complexities that high net worth individuals face in creating, preserving and Melville Douglas and STANLIB. The AWIF is an innovative impact investment fund that addresses UN SDGs Our My360 app is a good example of our commitment to transferring generational wealth. placing our clients and digitisation at the centre of our by funding first-time and experienced women We also continued to host our Wealth Leadership Academies, which are designed to empower and educate fund managers. strategy. The My360 app gives clients a consolidated view of their net worth across more than 20 000 global the families of our clients on the principles of investing, banking and lending, financial planning, leadership financial institutions on a single easy-to-use dashboard. and philanthropy. In 2020, we hosted three virtual Leadership Academies with over 1 000 attendees from Respond Now with more than 42 000 users, the My360 app won across the continent. The events were offered to our Future Leaders (18 to 24 year olds), Young Leaders We responded to the Covid-19 pandemic proactively, the Most Innovative International Fintech award at the (13 to 17 year olds) and Junior Leaders (10 to 12 year olds). consistently and with empathy to its effects on our 2020 Benzinga Global Fintech awards in recognition of its clients and our employees, simultaneously tailoring enhancement of financial wellness. personalised solutions to support our clients’ unique goals and aspirations. 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INVEST Discretionary (Melville Douglas), stockbroking, international deposits, pension fund administration (Nigeria) investment and advisory (Ghana) and funds, including alternative and passive investment funds.
Unsurprisingly, we experienced a ‘flight to quality’ in our high net worth segment and investment funds, reflecting positive client sentiment and strong client cash flows. This lifted total assets under management by Incorporating 10%, driven primarily by growth in our Melville Douglas Global Funds behavioural science to and in our Nigerian businesses. understand what clients While our international deposit base remained stable as investment want funds in the mass affluent segment continued to flow from Africa and A key development in 2020 was These include the development of WhatsApp-based corporate call accounts grew, investment performance was impacted by launching a gamified, digital, chatbots which allow clients to use a familiar interface to a reduction in global interest rates, 46% exposure to a volatile US dollar groupwide behavioural science conduct simple transactions, ask questions without going and increased regulatory pressures due to the South African credit programme to give our people through a call centre and purchase and manage products rating downgrades. The international business remains an important access to the fundamentals of the such as funeral cover. part of our value proposition and a strong contributor to group liquidity. discipline and to a pool of shared Our boutique investment management company, Melville Douglas, knowledge. Our digital solutions also enabled our clients to remain performed very well in difficult market conditions. Our global equity and financially active during the lockdown by conducting their Using behavioural science, we global growth funds remained in the top quartile, while our domestic financial service activities online. The introduction of increased funded offshore bank multi-asset strategies performed ahead of benchmarks and the digital client onboarding and e-signing improved accounts by 99% in 2020. We Leveraging our domestic peer group. Melville Douglas’ offshore performance was efficiency and risk management. acknowledged by Citywire’s Top AA-rated Global Equity Sector Fund provided bankers with behavioural digital capabilities Manager. science toolkits to enable meaningful client conversations, to meet our We continued to strengthen our partnership with Liberty, with which supported 58% growth in clients’ needs significant reinvestment from existing portfolios driving robust growth the value of funds in Private in assets with STANLIB. Our specialist non-active asset management Banking and 34% in Prestige partner 1nvest also hosted webinars in collaboration with Liberty and Banking. Extending these toolkits other external partners to increase awareness of passive solutions and into Africa drove a 200% increase to diversify distribution channels. 1nvest received a number of awards at in offshore leads from the recent South African Listed Tracker Awards. Mozambique. My360: HARNESSING TECHNOLOGY TO IMPROVE CLIENTS’ FINANCIAL WELLNESS Our adoption of innovative technology and use of data analytics Our My360 app was released to retail clients to provide a to understand and respond to our Incorporating behavioural global consolidated view of their entire financial life clients’ needs and behaviours is across more than 20 000 financial institutions from one science to understand encapsulated in our use of integrated touch point. INSURE Manufacturing and distribution of short-term what clients want digital solutions. Clients can track and access their assets and liabilities, and life insurance products, including By using behavioural science, our regardless of where their accounts are based. They can bancassurance. client sales and service teams also directly save and invest, using the app’s new increased referral sales for car and robo-advisor capability. home insurance and funeral plans by 19.5%, while private bankers in By enabling clients to authenticate for My360 via the Our insurance business delivered a stable performance while fielding Gauteng increased Credit Life sales banking app, we created a seamless transition in new rising retrenchment, loss of income and funeral claims. New insurance by 24%, outperforming their peers client onboarding for consumer and high net worth sales were slower, but we retained clients by proactively managing in other provinces. By improving our clients. understanding of what our clients policy cancellations. Our insurance business continued to grow in most Developed in collaboration with a fintech partner, the app want, we increased client retention African countries where we have a presence. is a truly integrated solution that incorporates other data by 11% and Flexible funeral policy sources, such as inflation or insurance policy data, to We diversified our insurance offerings with the successful national roll sales in KwaZulu-Natal by 95%. out of the innovative Flexible Funeral solution which allows clients to facilitate financial wellness – an increasingly relevant determine the amount of cover they need, to customise their benefits Expanding behavioural science into offering during a period of social distancing and the and to include a NeverLapse benefit that allows them to retain their the Africa Regions saw funeral increased use of digital channels. policy during challenging times. More than 260 000 Flexible Funeral policy sales in Namibia among the policies were sold during 2020. lowest selling branches increase by 71%. A key development was the Additional innovations introduced to make it easier for our clients to release by the behavioural science manage their insurance needs included: team of the 'Shoutouts' app which • Buy Online life insurance, a solution that allows clients to buy simple was designed to increase employee life, disability, terminal illness and income protection insurance online engagement and peer-to-peer in seven easy steps. recognition and contributed to a • Automated Credit Life exception reports that improve efficiency, significant increase in eNPS scores. increase client turnaround times and strengthen operational risk The app has been rolled out across control. We are also exploring the use of blockchain to improve the all insurance service centres in efficiency of windscreen claims. South Africa. 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Looking ahead for our clients Moving closer to our clients through new client segments We are clear on our strategy and focus: we will garner further insights and develop valuable relationships with Leveraging technology across our clients' value chains our clients through deepening our digital capabilities, to understand their preferences and dreams to provide Our clients in the fast-moving consumer goods physical cash from supply chains and improve them with the solutions they need. We will become central to fulfilling each of our client's financial, and sector supply wholesalers, retailers and the logistics and security. Technology can also increasingly non-financial, needs in their life and business journeys. Our changing functional structure, informal sector. Many of these clients want us to increase our clients’ visibility of suppliers’ including targeted new client segments, drives us closer to our clients by enhancing focus, improving support small local farmers in their supply chains production to ensure quality and sustainability of coordination across the group and enabling us to accelerate our strategy. or consumers in the informal sector who supply. In some instances, these interventions experience cash flow and cash management are provided through our small business challenges. By leveraging technology, we remove incubation centres.
Delivering integrated solutions to our clients As we transform the group, we are integrating our capabilities and reshaping our infrastructure to offer our clients Simplifying business Competitive working The ability to explore over integrated solutions. We also collaborate across the group to attract and serve new clients by banking our existing clients’ trade experiences clients across their value chains and within their client relationships centred on fulfilling their needs. 1. capital finance solutions 4 200 000 pages of curated Trade Suite manages our clients’ and risk reduction market insights in over 100 end-to-end trade processes, instruments countries, and commodities therein ensuring that the goods they import arrive on time, in good Expanding our services and solutions condition and at the price they expect. Access to some of Access to Trade Club The group also offers Trade Club, 2 South Africa’s best 5 where companies can source logistics businesses at approximately 18 000 new buyers To keep adapting to change, we continue to client growth across the group, primarily due to the an online platform that connects competitive rates and suppliers from over 60 countries, reorganise our business around our clients to ensure extension of our spectrum of financial services to our our clients to more than 18 000 vetted businesses across including sourcing products that we spend more time understanding the way they clients’ ecosystems. This has also gained traction in from China live, shop, socialise and do business, and responding South Africa. We will continue to leverage and scale 60 countries, drawing on our to their changing expectations. We are migrating ecosystems throughout our franchises, growing in global trade alliance with 13 leading international banks. towards providing our clients with an expanded range markets where we are under scale and strengthening A fully managed import Access to international of integrated services and solutions leveraging the our client base across all segments. To date, over 750 business clients 3 solution that allows 6 tradeshows and events (digitally group’s scale, scope and digital capabilities. For our We are also increasingly working in partnerships with have accessed our networks of businesses to focus on enabled owing to Covid-19 consumer, high net worth and small business clients, other businesses to provide solutions beyond those relationships, intimate other core areas of their restrictions) our services are increasingly individualised, instantly of traditional financial services through broader understanding of African markets operations available solutions and opportunities, enabled by ecosystems, using and growing our existing digital and global connectivity through a modern digital technology but delivered whatever solutions such as LookSee, Trade Suite, and OneFarm range of benefits, including: way our client chooses. For our commercial and to support our clients’ life and work experiences. For wholesale clients, our services require close human example, by scaling our digital trade capabilities and relationships that support the complexity, ecosystems to connect our clients to 18 000 vetted competitive pricing and bespoke nature of corporate businesses across 60 countries, leveraging our deals, while we transform client experience and partnership with ICBC to link African companies with efficiency by digitising manual processes and UNAYO – YOU HAVE IT Chinese importers, and managing our clients’ decision-making. end-to-end trade processes digitally, we are Our integration across the group extends positioning the group to support trade business Unayo is a global wallet account that has been geographically. In Africa Regions, our business and in Africa. designed to offer a fully digital experience with a commercial banking has tended to pave the way for range of solutions centred around client needs.
A mobile phone and number allows subscribers to connect, trade and transact through personal or merchant accounts. Money is redeemed into the client’s The acceleration of our integrated approach is demonstrated by the following examples: wallet when received as a voucher or sent from another client. The funds can be cashed at any connected merchant. Unayo provides a simpler, safer way of LookSee – supporting LookSee enables property buyers or sellers to: transacting and accessing cash. This allows both home ownership informal traders and well-established businesses to grow experiences View the estimated value of a Understand once-off and their business by joining the network and running their property by entering its address. monthly costs involved in owning business using Unayo instead of through branches. Our LookSee online guide helps View its growth and average the property, including estimated Unayo was launched in Malawi in November 2020 property buyers, sellers or values in the area. insurance, rates and taxes. following a successful pilot and will be rolled out homeowners to make informed across the group during 2021. decisions when buying or selling property. On the same site, Understand sales trends, crime Download property guides and homeowners can access online statistics, nearby amenities and compare up to three properties first-timer investment tips, demographics in the area where at a time. access bonds and home loan they would like to buy. protection plans. MENU DELIVERING OUR STRATEGY CLIENT FOCUS CONTINUED
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Priorities for the year ahead
BUSINESS & COMMERCIAL
Our new capability model will return the group to the great Partner our clients for growth by identifying, Provide superior and consistent client understanding and providing solutions for our experience through digitisation and rapid tradition of community banking, to understand our clients client aspirations, based on insights gained from deployment of enhanced customer relationship deeply and to anticipate their needs. The new core client data analysis; increasing meaningful client management; continuous improvement in the conversations; and evolving into long-term turnaround of credit decision-making; and segments are Consumer & High Net Worth, Business & strategic partners to our clients. empowerment of client engagement teams. Commercial and Wholesale Clients. Each client segment is equally supported by our client solutions; corporate functions; Elevate trade as a core capability across our Scale existing digital offerings and solutions, a specialised innovation capacity (providing future-ready international, regional and domestic markets, including but not limited to OneFarm to support solutions and new business models to generate new value encompassing trade, forex and cross‑border our agricultural capability; Trade Suite and Thrive payments. Continue to develop trade on the to support our trade capability and develop streams), and by our engineering infrastructure. Our 2021 Africa-China corridor in partnership with ICBC. client networks; and increase opportunities priorities for our new client segments include: in Africa Regions. Cultivate enterprise segment across all markets through our Enterprise Direct capability, Strengthen focus on key sectors, to deliver automation and continued digital banking solution sharper and contextually relevant propositions, delivery. this includes enhancing our teams with sector CONSUMER & HIGH NET WORTH expertise and experience to build relationships and serve these clients. Increase transformation in South Africa by Drive high levels of people engagement and Being more than a bank and scaling chosen understanding and supporting local businesses. productivity, and build a workforce that is highly ecosystems through leveraging partnerships, and engaged and skilled for the future ways of work. working in an integrated way with other segments and Client Solutions.
WHOLESALE Grow client franchise by being a bold, inclusive Maintain our stable and consistent risk and locally legitimate African brand. appetite for clients, providing financial support during good and tough times, and strengthen Continue to embed our relationship with Optimise our existing value propositions client rehabilitation and collections. ‘on-strategy’ clients forming the bedrock of our through innovating our client processes. Provide superior client experience consistently portfolio. by enabling clients to do all transactions once through mobile, and continue to use data and Reduce the cost of client acquisition and analytics to drive relevant conversations with servicing by increasing digital adoption and Capture emerging client opportunities best Drive sector and geographic diversification for our clients. solving client needs at first point of contact, served through digital business propositions. our core clients in our presence markets. reduce physical and voice branch‑based transactions that can be easily done on mobile and solution for clients to have easier access to cash. Increase our regional footprint for our clients in the markets where we operate. MENU DELIVERING OUR STRATEGY
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Employee engagement
Employee engagement is a critical driver of long-term sustainable value. Our people's thoughts and feelings about their work correlates with how Number of banking employees
satisfied our clients are; and indicates how successful we are likely to be Permanent Non-permanent in accelerating our strategy to achieve higher growth and efficiency, while employees employees retaining the trust our stakeholders have in the group. Diversity and inclusion: Gender equity: Representation of women (banking 44 450 3 010 activities) 2019: 44 996 | 2018: 47 419 2019: 3 618 | 2018: 4 728 2017: 48 322 2017: 5 725 We are continuously working to improve the representation of women in senior positions across the group. Women currently hold 33.6% of executive positions across the South Africa International MEASURING OUR STRATEGIC PROGRESS group. When measured against the 2020 McKinsey Women in the Workplace Report, the group compares favourably in respect of the representation of women What success looks like in both executive and senior management positions. 29 581 621 2019: 30 102 | 2018: 32 162 2019: 620 | 2018: 639 • We are considered a great place to work and our 2017: 32 876 2017: 615 people feel deeply connected to our purpose, their How we performed Women in executive Women in senior colleagues and our clients. positions management • Our people are empowered to, and are recognised Africa Regions for, delivering against our strategic priorities and eNPS being client-centric in everything that they do. 33.6% 40.7% • Our people make the most of every opportunity to 2019: 32.3% I 2018: 32.2% 2019: 40.3% I 2018: 39.4% embrace new ways of working and learn new skills to +44 14 247 remain relevant in a changing world of work, and 2019: +18 2018: +23 2019: 14 274 | 2018: 14 618 achieve their full potential. Target: >40% by 2023 2017: 14 831 • Our people are encouraged to speak up and feel heard when they voice their views. Representation of black people (South Africa) Our eNPS was an impressive 26 points higher than the prior In South Africa, in line with our employment equity Tenure breakdown (%) year and participation in our annual employee engagement targets, we improved the representation of black people, survey increased to 83% of employees, up from 74% in and African people in particular, at all management levels. 2020 2019 2019. 2020 How we measure progress Less than 2 years 18.0 Our anchor measure of employee engagement is our Top management Senior management 3 – 5 years 2 28.9 eNPS – an indicator of how likely an employee is to 6 – 10 years 22 20.6 recommend the Standard Bank Group as a good place Employee turnover 2019 11 – 20 years 2 23.8 to work. We measure eNPS annually across our global Overall turnover decreased to 6.0%, from 10.8%. Voluntary 21 – 30 years 2 6.5 footprint, through a survey of our people’s perspectives employee turnover declined year-on-year and our voluntary 48.6% 51.5% 31 – 40 years 2 2.1 More than 40 years 0 0.1 and opinions. This is supplemented by indicators that regrettable turnover also declined from 2.3% to 1.4%. Our 2019: 44.2% I 2018: 41.9% 2019: 49.1% I 2018: 46.3% provide additional insight. overall and voluntary turnover remain well below global financial industry benchmarks of 13% and 9% respectively Indicators of employee engagement (Source: Gartner financial services benchmarks: 2019). • eNPS: calculated by subtracting the percentage of survey detractors from the percentage of promoters. This value can range from -100 (if every employee is Voluntary Voluntary a detractor) to +100 (if every employee is a turnover rate regrettable turnover promoter). Although the eNPS score measures the distribution of promoters, insights gained from the responses of detractors and passives, employees 3.0% 1.4% Accountability for employee engagement who are satisfied but not necessarily enthusiastic, Board subcommittees contribute to creating and preserving value for our stakeholders while providing mandated are also assessed for further action. 2019: 4.8% I 2018: 4.9% 2019: 2.3% I 2018: 2.3% oversight governing our employee engagement value driver. • Employee turnover: measures the percentage of Group social and ethics committee: Oversees employee engagement, transformation and ethics resulting in a employees who left our employ during the year. responsive and responsible organisation with an ethical culture that values its employees. • Diversity and inclusion: measures the Overall Voluntary turnover at representation of people from under-represented turnover executive level Group directors' affairs and the remuneration committees: Oversee employee-related matters as part groups and also assesses their qualitative experience of their mandates. of the work environment through an in-depth Read more about the purpose and activities of the board analysis of the employee survey results. 6.0% 3.3% subcommittees. – Gender equity: measures the representation of 2019: 10.8% I 2018: 8.3% 2019: 3.8% I 2018: 4.8% women in senior management and executive positions across the group. – Employment equity: measures the representation of black people in management levels in South Africa. MENU DELIVERING OUR STRATEGY EMPLOYEE ENGAGEMENT CONTINUED
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Our people strategy responds to the following key challenges and the critical trade-offs they require:
We continue to invest significantly in Some of the more specialised skillsets and capabilities we what really matters to our people, while require to achieve our strategic aspirations are scarce in our appropriately managing our cost base. markets and subject to fierce competition not only in financial Ensuring we deliver a compelling and services but also in many other industries. We have introduced competitive employee value proposition is specific strategies to attract and grow these skills. From our chief people critical to attract and retain the right people to support the group’s strategic acceleration. and culture officer Through our culture change journey, we are taking care to SHARON TAYLOR, Chief people and culture officer honour the past and those attributes that have contributed In shaping a future-ready workforce, we to our longevity and success while adopting new behaviours expect our people to adapt and remain that will enhance our culture in line with our aspirations to relevant in a rapidly evolving and increasingly transform our business. digital environment. Our extensive efforts to reskill and retrain our workforce are enabling us to manage the human, socioeconomic We are focused on managing the risk of change fatigue and and reputational impact of skills redundancy building resilience to support focused and urgent delivery of “It is in really tough times that the core of what an organisation stands for and the credibility of its in the face of increasing digitisation. the group’s accelerated strategy. promises to its people and its clients are truly tested. Through the challenges of 2020, I believe the group’s leaders stayed true to our long-held strategic focus on employee engagement, as a critical driver of value. The group’s ability to rapidly and seamlessly adapt to unprecedented conditions was nothing short of remarkable, thanks to committed leaders and a passionate and resilient workforce.”
EMPLOYEE ENGAGEMENT eNPS Every year we conduct an employee engagement Our purpose, values and culture survey across the group to get a clear sense of what A sense of belonging is deeply grounded in whether the our people think and how they feel about working at purpose of an organisation resonates with its people. This Standard Bank. 83% of our employees participated in is fundamental in keeping and attracting the right people the 2020 Are You a Fan Survey, up from 74% in 2019. +44 – those aligned to this higher meaning and the "I would In our 2020 employee For 2020 eNPS was +44, an impressive 26 points organisational belief system it anchors. We can recommend the engagement survey, an higher than 2019. demonstrate that our people feel deeply connected to +18 Standard Bank our purpose – Africa is our home, we drive her growth; incredible Key feedback included: Group as a good they believe they are making a difference, not only in the • 96% of employees understand their contribution to place to work." 2020 lives of our clients, but also in the communities we serve. 96% of our the group’s purpose. That service took on a whole new meaning in the context • 94% of employees are proud to be associated with of the pandemic. Our people went the extra mile for our people the group. Emotional clients, many placing themselves at risk by serving on the told us that they understand • 88% of employees stated that the teams they are Promoter frontline during national lockdowns across our their contribution to our part of work well together to achieve common or Score geographies. purpose. aligned goals. • Although 75% of employees responded positively, Besides our inspirational purpose, our strong values, feeling heard when voicing their opinions is an area enabling culture and quality leadership are features of our +66 success and sustainability. Confronted with having to we have highlighted for further improvement. "How do you We evaluate whether make difficult decisions quickly and in the absence of a our more than FEEL about frame of reference, as we were in 2020, our values remain +48 working for our north star. Our leaders and our people tested every Standard Bank decision against our values, to ensure our actions remain 47 000 Group?" 2020 authentic – true to the organisation we are and what we stand for. banking Our culture blueprint, which incorporates the behaviours employees we believe are crucial for us to realise our vision, informs truly live our values on an our culture (’the way we do things around here’). We have ongoing basis. initiated several culture journeys across the group to ensure we strike the balance between honouring the past and the good qualities associated with our heritage, and driving the shifts in behaviour needed to put our clients at the centre of everything we do, to continuously adapt to our changing environment and to win in our chosen markets. MENU DELIVERING OUR STRATEGY EMPLOYEE ENGAGEMENT CONTINUED
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Leading by example Work is what you do, not where you are Learning outcomes We are clear on the attributes our leaders need to achieve ADAPTING TO NEW With most of our people embracing digital solutions and Equipping our employees with future-ready our strategy. Our leadership identity defines how we working remotely, it has become clear that we will need to skills expect our leaders to show up in the moments that CIRCUMSTANCES rethink our traditional ways of working. We are matter for our clients and our people, and informs all our We conducted a special ‘Tell us how you are’ survey considering the right balance between physical and leadership practices and development interventions. In mid-year to determine whether our people were remote working environments, given that our people have 2020, our leaders not only managed the crisis in a adapting to their new working conditions and to told us that most of them would prefer having the deliberate and thoughtful way, but stayed connected to understand how we could better support them. flexibility to balance working from home with time in the our people – whether they were working from home or in The vast majority told us they were adapting well office when it becomes feasible. >40 000 the office – to inspire energy, focus and hope. Our and expressed appreciation and pride for the employees have accessed our new leadership teams saw every challenge as an opportunity efforts that the group had made to help them Changing conditions bring new online learning platform to demonstrate their commitment to keeping our people and our clients through these difficult times. opportunities safe and well, and to supporting our clients. Specific feedback included: Our digitisation efforts, which are focused on helping our • 95% of employees reported that they were people to grow and thrive in the new world of work, were More than adapting well to the new circumstances. accelerated in 2020. Furthermore, our integrated approach to building future capabilities, which has • The top three sentiments expressed matured significantly over the last few years, continued to by employees were “grateful”, “positive” >5 million evolve even as we dealt with the immediate impact of the 84% and “appreciative”. learning items completed of our people rated their immediate leaders pandemic. as being caring and acting with integrity. • Positive feedback on the ability of leaders to empower and enable teams to deliver on Most notably, we accelerated the launch of our new expected outcomes, while showing real care for MyLearning platform, to give all our people easy access Keeping our people safe, healthy and their personal wellbeing. to an extensive range of learning resources. More than 85% took up the opportunity to access learning content productive • 89% of employees expressed their pride in the measures taken by the group to support both anytime, anywhere and on any device. More than five Our first priority at the onset of the Covid-19 pandemic was million learning items were completed online by >R677 million employees and clients during the pandemic. invested in employee learning to ensure the health, safety and wellbeing of our employees, employees since going live in 2020. To ensure our people capabilities and by extension their loved ones and our clients. remain future-fit, we have developed a future skills Our ongoing investment in technology and digitisation framework with 432 bespoke learning paths. Tailored enabled us to equip more than 75% of our people across Managing the impact of the prolonged learning academies focused on building capabilities the group to work from home, practically overnight. For pandemic on our people relevant to the group’s strategy have been introduced to supplement these learning pathways. those frontline employees providing essential services in As it became clear that the pandemic and its associated key office locations and branches, our focus remained risks were here to stay for the foreseeable future, we Staying focused on strategic imperatives sharp on keeping them safe and healthy in line with redoubled our efforts to help our people care for their This investment in digital learning solutions Despite the disruptions caused by the pandemic, we changing health risk dynamics. Multi-disciplinary teams physical, emotional and mental wellbeing. For many of resulted in an 8% improvement in how continued to deliver on our people strategy. Importantly, came together to solve different challenges, developing a our people, feeling isolated, missing the human our people rate their opportunities for we have continued to focus on enabling a diverse and range of critical protocols to provide clarity and guide connection with colleagues, long hours spent working development and career growth. inclusive workforce. Tailored diversity and inclusion plans, action in navigating complex scenarios. remotely and the blurring of boundaries between work with set targets and metrics, are now in place in all our and home have proven challenging – especially over a To keep our essential services workers safe, extensive countries. Ensuring healthy succession pipelines and prolonged period. To better enable sound people decisions, informed PPE and special transport were provided. We introduced by real-time data, a cloud-based people insights and implementing specific strategies to attract and retain special leave and other benefits, like parental leave for In response, we launched an extensive range of wellbeing predictive analytics solution was introduced for all line people in critical roles that require scarce skills remained school closures and leave for self-quarantine purposes. interventions, including counselling and support services, managers. Initial uptake of this solution has been a priority. Where feasible, our international assignees were online webinars and useful guidance on personal encouraging; as we add data sets, the business value repatriated to their home countries ahead of border resilience, loss and grief, remote working, leading remote of this solution will grow. closures and travel bans. We granted a special Serving teams, home schooling and parenting, mental wellbeing, Our Nation recognition award to all our employees who and violence against women and children. The pandemic served as a catalyst for our people and worked outside the safety of their homes, during the hard culture teams to think differently about deploying various lockdown across our countries of operation, to recognise people practices and solutions. Besides the rapid their efforts in providing continued essential services to redesign of all learning programmes for online delivery, our clients. We also launched a Covid-19 app and online we introduced a completely digital experience for information hub to facilitate constant communication job-seekers and onboarding new employees. Our youth with our people, provide important educational development programmes were also adjusted to be information, enable them to complete daily symptom delivered digitally and we provided all our graduates, checks and keep their leaders informed of their health learners and interns with devices and data to ensure they condition and work location. were well integrated into the organisation and remained connected and productive. MENU DELIVERING OUR STRATEGY EMPLOYEE ENGAGEMENT CONTINUED
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Our promise to our people Employee development LOOKING AHEAD Diversity outcomes The world of work is changing, and so are the The group is committed to growing and developing expectations of employees. In line with evolution of the our employees to their full potential, investing Our unrelenting effort to keep our people safe, healthy Gender equity (banking operations) group’s brand, and our commitment to our customers R677.5 million in 2020. and productive will continue as the pandemic runs its and to find new ways to make their dreams possible, course. Special emphasis will be placed on maintaining we launched our People Promise, based on what our disciplined adherence with all protocols and supporting the mental, physical and emotional employees have told us they are looking for in a future Graduate programme employer of choice. We shared a clear and aspirational wellbeing of our people as they deal with persistent Our signature programmes have a strong focus on 35.3% 13.6% promise as an employer – centred on finding new ways to pressure in their personal and professional lives. We future fit skills, including data science, actuarial Female Female chief continue to drive a growth mindset and encourage board executives in make their dreams possible; as well as what we expect of science, behavioural economics and relationship members Africa Regions people to take personal responsibility for constantly them in return. Our People Promise has been well banking. In 2020, our graduate programme had an evolving their skills and make full use of our world- received. It will not only help our employees deliver on our intake of 199 graduates, 150 in South Africa and 49 commitments to clients but will also inspire and enable from Africa Regions. The programme comprises class learning resources. We look forward to bringing Target 33% Target 20% our People Promise to life through a variety of by end 2021 by end 2021 them to realise their full potential. individualised learning journeys, action learning projects, executive sponsorship and accelerated initiatives that meet their needs in thoughtful ways. Ensuring future-readiness work experience. These allow us to build a strong To support the achievement of the group’s Informed by our aspiration to become a client-centric succession pipeline for core, critical and scarce future aspirations, our priorities in the year 33.6% 36.3% digital business, we embarked on our journey to roles in the group. ahead will include: Women in Women in transform the group which started with changes to executive executive positions in positions in the group’s top leadership team and the inception of Facilitating the ongoing evolution of the group’s group SBSA the GLC. organisational capabilities and ways of working to Bursaries and learnerships meet the needs and expectations of our clients. We actively engaged with our executive teams and all our Target 40% Target 40% Our bursary scheme allows employees to apply for by end 2023 by end 2021 people to position the need for urgent change, engender study support courses they want to pursue as part buy-in to our aspirations and help them understand the of their career development. Bursaries provided to Accelerating our strategy to empower our leaders Measured against the 2020 McKinsey Women in the Workplace implications of our accelerated strategic journey. Our employees for under- and post-graduate studies in Report, the group compares favourably in respect of the to step into the future with confidence. representation of women in both executive and senior people have responded with a sense of excitement and 2020 totalled R51 million and benefitted 1 831 management positions. hope for the future prospects of the group. employees. We are reviewing the bursary scheme to accommodate the changing landscape of Employment equity (SBSA) In particular, we are confident that the group has the learning and learning solutions. Experimenting with, and then implementing depth and breadth of leadership experience to achieve new ways to source and develop the right Student bursary programmes the balance between short-term deliverables and • skills, leveraging the total spectrum of the long-term sustainable value creation. Our leadership In 2020, we sponsored 36 students with augmented workforce. teams, supported by our extensive leadership bursaries that cover tuition, textbooks, accommodation and stipends. This year, the development programmes, have demonstrated their 48.6% 51.5% benefit was extended to include laptops and data Top Senior ability to deal with complexity and resolve the trade-offs Re-imagining our performance and reward management management to ensure minimal disruption to their studies. Black Black required to achieve accelerated growth, change, strategies to drive the right behaviours and innovation and efficiency – to perform and transform at • Employed learnerships business outcomes. the same time. We offer employees the opportunity to participate in learnership opportunities to build key skills. We >44.2% >49.1% introduced a virtual solution for the 987 employees in 2020 in 2020 Shaping the appropriate models of working that who registered for learnerships in 2020. balance the changing nature of work, higher levels of productivity and shifting client and employee needs. Empowering our leaders Exchange programmes and secondments During 2020, 132 employees participated in The significant increase in our employee engagement international assignments to build cross-cultural indicator, in an extraordinarily challenging year, The group and our awareness and support succession planning for key gives confidence that our people strategy is reaping delivery partners, GIBS 6 348 5 548 roles. Due to Covid-19 and travel restrictions rewards. With employee engagement being a leading employees across all our employees participated in and Henley Business implemented by many countries, 47 new School, won the 2020 indicator of client satisfaction, we are well on our way countries took part in bespoke leadership assignments were put on hold with 35 repatriations to transforming the experience we deliver to our leadership development development initiatives EFMD Excellence in and two medical evacuations facilitated for Practice Gold Award for clients, on which our long-term competitiveness rests. initiatives in 2020, of customised to meet assignees and their families. Our ongoing initiatives to support the resilience, which 3 470 were women specific requirements in our Strategic Leadership Programme in the Our exchange programme with ICBC, established in capabilities, wellbeing and future employability (55%). line with the of our people will enable the group to emerge from organisation’s business category of Executive 2016, allows selected employees from both the this crisis stronger and more ready for the future and capability building Development. group and ICBC to spend time in locations across than ever before. priorities. Africa and China. It supports collaboration and relationship building, enabling the sharing of knowledge and resources. Since inception, 45 assignees have participated. Covid has not stopped the sharing of knowledge and resources and three exchange assignments have successfully proceeded. MENU DELIVERING OUR STRATEGY
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Risk and conduct
Our reputation as a trusted partner is built on the strong foundation of risk management processes and ethical personal, market and societal conduct. This protects the value we create for all our stakeholders. Respond Risk management is a cornerstone of the group’s response to the Covid-19 crisis, enabling fast, targeted and responsible support of our clients, while preserving the group’s financial position. Measures include: • Balancing extensive client relief programmes with careful monitoring and management of our capital, liquidity and Recover MEASURING OUR STRATEGIC PROGRESS credit loss risk measurements. Uncertainty remains a feature of our risk • Focusing on protecting the health of our employees by landscape as the Covid-19 pandemic evolves and providing appropriate PPE to essential office workers and recovery is set to be uneven across the countries in which we operate. This requires close What success looks like leveraging our investment in technology and digital innovation to equip over 75% of our employees to work from monitoring of financial risks, which are well • We are a responsible corporate citizen that adheres home. understood and well‑managed. The impact of to good corporate governance practices and Covid-19 on the interrelated non-financial risks • Collaborating with all internal assurance functions to identify promotes sustainability, and the social and economic continues to unfold and our risk management new or heightened risks in the new environment and development goals of Africa. processes are designed to proactively identify compliance requirements from new regulations and advising • We do the right business, the right way, without and analyse this new information, as well as on appropriate controls. exception, rooted in a culture of conscious risk- MANAGING THE IMPACTS establish their potential impact on our financial taking. • Engaging with banking regulators on financial risks and recovery plans. • We contribute to safe and efficient financial systems OF COVID-19 exceptions to liquidity and capital requirements, non- in and across the markets in which we operate. The group operated in a highly complex financial risks and highlighting systemic risks that may Our digitisation strategy is key to our recovery. It • We comply with all applicable laws and regulations and uncertain external environment in adversely impact the country’s banking system. enhances client experience by reducing banking costs, improving payment mechanisms and and meet the highest standards of ethical business 2020. The public health, financial and • Maintaining the group’s operational resilience through providing better debt management support. conduct. humanitarian threats associated with robust business continuity and crisis management response • We safeguard our reputation and protect it from plans that included a change in working locations. However, digitisation, combined with the group’s Covid-19 compounded the harm, in everything we do. • Channelling learnings from our Covid-19 experience back transformation into a more digitally focused socioeconomic pressures that existed in into governance processes to improve the efficiency of our solutions provider, has increased the many of our markets prior to the onset governance structures. susceptibility to cyber, information, fraud, and third-party risks. These non-financial risks were of the pandemic. Covid-19 did not slow • Making Covid-19 training compulsory for all employees, and exacerbated in 2020 by the shift to a work-from- the momentum of change in our providing emotional support and wellbeing services to our RISK anywhere approach and required additional competitive landscape; rather, it people to support them in dealing with social, financial and employee conduct and information security to work-from-home demands. How we manage it amplified the direct threat to our client controls to minimise the impact on client franchise and, more generally, the threat Our robust risk management system is governed by We helped ease the liquidity crisis facing many clients, facing services. mandated board and management committees with to the relevance of traditional financial particularly corporate clients, while maintaining the appropriate expertise. We take measured risks within services offerings, posed by BigTech effectiveness of debt collection activities. We continue to the risk appetite set at group level by the board, and companies and niche fintech offerings. manage credit portfolio concentrations, including risk limits that are set and reviewed regularly by the This made it imperative to accelerate the concentrations in specific client sectors, such as real estate relevant management committees at legal entity and and hospitality. other appropriate levels of the group. transformation of our business in line with our medium-term strategy, while at Our risk measurements are designed to balance the same time dealing with the regulatory capital requirements and shareholder expectations for risk-adjusted returns. They allow us immediate impacts of the pandemic. to carefully manage our capital, liquidity and funding More specifically, pandemic-related allocations to transform and grow the business, while restrictions on workplaces and the maintaining depositor and creditor confidence. We desire for contactless services created RE-IMAGINE continuously improve the management of complex the need to advance our digitisation non-financial risks in order to manage risks that arise as we pursue growth opportunities that create value strategy significantly and urgently, with We will continue to leverage our risk management capabilities in support of the group’s transformation strategy. for all our stakeholders. heightened attention given to the We expect uncertainty and rapid change to remain features of our operating environment in 2021 and we are associated risks. alert to the ongoing impacts of Covid-19 on the group, our employees, our clients and communities we serve. How we performed The proactive management of unprecedented pressure in our risk environment proved effective, with no material breaches of board-approved risk Read more about the group's strategy on page 32. appetite and no regulatory fines that affected our licence to operate. The group remains well capitalised despite the impact of Covid-19. MENU DELIVERING OUR STRATEGY RISK AND CONDUCT CONTINUED
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CONDUCT TRADE-OFFS How we manage it We monitor and report We manage conduct risk in accordance with our conduct risk management regularly on conduct risk framework, which defines the group’s conduct risk appetite and informs using predictive and Achieving our risk and conduct priorities is the approach to managing and mitigating instances of misconduct. retrospective analysis. Our contingent on managing the following trade-offs: Quarterly conduct governance dashboards are submitted to the group indicators include: • We reallocated resources in response to Covid-19 leadership council, providing a view on the ethical climate of the group. • Effectiveness of new 2020 KEY PRIORITIES to ensure we keep our people and our clients safe, Conduct is evaluated, managed and monitored by the appropriate client product sales. ! investing in PPE and implementing necessary governance and management committees, using conduct risk indicators. • Client satisfaction. Good progress has been made protocols in the workplace, and supporting their Where deficiencies are identified, immediate remedial action is taken. We • Effectiveness of money ability to work from home by making data and against these priorities, and continue to identify metrics and mitigation measures to improve the laundering prevention necessary equipment available. responsiveness and effectiveness of conduct risk controls. practices. adjustments were made to ensure • In managing our exposures responsibly in line • Information security appropriate focus on Covid-19 crisis with macroeconomic and socio-political realities, How we performed processes. management: it is sometimes necessary to tighten our risk Good conduct is key to winning and retaining our clients’ trust. Through • Continue to align the risk and compliance appetite in lending to vulnerable sectors and our actions and behaviour, we aim to deliver fair outcomes for our clients. functions to changes in group clients. This reduces the potential for losses but The group drives culture and ethical conduct through the group social and architecture and transformation to a may inhibit client growth and revenue generation. ethics committee, a board subcommittee. truly digital organisation. • We manage the natural tension between client • Deliver value-based risk management convenience and the speed at which we can fulfil services with a clear link to financial their needs, and the parameters of our mature outcomes. and continually evolving regulatory, supervisory Our indicators • Actively monitor stressed client and control environment. • The evolving expectations of ensuring compliance Actual portfolios at a group level. Medium-term • Enhance our scenario analysis and stress is a necessary condition of maintaining our Measure Metric 2020 2019 target test our strategic objectives and reputation as a trusted partner, which is a expectations against key risk scenarios. strategic asset and a source of competitive Responsible CET 1 advantage, especially as an incumbent financial • Embedding the effective management of risk taking A measure of solvency that assesses capital services organisation. strength against our risk-weighted assets (RWA). 13.3% 14.0% 10.0% – 11.5% non-financial risks across the group, expanding the traditional operational risk • Our size and footprint places us under the Total capital adequacy ratio 16.1% 16.7% universe. constant scrutiny of regulators and other stakeholders and it is imperative that we are able LCR • Continue to leverage data as an asset to demonstrate transparently that our business Measures our ability to manage a sustained and develop intuitive risk management activities create measurable value in a socially outflow of client funds in an acute stress event through technology. over a 30-day period. 134.8% 138.4% Minimum >80% and environmentally responsible manner. NSFR • Our ability to balance mitigation of potential The amount of available stable funding relative to disruption to client experience while we the amount of required stable funding in accelerate the transformation initiatives of the accordance with Basel III. 124.8% 119.5% Minimum >100% group. Conduct index Compliance training completion rate1 98.0% n/a
1 The compliance training completion rate was introduced as a measure from 2020. Accountability for risk and conduct CET 1 RATIO RETURN ON RWA The key board subcommittees that provide mandated oversight in governing our risk and conduct value driver are % % the group risk and capital management committee, the group audit committee, the group technology and 15 3.5 information committee, the group social and ethics committee, the group remuneration committee and the group model approval committee. Various group management committees report to these committees 3.0 14 quarterly and certain members of the group leadership council are invitees to the board subcommittees. 2.5 Read more about the purpose and activities of the board subcommittees here. 13 2.0
1.5 12 2016 2017 2018 2019 2020 1.0 2016 2017 2018 2019 2020 13.9 13.5 13.5 14.0 13.3 2.7 3.1 3.0 2.8 1.4 MENU DELIVERING OUR STRATEGY RISK AND CONDUCT CONTINUED
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How we manage risk
We take a holistic, forward-looking view of the risks we face, assessing the threats and opportunities in our operating environment. Our well-developed framework supports a consistent approach to risk and capital management throughout the group. RISK GOVERNANCE RISK LIFECYCLE THREE LINES OF DEFENCE DOCUMENTS, comprising governance Our risk universe is managed through the We leverage the lines of defence to maintain GROUP STRATEGY frameworks, standards and policies risk lifecycle. Our risk measurement a strong and resilient risk culture. Our governance of risk is underpinned by process includes rigorous quantification of risks under normal and stressed Design and implement an effective risk a strong control environment and is defined 1 RISK OWNERSHIP management programme across the ASSURANCE Organisational design in our risk governance and management conditions, up to and including recovery enterprise. COMBINED standards and policies. and resolution. Risk management is enterprisewide, applying to all entity levels. DIRECT, CONTROL Facilitate risk and capital management 2 REPORTING AND COMMITTEE AND OVERSIGHT activities at an enterprise level. Identify Treat STRUCTURES Provide assurance on the adequacy and RISK ADVISORY Our governance structure enables oversight 3 effectiveness of the risk management AND ASSURANCE Risk management approach and accountability through appropriately programme. Our risk management approach ensures consistent and mandated board and management Assess and Monitor and measure report effective management of risk within our board-approved risk committees. Doing the right business, appetite and provides for appropriate accountability and Risk culture the right way oversight. RISK UNIVERSE
Our risk universe represents the risks that are core to our business. We regularly scan our operating environment NON-FINANCIAL RISKS for changes to ensure that it remains relevant. The risk of inadequate or failed processes, people and systems as a result of changes in internal or external factors. STRATEGIC RISKS FINANCIAL RISKS
The potential downside impact of an operating Credit risk Cyber risk People risk Legal risk income shortfall due to lower than expected The risk of loss arising out of the failure of obligors The potential of a digital attack on the The challenge or failure to attract and The risk of financial or reputational loss performance in business volumes and margins not to meet their financial or contractual obligations group’s systems for financial gain – retain skilled, committed people and the that can result from lack of awareness or when due. It is composed of obligor risk, misunderstanding of, ambiguity in, or compensated for by a reduction in costs. either direct (through cash out attacks) inability to enable people to grow and concentration risk and country risk and represents or indirect (through stolen data or remain relevant in a rapidly evolving reckless indifference to, the way law and Strategy position risk* the largest source of risk to which our banking extortion). workplace. regulation apply to your business, its relationships, processes, products and Risks relating to strategic choices like value proposition, entities are exposed. Technology risk Financial crime risk services. product, consumer segment and channel that result in Market risk The inability to manage, develop and The risk of economic loss, reputation unexpected variability of earnings and other business The risk of a change in the market value, actual or Model risk value drivers. maintain secure, agile technology damage and regulatory sanction arising effective earnings, or future cash flows of a capability that enables the group to from involvement in any type of financial Incorrect or inappropriate use of a model Strategy execution risk* portfolio of financial instruments, including operate efficiently and achieve strategic crime. This would include instances and fundamental errors in models that may produce inaccurate outputs that are Risks relating to strategy implementation failures where commodities, caused by adverse movements in objectives. where the crime has been perpetrated not aligned to design objectives and management execution capability and operational market variables such as equity, bond and against the group, and also instances Information risk intended business uses. decisions do not meet strategic objectives. commodity prices, currency exchange and interest where the group may have facilitated the rates, credit spreads, recovery rates, correlations The accidental or intentional commission of a crime through misuse Financial accounting risk Reputation risk and implied volatilities in all of these variables. unauthorised use, access, modification, of its products and services. Financial Losses arising due to inadequate The risk of potential or actual damage to our image which disclosure, dissemination or destruction crime includes fraud, theft, money Funding and liquidity management and oversight of internal may impair the profitability and sustainability of our of information resources, which may laundering, bribery, corruption, tax financial accounting processes. business. The risk that an entity, although solvent, cannot compromise the confidentiality, integrity evasion, terrorist financing and providing maintain or generate sufficient cash resources to and availability. This may result in service financial services to sanctioned meet its payment obligations in full as they fall due, Tax risk * Previously included as business risk. disruption, reputational damage and individuals. Tax risk is the risk of failing to meet or can only do so at materially disadvantageous financial loss. terms. Compliance risk statutory reporting and tax payments/ Business resilience risk filing requirements. Country risk The potential legal or regulatory TOP ENTERPRISE RISKS Also referred to as cross-border country risk, is Losses arising from critical system sanction, financial loss or damage to Physical assets, safety and security the uncertainty that obligors (including the failures and/or business process failures reputation that the group may suffer as a risk We continually assess and annually identify the top relevant sovereign, and our branches and impacting services provided by us to our result of its failure to comply with laws, The risk of damage to the organisation’s enterprise risks that require focused management due to subsidiaries in a country) will be able to fulfil stakeholders. regulations, codes of conduct, internal physical assets, client assets, or public their potential to have a material impact on our strategy. obligations due to the group given political or policies and standards of good practice assets for which the organisation is Third-party risk applicable to its financial services • BigTech domination of financial services economic conditions in the host country. liable, and (criminal) injury to the Ineffective management of third-party activities. organisation’s employees or affiliates. • Ransomware attack Insurance risk relationships and the operational, • Extreme weather events Conduct risk The risk that actual future underwriting, compliance, reputation, strategic and • Third-party non-performance policyholder behaviour and expense experience credit risks inherent in the services and The risk where detriment is caused to • Slow pace of implementation. will differ from that assumed in measuring products they provide to the group. the group's clients, markets or itself as a result of inappropriate execution of policyholder contract values and in pricing ESG risk Read more on page 80. products. Insurance risk arises due to uncertainty business activities. regarding the timing and amount of future cash The direct and indirect impact on the flows from insurance contracts. environment and society caused by the group that might prevent the group from achieving its strategic objectives. MENU DELIVERING OUR STRATEGY RISK AND CONDUCT CONTINUED
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OUR RISK LANDSCAPE Our risk universe diagram represents the risk types that are prevalent in our business. These risk types are well understood, and organised into strategic, financial and non-financial risks categories. Under these risk types, some risks have been identified as those that require additional management focus in 2021 and beyond as we accelerate our transformation initiatives.
RISK DESCRIPTION Driver Mitigation PERFORMANCE AGAINST STRATEGY The demand across the group for risk management services that are integrated into business process BigTech domination of • BigTech organisations can • Implement strategic acceleration and closer to our customer services and partners is underpinned by the common ambition to financial services offer simple, efficient and initiatives. accelerate the group’s transformation strategic objectives. Effective risk management enables us to affordable financial services • Strategic partnerships with key consistently do the right business, the right way to meet our strategic objectives. The threat of BigTech on their platforms. BigTech organisations. monopoly swallowing • Increased competition in financial services and payments and small lending becoming too big to fail and markets. to regulate. • Traditional financial services Delivering exceptional client experiences Risk type: Strategy execution firms are not innovating fast enough. The stability of our risk management process enabled us to respond proactively to early signs of financial risks stress. The financial impact of Covid-19 resulted in a slight adjustment of our risk appetite in order to address credit concentration concerns in some geographies and sectors and still meet our client expectations of service Ransomware attack • Rising cyber incidents, • Accelerate the simplification of continuity and financial support. A successful ransomware especially ransom attacks, the group’s digital landscape. on large corporates. attack on the payments IT • Continue to mature security • Complexity of the group’s culture and practices. system value chain. systems and connected • Ongoing improvement of access During 2020: • Our people remained focused and maintained high Risk type: Cyber devices. controls. • Early warning triggers were reassessed and adjusted to ethical conduct when delivering services to our be able to respond better to higher risk customers and clients from their different work locations. impending distress levels. • Further optimised forward-looking stress testing • Ongoing investment in technology improved our processes and systems to support our balance • Increased impacts of global • Continue to deepen TCFD Extreme weather events systems resilience and reduced service disruptions. sheet optimisation strategy and decision-making. warming and climate change. reporting. The increasing frequency of • Digital fraud prevention capabilities improved through • Developed a risk competency framework and a • Slow transformation to • Embed sustainable bond extreme weather events may the release of digital biometric access authentication certified risk management academy (Business sustainable energy. framework and ESG risk and identification of unusual transaction behaviour. School certified) to address the future risk cause food insecurity, water management framework. Digital onboarding and verification of clients were also skills need. scarcity and create climate • Support lending to green projects enhanced. refugees. through sustainable financing. Risk type: ESG
SAFER AND MORE SECURE BANKING Third-party non- • Increasing number of critical • Rollout third-party risk performance suppliers are in place for management framework and Safer and more secure banking essential services to clients. implement digital solution to Third-party failure or non- The group launched DigiMe, an innovative client authentication solution that uses • Increase in strategic partners facilitate performance performance may result in the latest biometric and facial recognition software, combined with multifactor needed for accelerated monitoring. authentication, to create safe and secure banking experiences for clients using failure of strategic initiatives execution of strategy. • Enhance vendor and contract mobile devices. or poor client service. management processes for third Risk type: Third-party parties. Recognition
The Business Continuity Institute Africa Awards awarded Slow pace of • Complex legacy IT systems. • Continue the IT landscape Standard Bank Malawi the Continuity and Resilience Team implementation • Late and inaccurate simplification programmes. award. translation of concepts into Increase the capability of the Opportunity cost of slow and • clear and measurable innovation unit. protracted implementation of deliverables. • Proactive policy advocacy to innovation. • Complex regulatory positively influence regulation Risk type: Strategy execution environment. changes.
RCM Read more online. MENU DELIVERING OUR STRATEGY RISK AND CONDUCT CONTINUED
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Our approach to ethics Leveraging our digital capabilities to meet our clients’ needs Policies covering: Execution We have accelerated our strategy to achieve future-readiness. Some initiatives include Governance framework the continuation of our cloud journey and ongoing strategic partnerships. Our risk • Conflicts of interest. • Tracking metrics related to management practices continue to evolve to address the risks of digitisation. Board level: group social 1 • Gifts and entertainment. diversity and inclusion, Operational resilience is always a priority to ensure we deliver our promise of 'always on, and ethics, and group risk • Outside business interests. employee trends and always secure' services. A key component is empowering and supporting our people to and capital management • Personal account trading. wellbeing, and monitoring do the right business, the right way. committees • Diversity and inclusion. progress against targets. Management: GLC 2 • Harassment, sexual harassment and and social and ethics • Performance management unfair discrimination. management committees and remuneration. • Occupational health and safety. • Recruitment and selection. Personal conduct conduct Personal in the group) behave we (how Group standards and During 2020, we: approach for the benefit of scalability and cost 3 • Whistleblowing. policies • Culture. • Introduced internal digital tools for the management of efficiency. non-financial risks. Regulatory compliance was • Further matured the cybersecurity model to face • Leadership development and digitised through the use of monitoring trackers, the ongoing threat of attack against a digital bank. Our annual employee survey: group leadership identity. mobilisation of applications and quick reference • Rolled out supplier management and third-party • Provides employees with a safe way in which to speak out. insights. management framework and processes across all • Enables us to assess how employees view the integrity of their line managers. • Developed internal multilingual chatbots to provide jurisdictions. • Provides insights on how employees feel about working for the group (eNPS score). immediate and optimal knowledge when needed. • Launched a WhatsApp for Credit Card engagement • Seamlessly migrated liquidity management systems to channel that allows customers to make payment the cloud, capitalising on the infrastructure as a service arrangements on a direct digital platform.
Governance framework Policies covering: Execution
• Anti-bribery and • Business units manage conduct risk ETHICAL AND EFFICIENT BUSINESS Board level: group social Recognition 1 corruption. associated with their businesses. and ethics, and group risk • Whistleblowing. The Regtech solution uses AI such as machine learning and data and capital management • Business units submit quarterly conduct • Financial crime control. analytics to gain accurate insights from large volumes of data committees dashboards to the group social and ethics • Published our first fossil • FAIS disbarment. processed by the group. Regtech provides augmented Management: GLC committees. fuel policy and issued our 2 • Data privacy. intelligence by assisting human decision-making rather than and social and ethics first TCFD-related • Market abuse control. replacing humans. The solution is being implemented throughout disclosures. management committee • Treating customers the group to monitor and investigate transactions. It is already Group standards and Dashboard metrics and considerations include: • Improved our Dow Jones conduct Market in the market) behave we (how impacting name screening, the identification of individuals 3 fairly (TCF). Sustainability index rating. policies • Compliance training. involved in transactions who are considered higher risk • Complaints • Compliance with policies. • Successfully raised individuals, are politically exposed or subject to sanction. Future management. • Whistleblowing incidents. Basel III compliant developments of the solution are likely to be done in partnership additional tier 1 (AT1) and with other financial service providers or fintechs, in consultation tier 2 capital bonds of with regulators to address their concerns and contribute to R1.5 billion and R7 billion faster and more efficient deployment of new industry solutions. respectively, the proceeds With technology availability and innovation at the centre of the of which were invested in Governance framework Policies covering: Execution group’s accelerated strategy, we manage the risks of digitisation SBSA on the same terms • Respectful, constructive, transparent • Group corporate citizenship. through a deep understanding of our digital process and a focus and conditions. 1 Board level: group social and responsive stakeholder • Corporate social investment on business and operational resilience to keep our digital and ethics committee engagement. forum. channels secure. • Trade associations and industry 2 Management: GLC • SBSA’s political economy, and social and ethics memberships. transformation and black management committee • Engaging advocacy and lobby groups. economic empowerment • Human rights statement. committee. 3 Group standards, policies and statements • UN Principles for Responsible • Leadership and participation
Societal conduct conduct Societal in society) behave we (how Banking. in various industry initiatives, • Equator Principles. associations and forums. EVOLVING OUR ETHICAL FRAMEWORK • Environmental and social risk management. • The environmental and social We aim to: • UN HeForShe campaign. risk management framework Our ability to achieve our purpose depends on our reputation as a trusted • Understand the impacts of our is used to proactively identify, business activities – direct and • Corporate social investment policy. partner. Our reputation rests on the ethics and values that shape the indirect – including impacts on • Whistleblowing. manage and monitor related the environment, society and • Procurement policy. risks in our lending processes. culture and conduct of our people. economic growth. • Third-party code of conduct. • Identify and develop • External reporting (RTS and Our code of ethics requires all employees to act with integrity and to place the interests of our clients, and the opportunities to provide financial ESG report) and ranking on products and services that help key ESG indices. communities impacted by our business, at the centre of our decision-making. It sets out clear principles to our clients overcome economic, help our employees decide on the correct course of action. All employees must undertake annual mandatory social and environmental training on the code of ethics. We are currently updating the code to ensure that our focus on our SEE impacts challenges. is reflected.
RTS Read more online. GOV/REM Read more online. MENU DELIVERING OUR STRATEGY RISK AND CONDUCT CONTINUED
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LOOKING AHEAD As the group accelerates its transformation to a digital financial services business, we will continue to leverage our current risk management capabilities and proactively expand and evolve our enterprise Driving a strong conduct culture Evolving regulation of conduct risk environment to anticipate and effectively manage risks that may arise. We expect uncertainty and Managing conduct In a dynamic and evolving regulatory rapid change to remain features of our operating environment in 2021 and we are alert to the ongoing environment, new conduct regulations As part of our ongoing efforts to instil the right behaviours and impacts of Covid-19 on the group, our employees and our clients. included: driving and encouraging actions that are aligned to our values and behaviours, as articulated in our code of ethics, the board exercises continual oversight of executive management’s efforts to foster a culture of ethics and appropriate conduct within the The Financial Sector Conduct Authority group. Executive management is ultimately responsible for (FSCA) published the Conduct Standard 3 of continuously reinforcing and championing of the group’s ethics, 2020 (Banks) on 3 July 2020, with Strategic risks conduct and culture. transitional commencement timelines under Changing client preferences and the rise of new competitors in the financial services space have seen traditional the Financial Sector Regulation Act 9 of 2017. financial institutions accelerate their transformation into digitally focused solutions providers to remain Our leadership set the tone from the top to inculcate a strong The generic compliance risk management competitive. However, the industry faces the risk of unfair asymmetrical regulation if established institutions are positive culture of treating customers fairly in all our markets 1 plan (CRMP) was developed, and workshops required to comply with regulations that do not apply to new digital entrants. In this landscape the group’s and jurisdictions to ensure that we operate in an ethical and were held to clarify any interpretation issues advanced risk and compliance management capabilities will provide an additional competitive advantage as data sound manner. To support the delivery of treating customers relating to the compliance requirements and use and privacy becomes subject to increasing regulatory scrutiny. fairly, the group developed six habits which are linked to each of the completion of business areas’ the fairness outcomes. These are: customised CRMPs are being tracked to • Be fair: Customers can be confident that fair treatment is ensure readiness for the implementation central to our culture. timelines. • Meet the need: Products and services are designed to meet Financial risks Non-financial risks the needs of identified customer groups. The economic impact of Our non-financial risk universe was also impacted by Covid-19 with • Communicate: Customers are provided with clear Covid-19 is expected to continue long lasting consequences for the employee experience and the way Amendments to the Specific Code of information and kept informed before, during and after the beyond 2021, with different levels we operate to serve clients. While supporting the acceleration of the Conduct for Authorised FSPs and sale. of severity in countries of group’s strategy, we will continue to: Representatives Conducting Short-Term • The right fit: Advice to customers is suitable and considers operation and client sectors. We Deposit Business, 2004 under the Financial • Manage the risk of further Covid-19 infection surges and its their circumstances. will continue to: 2 Advisory and Intermediary Services Act 37 of impact on the mental and emotional wellbeing of our people. • Your word, your honour: Product performance and service 2002 (FAIS) were published in June 2020 • Monitor portfolio credit risk • Invest in the resilience capability in our systems and critical meet the expectations that have been created. with an effective date of 26 December 2020. appetite and engage business services to support the acceleration of the group’s • Make it easy: Customers do not face unreasonable barriers The generic CRMP has been developed and proactively with clients to strategy and deliver exceptional client experiences. to change products, switch banks, claim or complain. distributed to BCOs. provide tailored support to • Mature resilience against the expanding cyber threats and assist with the impact of improve client security awareness and authentication controls. Our board ensures all aspects of conduct are central to our Covid-19. • Roll out our third-party management solution that has in-built risk governance arrangements, including general execution of • Contribute to uncertainty of management capability. business activities, effective oversight of how fairly we treat National Treasury published the second draft client liquidity demands. • Strengthen our control and monitoring activities for conduct risk customers and the way we uphold market integrity. This is of the Conduct of Financial Institutions Despite liquidity in financial and invest in training and awareness programmes for employees. achieved by: (COFI) Bill for public comment on markets recovering strongly, • Align our compliance management practices across the group to • Enhancing governance structures as the management of 29 September 2020. The COFI Bill aims to the risk of further financial ensure that current and global regulatory developments are met. conduct risk is integrated fully into business as usual. establish a consolidated, comprehensive and market dislocation remains. • Enhance our capabilities to monitor and frustrate fraudsters, • Overseeing the rigorous interrogation and assessment of consistent regulatory framework for the Integrated forecasting models including working with industry participants to prevent, detect identified conduct risks. 3 conduct of financial institutions, and to give are being developed and will and create awareness about fraud. • Establishing escalation mechanisms when required. legislative effect to the market conduct policy be integrated across the approach, including entrenching TCF group. Continued • Ensure the protection of sensitive information and enhance our • Monitoring the end-to-end client experience. This includes principles into law. The COFI Bill follows the enhancement of processes ability to use data intelligence to efficiently manage information consistency across third-party supplier arrangements. Financial Sector Regulation Act 9 of 2017 and and systems will continue to risks. • Proactively identifying areas where misconduct occurs to is the next phase in the broader reform of drive improvements in data • Optimise our ESG risk management processes, integrate these ensure management responds swiftly and decisively when financial sector regulation. quality, efficiency and into business transaction and third-party relationship decisions. individual/s act against the values and ethics of the group. effectiveness. • Maintaining an ethical culture by strengthening our control environment that promotes good business practices and reinforce appropriate behaviours aligned to the group’s values. Amendments to the General Code of Conduct for Authorised FSPs and Our employees contribute toward the group’s compliance Representatives (GCoC) under FAIS was Our priorities for the year ahead include: • Continuing to service our multinational client efforts, to create a culture of compliance when executing their published in June 2020 with phased franchise by effectively using the integrated daily tasks. All employees, consultants, contractors, suppliers, implementation timelines. The previous • Supporting the simplification of client experiences organisation approach to provide cross-jurisdictional other associated persons and other third parties are required to: 4 generic FAIS GCoC CRMP has been retired. to ensure efficiency and protection for clients and regulatory support. • Act honestly and with integrity at all times. The revised FAIS GCoC CRMP has been the group. • Enabling risk as a service by using platforms, like • Execute business activities with due care, skill and diligence provided to business compliance officers for • Focusing on the use of AI (predictive analytics, Risk Market Place, to digitally embed risk processes and in the best interest of clients. customisation with their respective business machine learning and robotic process automation) that support our strategic transformation. • Be aware of and adhere to, all regulatory requirements that areas. to modernise our approach to non-financial risk • Deepening our ESG risk management, reporting and apply in the jurisdictions in which they are located. management and enable effective risk-based decision-making aligned to our risk appetite. disclosure, including TCFD reporting. MENU DELIVERING OUR STRATEGY
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"In a crisis year, like 2020, our focus was on supporting our clients Financial outcome through extensive and material restructures of loan books and facilities yet remaining within risk appetite set by our board. A proactive and agile Delivering sustainable returns to our shareholders depends on the approach to balance sheet management was needed to ensure a healthy extent to which we have made strategic progress in achieving client focus, balance between risk management, growth and sustainability." employee engagement and risk and conduct. ARNO DAEHNKE, Chief financial and value management officer
PERFORMANCE AGAINST STRATEGY Recover • In the second half of the year, activity levels recovered; MEASURING OUR The group’s results for the year reflect the very difficult however, credit impairment charges remained elevated STRATEGIC PROGRESS operating environment. Covid-19 placed considerable strain and the negative impact of interest rate cuts became on our clients, particularly in South Africa. This placed the more pronounced. Key metrics group under strain and we were unable to meet the targets • In 2020, revenues declined marginally (down 2%) from initially set for the year. What success looks like 2019. Costs were well contained (up 1%). This led to Headline earnings ROE We consistently deliver superior value The extent to which we made progress against our priorities negative jaws of 306 basis points (bps), and a cost-to- to shareholders. for 2020, and how they shifted due to the impact of income ratio of 58.2%. R15.9 bn 8.9% Covid-19, is discussed in the detail that follows. • Credit impairment charges increased to R20.6 billion, 2.6 times those reported in 2019. 2019: R28.2 billion 2019: 16.8% We implemented a three-phase approach in our response to • Despite a significant increase in RWA, the group’s CET 1 show the profits we make, excluding shows how much profit we generate managing and mitigating the impacts of Covid-19 – our How we measure our profits or losses from non-recurring with the money shareholders have ratio remained robust at 13.3%. initial RESPONSE, our plans to RECOVER and, for the progress events1. invested in us. ROE is the ultimate • A final dividend of 240 cents per share has been declared, measure of our effectiveness in future, how we will RE-IMAGINE our activities. We measure our progress in generating representing a payout ratio of 23.9% on headline earnings executing our group strategy. for 2020. sustainable returns by how we manage Respond revenues and costs, as well as creating • The group’s diverse client base, geographic footprint and • The group’s strong capital position, going into the sustainable shareholder value. business mix cushioned a weak performance in South Banking headline Banking ROE crisis, enabled us to respond quickly and substantively. Africa. SBSA’s headline earnings declined by 72%. Africa earnings • The group provided significant support to our clients, Regions grew headline earnings 9%, and 4% in constant employees and our communities. In addition, we currency (CCY). 9.6% expanded and enhanced our digital service solutions to Accountability for financial R15.7 bn • Africa Region’s contribution to banking headline earnings 2019: 18.1% enable our clients to continue to transact and our grew to 58% from 31% in 2019. The top six contributors outcome 2019: R27.2 billion employees to continue to operate productively during to Africa Regions’ headline earnings remained Angola, Board subcommittees provide enforced lockdowns. Pleasingly these efforts were Ghana, Kenya, Mozambique, Nigeria and Uganda. mandated oversight for governing our reflected in improvements in client satisfaction and • Enhancing our operational efficiencies and digital financial outcome, contributing either Credit loss ratio (CLR) Cost-to-income ratio retention, and growth in our underlying client franchise. channels has allowed us to reduce inefficiencies and to directly or indirectly to creating and The group’s ongoing resilience is underpinned by our improve both client and employee experience. diverse client base and varied revenue streams (for detail preserving value for our stakeholders. • We finalised the sale of ICBC Argentina to ICBC in 151 bps 58.2% refer to the client focus section from page 44). Key to effective creation and June 2020, reflecting our core focus on Africa. 2019: 68 bps 2019: 56.4% • Group headline earnings was R15.9 billion, a decline of • We increased shareholdings in our subsidiaries in Nigeria protection of value relating to measures our credit impairment measures our efficiency in generating 43% on the prior year and ROE was 8.9%. Banking and Kenya in 2020. financial outcome are: charges as a percentage of average revenues relative to the costs we operations headline earnings was R15.7 billion, down 42% Group audit committee: monitors loans and advances. We aim to have incurred, as containing our maintain our CLR at an acceptable costs is key to growing headline on the prior year, and ROE was 9.6%. and reviews the adequacy and level in line with our risk appetite. earnings and improving ROE. • The group’s results were negatively impacted by lower effectiveness of accounting policies, activity levels and higher credit impairment charges. financial and other internal control systems and financial reporting Jaws Africa Regions contribution processes, ensuring that value is not to banking headline earnings eroded by control and policy inadequacies. (306) bps 58% KEY TRADE-OFFS Group risk and capital 2019: 113 bps 2020 KEY PRIORITIES ! management committee: provides measures total income growth minus 2019: 31% independent and objective oversight total operating expenses growth. We measures the percentage • To ensure that we can continue to attract • Increase our competitiveness by improving client experience of capital management, liquidity and aim to achieve positive jaws to contribution from countries outside ensure we grow our revenues faster South Africa to banking headline the capital we need to fund the growth in through the seamless delivery of relevant and personalised funding requirements across the than our costs. earnings. our assets, we must provide an financial solutions to our clients, in a secure manner, via their group, ensuring continued operations channel of choice. and sustainable value creation. appropriate rate of return to our equity shareholders and debt funders, including • Exercise tight cost discipline and increased efficiency by Read more about the purpose and activities 1. As prescribed by the South African Institute of Chartered Accountants (SAICA) circular. depositors. This requires that we balance permanently reshaping the group’s cost structure. of all the board subcommittees on page 120. our ability to generate revenue with the • Seek to allocate resources efficiently and in support of our costs incurred in doing so. strategy to build a group ready for the future. • Balancing the need to provide • Strive to deliver sustainable earnings (our medium-term targets sustainable returns to shareholders while were withdrawn due to uncertainty created by Covid-19). creating value for other stakeholders, as • Pursue growth opportunities. a responsible corporate citizen. • Continue to support faster, more inclusive and more sustainable growth and human development in South Africa and across the continent we are proud to call home. MENU DELIVERING OUR STRATEGY FINANCIAL OUTCOME CONTINUED
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NET INTEREST INCOME CAGR: 4% NET INTEREST INCOME Rbn bps CAGR: 4% 80 500 BANKING ACTIVITIES HEADLINE EARNINGS CAGR: (5%) Rbn bps 400 6080 500 Measuring our Net interest income (NII) declined 2% from Rbn Banking headline earnings 300 30 400 2019, as strong balance sheet growth was were R15.7 billion, down 42% 6040 200 more than offset by margin compression, and 25 on 2019. Africa Regions' 300 financial outcome 4020 negative endowment, associated with the 20 contribution to banking 100 200 significant interest rate cuts across our 15 headline earnings grew to 200 0 100 markets. Net interest margin (NIM) declined 58%, from 31% in 2019. Headline earnings 2015 2016 2017 2018 2019 2020 10 49 310 56 892 60 125 59 505 62 919 61 425 year-on-year from 431 bps to 370 bps. 0 0 5 2015411 2016 448 2017 474 2018 438 2019 431 2020364 0 The group’s headline earnings is 49 310Net interest 56 892 income 60 125 (Rbn) 59 505 62 919 61 425 2015 2016 2017 2018 2019 2020 411Net interest 448 margin 474 (bps) 438 431 364 20 323 22 062 24 268 25 847 27 216 15 690 one of the components used in the Net interest income (Rbn) determination of the group’s ROE and Net interest margin (bps) represents the major lever in lifting the Non-interest revenue (NIR) declined 1%. Pressure group’s ROE. on fee income was largely offset by a strong investment portfolio and NON-INTEREST REVENUE trading performance. Lower fee income was driven LIBERTY HEADLINE EARNINGS LibFin markets. In contrast, CAGR: 3% by constrained consumer activity levels and CAGR: (177%) Liberty’s South African asset Rbn transactional volumes, fee waivers and Rbn management business 50 Banking activities balance sheet drivers moratoriums, and an accelerated switch to lower 3.0 reported flat earnings and an 2.5 Growth in deposits and funding, and loans and advances 40 fee-generating digital channels. Elevated market 2.0 increase in net external supported the group's headline earnings. 30 volatility drove increased client activity and, in 1.5 third-party client cash inflows. turn, trading revenue growth. Knowledge-based 1.0 Liberty recognised a Covid-19 20 fees were supported by higher advisory fees from 0.5 related pandemic post-tax 10 corporate deals in South Africa and International. 0 reserve of R2.2 billion and NET LOANS AND ADVANCES (0.5) CAGR: 3% Higher other fee and commission revenue was reported a headline loss of 14% 0 (1.0) 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Rbn largely driven by fees earned from the group’s R1.5 billion (2019: earnings of 2 433 955 1 435 1 600 1 855 (651) 1 500 average interest Net fee and commission based revenue pension fund management business in Nigeria. R3.3 billion). After adjusting Trading revenue Negative revaluations impacted the equity for treasury shares, the Other revenue 1 200 earning assets Other gains and losses on financial instruments investment portfolio. Gross written premium Liberty’s performance was negatively group’s share of the loss impacted by lower earnings across all amounted to R0.7 billion 900 growth was offset by higher credit life and funeral claims. insurance business areas as well as weak (2019: earnings of 600 performance in the shareholders’ R1.9 billion).
300 2015 2016 2017 2018 2019 2020 16% CREDIT IMPAIRMENTS 1 077 1 065 1 048 1 120 1 181 1 271 CAGR: 17% CREDIT IMPAIRMENTS CAGR:Rbn 17% bps ICBCS recorded a profit of average deposits 25 165 Credit impairment charges increased to USD125 million in 2020 (2019: DEPOSITS AND DEBT FUNDING and funding Rbn bps CAGR: 6% OTHER BANKING INTERESTS 2520 165132 R20.6 billion, 2.6 times that of 2019. The increase loss of USD248 million). The HEADLINE EARNINGS Rbn was driven by the year-on-year deterioration in turnaround was driven by the 2015 13299 1 800 client risk profiles and forward-looking non-repeat of a single client 1 600 1510 9966 assumptions, additional charges associated with Rbn 1.0 loss in 2019, revenues earned 1 400 105 6633 the remaining client relief portfolio in PBB, and 0.8 on the back of the market 1 200 corporate and sovereign risk downgrades. Due to 0.6 volatility and an insurance 61 bps 50 330 0.4 1 000 2015 2016 2017 2018 2019 2020 the enduring uncertainty and associated forecast 0.2 recovery. The group’s 40% 800 0 9 371 9 533 9 410 6 211 7 964 20 594 0 risk, an additional R500 million provision was 0 2015 2016 2017 2018 2019 2020 (0.2) share of ICBCS’ earnings 600 net interest 0.870 0.860 0.860 0.570 0.680 1.510 9 371 9 533 9 410 6 211 7 964 20 594 raised and held centrally. The group CLR (0.4) equated to R881 million. The 400 margin 0.870Total credit 0.860 impairments 0.860 0.570 0.680 1.510 (0.6) 2015 2016 2017 2018 2019 2020 increased to 151 bps from 68 bps in 2019. Credit loss ratio (0.8) group completed the sale of 1 202 1 229 1 258 1 372 1 446 1 642 Total credit impairments (1.0) its 20% stake in ICBC Credit loss ratio 2015 2016 2017 2018 2019 2020 (569) (008) 567 418 (864) 816 Argentina to ICBC in June 2020. TRADING AND PLEDGED ASSETS AND FINANCIAL INVESTMENTS OPERATING EXPENSES GROUP HEADLINE EARNINGS CAGR: 16% CAGR: 4% Operating expense growth was well contained at CAGR: (6%) cents 1%. Staff costs were down 1% as annual salary GROUP HEADLINE EARNINGS per Rbn Rbn % Rbn share CAGR: (6%) 600 70 60 increases were offset by lower headcount and 30 1cents 200 per 60 500 lower performance-related incentives. Other Rbn25 1share 000 55 50 costs increased 4% driven primarily by higher IT 30 1 200 Group headline earnings 400 20 800 40 costs, professional fees and communication 25 1 000 were R15.9 billion, a decline 300 50 15 600 30 costs. The group purposefully continued 20 800 of 43% on the prior year, 200 20 10 400 45 developing and rolling out innovative digital 15 600 due to the impact of the 100 10 5 200 pandemic. A final dividend solutions to improve service efficiency and client 10 400 0 0 40 experience. In addition, the group incurred 0 0 of 240 cents per share was 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 5 2015 2016 2017 2018 2019 2020 200 258 286 349 392 443 543 Covid-19 related business continuity costs and 22 187 23 009 26 270 27 865 28 207 15 901 declared, representing a Other 0 0 674 780 910 970 994 240 IT and amortisation employee work-from-home costs. Jaws were 2015 2016 2017 2018 2019 2020 payout ratio of 23.9% on Depreciation negative 306 bps and the cost-to-income ratio 22 187Group 23headline 009 earnings 26 270 (Rbn) 27 865 28 207 15 901 2020 headline earnings. Sta costs 674Dividend 780 per share 910 (cents per 970 share) 994 240 Cost-to-income ratio increased to 58.2% (2019: 56.4%). Group headline earnings (Rbn) Dividend per share (cents per share) MENU DELIVERING OUR STRATEGY FINANCIAL OUTCOME CONTINUED
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Return on equity Our ROE is the most relevant
measure of our financial GROUP AVERAGE RoRWA GROUP AVERAGE RWA CAGR: (12%) GROUP FINANCIAL LEVERAGE performance over time as it CAGR: 7% combines all of our critical drivers, Rbn times 1 400 % 8.0 3.5 1 200 including earnings growth and 3.0 6.0 1 000 2.5 capital utilisation, into a single 800 2.0 4.0 600 metric. Internally we measure our 1.5 400 1.0 2.0 200 return on equity on risk-weighted 0.5 0 0 2015 2016 2017 2018 2019 2020 0 2015 2016 2017 2018 2019 2020 assets (RoRWA) as a more direct 2015 2016 2017 2018 2019 2020 819 839 846 923 1 012 1 160 5.75 5.59 5.51 5.95 6.01 6.48 2.70 2.74 3.10 3.00 2.80 1.4 measure of earnings relative to Group average RWA increased by 14.6% in The group’s average RoRWA decreased to The group's financial leverage is the ratio of regulatory capital utilisation. 2020 to R1 160 billion, from R1 012 billion in 1.4% (2019: 2.8%), driven by the lower average RWA to average shareholders' 2019, mainly due to depreciation of the rand group headline earnings (year-on-year equity. For 2020, financial leverage was and an increase in client exposures. decline), and higher group average RWA 6.5 times, marginally higher than 2019, (year-on-year growth). supported by higher average RWA.
GROUP HEADLINE EARNINGS CAGR: (6%) GROUP HEADLINE EARNINGS cents per CAGR: (6%) Rbn centsshare 30 1per 200 Rbn share 3025 1 200000
2025 8001 000 AVERAGE SHAREHOLDERS’ EQUITY RETURN ON EQUITY 2015 800600 CAGR: 5%
1015 600400 Rbn % 200 20 105 400200 175 150 15 05 2000 2015 2016 2017 2018 2019 2020 125 0 22 187 23 009 26 270 27 865 28 207 15 901 0 100 10 2015 2016 2017 2018 2019 2020 674 780 910 970 994 240 75 22 187 23 009 26 270 27 865 28 207 15 901 50 5 674Group headline 780 earnings 910 (Rbn) 970 994 240 25 Dividend per share (cents per share) 0 0 Group headline earnings (Rbn) 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Dividend per share (cents per share) 142 467 150 124 153 528 155 173 168 320 179 113 15.6 15.3 17.1 18.0 16.8 8.9 The group’s average shareholders’ equity In 2020, the group’s ROE decreased to increased by 6% from 2019, supported by 8.9%, reflecting the result of a difficult year. the profit earned for the year. Our medium-term target range has been withdrawn due to uncertainty created by Covid-19.
RCM Read more about the group’s cost of equity online. MENU DELIVERING OUR STRATEGY FINANCIAL OUTCOME CONTINUED
92 STANDARD BANK GROUP Annual integrated report 2020 93
Net interest income Our resilient balance sheet What it is: the interest received on The balance sheet or statement of financial position shows the position of the lending products that we offer to our Our performance group’s assets, liabilities and equity, and reflects what the group owns, owes and clients and investment in debt the equity attributable to shareholders. Material line items have been discussed instruments, less the interest paid on the The income statement below reflects the revenue generated and costs incurred deposits that our clients place with us below. and debt funding sourced from other by our banking activities, with material income statement line items explained. A Derivative and trading assets and lenders. detailed analysis on the group’s financial performance, and the principal headline BALANCE SHEET liabilities Drivers: number of clients, product earnings drivers for growth in our ROE, is on page 90. as at 31 December 2020 What it is: derivative assets and liabilities offerings and pricing, level of economic include transactions with clients for their and client activity, foreign exchange, GROUP INCOME STATEMENT Change 2020 2019 trading requirements and hedges of those pricing in commodities and equity capital client positions with other market markets, competition, and market for the year ended 31 December 2020 % Rm Rm positions and hedges of certain group volatility. risks. Trading assets and liabilities are Change 2020 2019 Assets held by the group to realise gains from % Rm Rm Cash and balances with central banks 16 87 505 75 288 changes in underlying market variables. Drivers: number of clients, product Non-interest revenue Derivative and trading assets 27 364 003 287 234 What it is: comprises net fee and Net interest income (2) 61 425 62 919 offerings, level of economic and client commission revenue, trading revenue and Pledged assets (42) 10 382 17 800 activity in debt, foreign exchange, other revenue. Non-interest revenue (1) 47 156 47 542 Financial investments 34 275 066 204 703 commodities and equity capital markets, competition, and market volatility. Drivers: number of clients, transactional Net fee and commission revenue (4) 29 413 30 622 Disposal group assets classified as held banking volumes and pricing, capital markets activity, trading volumes and Trading revenue 15 13 874 12 075 for sale (99) 7 819 market volatility, property-related Other revenue (23) 3 158 4 089 Loans and advances 8 1 271 255 1 181 067 Loans and advances revenue, and income from bancassurance Other gains and losses on financial Other assets 28 33 077 25 919 What it is: includes our lending to banks and unlisted investments. Interest in associates and joint ventures 8 2 703 2 502 and our clients. instruments (6) 711 756 Drivers: number of clients, product Property, equipment and right-of-use offerings, competition, level of economic Credit impairment charges Total income (2) 108 581 110 461 asset1 (3) 19 009 19 608 and client activity, repayments and level What it is: losses incurred due to the Credit impairment charges >100 (20 594) (7 964) Goodwill and other intangible assets (18) 17 764 21 712 of credit impairments. inability of our clients to repay their debt obligations. Net income before operating Total assets – banking activities 13 2 080 771 1 836 652 Drivers: probability of our clients expenses (14) 87 987 102 497 Total assets – other banking activities (8) 3 522 3 841 Goodwill and other intangible assets defaulting, and the loss given default, Operating expenses 1 (63 182) (62 335) Total assets – Liberty1 3 448 647 435 096 What it is: represents the excess of the business confidence, and levels of purchase price over the fair value of debt-to-disposable income. Staff costs (1) (34 380) (34 554) Standard Bank Group – total assets 11 2 532 940 2 275 589 business that we acquire, less impairments, where applicable, and the Other operating expenses 4 (28 802) (27 781) Equity and liabilities cost of internally developed IT assets less Operating expenses Equity amortisation and impairments (where What it is: costs that are incurred to Net income before non-trading and applicable). Equity attributable to ordinary Drivers: corporate activity, investment in generate future and current revenues. capital related items (38) 24 805 40 162 shareholders 4 161 848 155 664 Drivers: inflation, headcount, IT and digital capabilities to better serve investments in branch and IT Non-trading and capital related items >100 (2 255) (151) Preference share capital and premium our clients. infrastructure which results in Net income before equity accounted and AT1 capital issued 14 12 528 10 989 amortisation, general costs to operate Equity attributable to non-controlling (including those related to innovation and earnings (44) 22 550 40 011 AT1 capital issued work efficiency programmes), and Share of profit from associates and joint interests 13 11 118 9 868 What it is: the group’s Basel III compliant operational losses. ventures (43) 191 333 AT1 capital bonds that qualify as tier 1 Total equity – banking activities 5 185 494 176 521 capital. The capital notes are perpetual, Profit before taxation (44) 22 741 40 344 Total equity – other banking interests (8) 3 522 3 841 non-cumulative with an issuer call option 1 Direct and indirect taxation (50) (4 901) (9 894) Total equity – Liberty (10) 26 256 29 122 and contain certain regulatory prescribed Non-trading and capital related items write-off features. What it is: items typically excluded from Profit for the year (41) 17 840 30 450 Standard Bank Group – total equity 3 215 272 209 484 Drivers: regulatory capital requirements, and growth in RWA. headline earnings, for example, gains and Attributable to other equity instrument losses on the disposal of businesses and Liabilities property and equipment, impairment of holders (8) (803) (873) Derivative and trading liabilities 22 181 322 148 441 goodwill and intangible assets. Attributable to non-controlling interests 14 (2 875) (2 528) Deposits and debt funding 14 1 642 401 1 446 080 Standard Bank Group – total equity Drivers: obsolescence and asset What it is: the total of the group’s replacement, operational performance Attributable to ordinary shareholders Deposits from banks 9 132 174 121 119 ordinary and preference share capital, AT1 and changes in market prices, which – banking activities (48) 14 162 27 049 Deposits and current accounts from capital, foreign currency translation result in impairment on goodwill and Headline adjustable items – banking customers 14 1 510 227 1 324 961 reserve, minority interests and other intangible assets, and corporate activity reserves. activities >100 1 553 167 resulting in disposal-related gains. Subordinated debt 23 225 23 319 Drivers: income statement drivers (refer Headline earnings – banking activities (42) 15 715 27 216 page 88), changes in foreign exchange Provisions and other liabilities 14 48 329 42 291 rates, and regulatory capital Headline earnings – other banking Direct and indirect taxation Total liabilities – banking activities 14 1 895 277 1 660 131 requirements. interests1 (>100) 881 (864) What it is: includes both direct income Total liabilities – Liberty1 4 422 391 405 974 taxes (and related deferred tax in terms Headline earnings – Liberty (>100) (651) 1 855 of IFRS) and indirect taxes, including Standard Bank Group – total liabilities 12 2 317 668 2 066 105 Deposits and debt funding and withholding tax and value-added tax. Standard Bank Group headline subordinated debt Drivers: corporate tax rates in the earnings (43) 15 945 28 207 Total equity and liabilities – banking What it is: provides the group with the countries in which the group operates, activities 13 2 080 771 1 836 652 funding to lend to clients, fulfilling the level of profitability of our operations, group’s role in connecting providers of interest income from certain bonds and 1. The disposal of ICBC Argentina was completed during June 2020, resulting in no headline earnings Total equity and liabilities – other capital with those that require additional treasury bills, dividends on investments attributable to the group for 2020. banking interests (8) 3 522 3 841 capital and thereby contributing to the that are exempt, and costs that are not Total equity and liabilities – Liberty1 3 448 647 435 096 functioning of the broader financial tax deductible. system. Standard Bank Group – total equity Drivers: client demands, transactions and liabilities 11 2 532 940 2 275 589 and savings. Attributable to non-controlling interests For further detail on the group results, including What it is: portion of profit generated definitions, and details of restatements to previously which is attributable to minority reported figures, please refer to the Standard Bank Group 1. Includes adjustments on consolidation of Liberty into the group. shareholders in entities in which we own analysis of financial results 2020 on our website: less than a 100% interest. http://reporting.standardbank.com/results-reports/ The balance sheet presents the group’s banking activities separately from other banking interests and Drivers: level of profitability of these financial results/ Liberty. It differs to the balance sheet presented in the group’s annual financial statements, which is entities, and other shareholders’ interest presented on a consolidated basis. in our subsidiaries. MENU DELIVERING OUR STRATEGY FINANCIAL OUTCOME CONTINUED
94 STANDARD BANK GROUP Annual integrated report 2020 95
MAINTAINING OUR ROBUST BALANCE SHEET
Loans and advances PBB provisions held against loans and advances Funding and liquidity Capital management Gross loans and advances to customers grew 4% from increased 38% year-on-year, with most of the increase in Longer term funding was increased by R52.8 billion The deterioration in the environment fed into sovereign 31 December 2019 to 31 December 2020. PBB grew 7% South Africa. In PBB Africa Regions, increases were through the issuance of negotiable certificate of deposits, ratings and client risk grades and in turn, into higher boosted by a recovery in demand in the latter half of driven principally by provisions raised in Ghana, Kenya, senior debt and syndicated loans. The group continues to RWA. Despite an 12% increase in RWA, the group 2020. CIB grew 1% year-on-year as strong growth in 1H20 Namibia, Tanzania and Uganda. benefit from increased liquidity in the market, maintained strong capital adequacy ratios. As at subsided by year end as clients managed their debt levels Against a fiercely competitive backdrop, particularly in contributing to the strong liquidity ratios being reported. 31 December 2020, the IFRS 9 Financial Instruments down. Provisions held increased 42% year-on-year and South Africa, CIB continued to win mandates and R7.0 billion tier II capital and R1.5 billion AT1 capital was (IFRS 9) phased-in CET 1 ratio was 13.3% (FY19: 14.0%) 8% relative to 30 June 2020. originate client loans in 2020. Cumulative Covid-19 relief issued during 2020, the proceeds of which were invested and total capital adequacy ratio was 16.1% (FY19: 16.7%). in SBSA on the same terms and conditions. The CET 1 ratio, including the full IFRS 9 transitional Within PBB South Africa, lockdowns severely constrained provided to clients, in the form of increased liquidity impact, was 13.2%. From 1 January 2021, there will be no origination in the second quarter of 2020. By the facilities, loan restructurings, covenant relaxations and Deposits from customers grew 14% year-on-year to transitional impact. beginning of 2H20, restrictions had been partially lifted payment holidays, equated to R24.8 billion. Provisions R1.5 trillion. Customers remained cautious and and registration offices had re-opened. Disbursements increased 52% year-on-year following a deterioration of lockdowns restricted activity resulting in a build-up of Despite the volatile and constrained liquidity recovered as the backlog was cleared and new corporate risk grades and higher stage 3 loans. Stage 3 deposits. Foreign currency balances also increased on the environment, the group maintained sufficient liquidity to applications were processed. Mortgage disbursements provisions increased as additional clients rolled into back of a weaker rand. PBB customer deposits grew 15%, meet risk appetite limits. Proactive engagement across reached record levels; fuelled by low interest rates. stage 3, particularly in the oil & gas and power & with strong growth in savings and investment products as treasury, risk and business ensured that our clients’ Personal unsecured and business lending showed infrastructure sectors, and as the outlook for pre-existing well as call deposits. Strong current and savings account liquidity needs were appropriately planned for and moderate growth. The latter includes R7.1 billion of drawn stage 3 exposures deteriorated. The stage 3 ratio and inflows in PBB Africa Regions continued. Our offshore timeously met. The group’s Basel III liquidity coverage exposures relating to the South African Covid-19 loan stage 3 coverage ratio increased relative to operations in the Isle of Man and Jersey continued to and net stable funding ratios remained in excess of guarantee scheme (loans contracted under the scheme 31 December 2019 and 30 June 2020. provide the group with access to hard currency funding. regulatory requirements of 80% and 100% respectively. totalled R7.4 billion). Affordability criteria have been Deposits increased to GBP5.6 billion as at 31 December COMPOSITION OF LOANS tightened and new business growth continues to be 2020 (GBP5.2 billion as at 31 December 2019). CIB CAPITAL ADEQUACY TO CUSTOMERS (%) closely monitored. Low business confidence continues to customer deposits grew 14%, driven by call and cash (including unappropriated profit) 2020 impact business lending demand. management deposits. % 20 By 31 December 2020, Covid-19 client relief provided by COMPOSITION OF GROSS PBB South Africa had reduced to R19 billion; representing 16 2019 DEPOSITS FROM CUSTOMERS (%) 3% of the PBB South Africa portfolio. Mortgages and 12 Card represented 69% and 23% of the remaining active 2020 client relief portfolio respectively. In keeping with the 8 2020 2019 group’s promise to deepen client relationships and Term loans 36 2019 4 support them through the crisis, payment holiday Mortgage loans 34 extensions were provided to select clients. Vehicle and asset finance 9 0 Overdraft and other demand loans 9 2015 2016 2017 2018 2019 2020 PBB Africa Regions gross loans and advances grew 8% to Other term loans 7 2020 2019 12.9 13.9 13.5 13.5 14.0 R84 billion, supported by continued focus on client Card debtors 3 Call deposits 2 27 13.3 14.3 14.2 14.1 14.7 0 15.7 16.6 16.0 16.0 16.7 ecosystem origination, digital client onboarding and Loans granted under resale agreements 2 Term deposits 20 22 digital disbursements. By 31 December 2020, the PBB Current accounts 18 CET 1 capital adequacy ratio1 Cash management and deposits 14 Tier 1 capital adequacy ratio1 Africa Regions Covid-19 client relief provided had reduced 1 Negotiable certificates of deposit 11 Total capital adequacy ratio to R2 billion; representing 2% of the PBB Africa Regions Other deposits 8 portfolio. 1 Capital adequacy ratios based on the SARB IFRS 9 phased-in approach. MENU DELIVERING OUR STRATEGY FINANCIAL OUTCOME CONTINUED
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INSIGHT ON CREDIT IMPAIRMENTS
The deteriorating economic and trading environment, coupled with accounting and regulatory requirements STAGE 1 relating to forward-looking expectations and Covid-19 Covid-19 specific considerations client relief provided, drove an increase in balance 12-month expected credit loss (ECL) is sheet provisions held against loans and advances of recognised for exposures for which there has The incorporation of forward- Covid-19 had a profound impact globally All exposures were 42% year-on-year and 8% relative to 30 June 2020. been no default event and the credit risk has looking information into credit and there remains much uncertainty as assessed to We remain comfortable with the provisions raised not significantly increased since initial impairments begins with the group to the future economic path and determine whether and these continue to be reviewed and updated to recognition Economics Research team recovery. The group has recognised a they had ensure that we have sufficiently provided for determining the macroeconomic post-model judgemental credit deteriorated since expected credit losses, in accordance with IFRS 9. outlook for each country and adjustment to factor in the impact of initial recognition formulating a group view of this uncertainty surrounding the future and therefore commodities over a planning macroeconomic environment, and the requiring a transfer The graph below shows the loans and advances for PBB and horizon of at least three years. The fact that the pandemic has impacted into stage 2 (where CIB, classified into the stages as required by IFRS 9. Loans STAGE 2 macroeconomic outlooks outline a clients across all geographies and client SICR was classified as stage 3 increased from 3.9% of total gross loans range of variables, including GDP, segments. The post-model adjustment triggered) or stage and advances as at 31 December 2019 to 4.6% as at central bank policy interest rates, encompasses the risk that is inherent in 3 (where default or 30 June 2020 and 5.5% as at 31 December 2020. Stage 1 and A lifetime ECL is recognised for exposures for inflation, exchange rates and the current macroeconomic imminent default stage 2 provisions increased 32% year-on-year but were flat which there has been a significant increase treasury bill rates for each of the environment. The credit adjustment is was triggered). relative to levels recorded as at 30 June 2020. Stage 3 in credit risk (SICR) since initial recognition three outlooks, being bear, base based on reasonable and supportable provisions increased 47% year‑on‑year, and 13% relative to and bull cases and typically include information available at the reporting 30 June 2020. Stage 3 coverage (balance sheet impairments consideration of the country’s date and is held within central for non‑performing specifically impaired loans as a percentage economic background, sovereign and other. of specifically impaired loans) was 48%, 46% and 46% risk, foreign exchange risk, financial respectively. sector, liquidity and monetary AFS Refer to the group annual financial STAGE 3 statements for details of these scenarios. An additional R500 million post-model judgemental credit policy stance. adjustment on the total loans and advances to customers portfolio was raised at 30 June 2020 and remains unchanged A lifetime ECL is recognised for exposures at 31 December 2020. that are either in default or where default is PBB CIB Detail of credit impairment charges is imminent included on page 88. • From a South Africa perspective, in accordance with SARB D3, • Review of ratings were performed where a restructure is considered due to Covid-19 related factors, for each client to obtain the group determines whether the exposure is expected to remain an understanding of the impact of GROSS LOANS AND PROVISIONS in an up-to-date status subsequent to the relief period. These Covid-19. This process entailed restructured exposures are classified as Covid-19 related credit analysts completing a credit restructures and the determination of temporary or permanent scorecard and incorporating GROUP PBB CIB distress is assessed monthly. Temporary distressed accounts forward-looking information. The
1 are classified as stage 1 or stage 2 based on their risk profile weighting is reflected in both the Rbn Rbn Stage 1 Rbn +2% and permanently distressed accounts are classified as stage 3. determination of significant 1 500 (5%) 800 Stage 2 800 Stage 3 • Following risk profile assessments, exposures were transferred increase in credit risk as well as the 700 700 (14%) 1 Based on gross loans and 1 200 from stage 1, to stage 2 and stage 3 where deemed relevant in measurement of the resulting 600 600 advances and provisions per page 54-59 of the 2020 terms of IFRS 9 requirements, this was not necessarily specific provision for the individual client. 500 500 900 financial analysis booklet. to payment holidays or other relief measures. Risk appetite was adjusted to 400 400 Group net of interdivisional • During the second half of 2020, stage 2 and stage 3 exposures reflect changes in clients' operating 600 300 300 balances. Group includes the central provision of decreased, this was as a result of positive collection trends and environment and to manage 200 200 300 R500 million, split stage 1, improved performance of payment holiday accounts. concentrations in certain sectors. 100 100 R185 million and stage 2, • Credit impairment charges were 0 0 0 R315 million. • Credit impairment charges increased to R15.9 billion (2019: December June December December June December December June December R6.4 billion), 2.5 times that of 2019. Lockdowns disrupted 2.6 times that of 2019, reflective of Gross loans and advances loans Gross 2019 2020 2020 2019 2020 2020 2019 2020 2020 the economic conditions and 1 216 1 390 1 319 737 756 769 533 691 594 businesses and impacted client liquidity positions. The temporary payment relief granted provided some respite, market stress. CIB’s CLR on loans to customers was 80 bps (2019: Rbn Rbn Rbn but the delayed economic recovery was evidenced in customer +8% 40 bps). The difficult operating 50 50 10 +5% repayment profiles and the requirement for client relief +9% extensions. This, combined with the deterioration in environment, together with 40 40 8 macroeconomic assumptions, drove higher provisioning disruptions in operations and trade, negatively impacted the 30 30 6 and credit impairment charges. CLR on loans to customers increased to 229 bps (2019: 96 bps). hospitality, automotive and mining 20 20 4 sectors.
10 10 Rbn 2 Stage 1 Provisions 1 500 (5%) Stage 2 0 0 0 Stage 3 December June December December June December 1 200 December June December 2019 2020 2020 2019 2020 2020 2019 2020 2020
35.3 46.3 50.0 29.5 37.4 40.7 900 5.7 8.3 8.7
600
300
0 December June December 2019 2020 2020 1 216 1 390 1 319
Rbn +8% 50
40
30
20
10
0 December June December 2019 2020 2020 35.3 46.3 50.0 MENU DELIVERING OUR STRATEGY FINANCIAL OUTCOME CONTINUED
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CONTRIBUTION BY BUSINESS UNIT East Africa (in CCY) TO THE AFRICA REGIONS LEGAL ENTITIES TOTAL INCOME NII decreased as balance sheet growth was offset by the Regional impact of lower interest rates. Fee and commission revenue Rm reflects lower transactional volumes due to Covid-19 UGANDA KENYA 25 000 lockdown restrictions, as well as reduced fees following performance Currency impact Currency regulatory imposed fee caps and waivers, while market 20 000 The Ugandan impact Balance sheet (in CCY) volatility and increased client volumes resulted in robust shilling The Kenyan 15 000 Overall, Africa Regions experienced strong deposit growth driven trading revenue growth, particularly in Kenya and Uganda. strengthened by shilling by ongoing growth of the client franchise and a flight to quality in Credit impairment charges increased as a result of a 0.2% against the depreciated by 10 000 US dollar. a difficult environment. Growth in customer loans and advances deterioration in client risk profiles and forward-looking 7.8% against the 5 000 assumptions. Operating expenses decreased mainly due to US dollar. was driven by increased term loans disbursements across the GDP result portfolio. There was also strong growth in financial investments lower headcount in Kenya and lower provisions for incentives 0 GDP contracted by GDP result and interbank placements as excess liquidity was invested in 2019 2020 2019 2020 in alignment with operating performance. 0.3% (2019: GDP growth of bonds and government securities; mainly in West and East Africa PBB B +6.7%). 1% (2019: 5.4%). region. NIM compressed due to the declining interest rates in East Africa several markets. South and Central Africa West Africa RE-IMAGINE West Africa (in CCY) In 2021, global GDP is expected to rebound, pressure on weaker countries, sectors and clients, Loans and advances growth driven by the introduction of a minimum loan-to-deposit ratio in Nigeria and increased underpinned by a vaccine-fuelled improvement in particularly leveraged corporates and certain South medium-term lending in Angola and Ghana. Revenue growth was underpinned by strong balance sheet growth, confidence, demand and trade. A world awash with African state-owned entities. Credit impairment offsetting lower interest rates, and an increase in transactional and trading volumes in Ghana with fair value gains on liquidity and stimulus should drive global risk-on charges are expected to decline from 2020 levels, treasury bills and increased interbank foreign exchange volumes in Nigeria. Angola’s revenue growth was underpinned sentiment and Emerging Market inflows. however, CLR is expected to remain above the by strong trading revenue related to the kwanza devaluation and increased foreign exchange volumes, as well as NII group’s historic through-the-cycle range of 70 to The global recovery is, however, likely to be bumpy growth following strong balance sheet growth, particularly financial investments. Credit impairment charges increased 100 bps. To deliver on increasingly digital demands, and very uneven across different regions. The IMF due to the non-recurrence of prior year recoveries in Nigeria, increased growth in exposures in Ghana and the impact of IT spend is expected to continue to grow above forecast for sub-Saharan Africa GDP growth is 3.2% the downgrades in Angola. Operating expenses increased due to the introduction of depositor insurance in Ghana and inflation. Total cost management will remain a focus (January 2021). South Africa and Nigeria are the impact of AOA devaluation on US dollar-denominated costs in Angola as well as higher IT costs. with below-inflation cost growth a target. As and expected to grow at 4.6% and 0.9% respectively when the recovery gains momentum, group ROE (SBG Research, February 2021). While initiatives to should improve. Recovery of the group’s key metrics, ANGOLA GHANA NIGERIA source vaccines for Africa are gaining momentum, namely headline earnings and ROE, to 2019 levels many African countries lack the resources and will take some time and the path is unlikely to be Currency impact Currency impact Currency impact capabilities to roll them out efficiently and The kwanza depreciated by The cedi weakened by 2.8% The naira weakened by 8.8% linear. We remain committed to growing shareholder 36.58% against the US dollar. against the US dollar. against the US dollar. effectively. This is likely to delay an African recovery returns by allocating capital to revenue-enhancing until 2H21 and into 2022. Further waves of infection GDP result GDP result GDP result and ROE-accretive growth opportunities, particularly and renewed restrictions are likely and risk delaying in Africa Regions. While future dividends remain GDP contracted by 0.9% GDP contracted by 4% GDP contracted by 4.3% the recovery further. (2019: +6.5%). (2019: -0.9%). (2019: +2.2%). subject to earnings and capital levels, the group’s South Africa’s recovery is expected to be multi-year dividend payout ratio is expected to increase over and, like elsewhere, will be closely linked to the the medium term towards the lower end of historic South & Central Africa (in CCY) effectiveness of its vaccine rollout programme. levels (45% – 55%). Inflation is expected to remain within the SARB’s Zimbabwe’s earnings were impacted by hyperinflation As a large financial services group operating on the MOZAMBIQUE target range and interest rates at current low levels African continent, we recognise the need for following a significant depreciation of the Zimbabwean for the duration of 2021. The latter should support dollar (ZWL) as well as the introduction of a formal Currency impact inclusive and sustainable growth and environmental credit growth. Governance and structural reform are sustainability. We will continue to balance these foreign exchange auction trading system for ZWL. Loan The metical depreciated by 19.9% against the US dollar. expected to continue, albeit at a slow pace. Job and deposit market shares in Botswana, Mozambique needs in the context of Africa's just transition. In GDP result: creation and inclusive growth are key to driving a addition, we will continue to improve the and Zimbabwe increased, however, revenue remained GDP contracted by 0.5% (2019: 2.3%). more favourable long-term outlook. The extension of under pressure as interest rates declined, higher transparency and reporting of the group’s positions the Covid-relief grants introduced in 2020 and the on key matters in line with global best practice. foreign currency reserving requirements were government employment program should provide implemented, and forex trading was impacted by South Africa some support to low income households and in turn, From 1 January 2021, the group changed from a regulatory directives issued. Fee and commission household expenditure. A recovery in household business line structure to a client-led capability revenue growth was supported by foreign denominated Headline earnings declined by 72% to R4.7 billion, relative to spending is expected to gain momentum in late model with three core client segments (namely fees in Zimbabwe as well as client account growth and 2019, illustrating the impact of Covid-19. NII decreased due to 2021, followed by capital investment in 2022. Fiscal Consumer & High Net Worth, Business & upward pricing adjustments in Zambia. Trading lower average interest rates, partly offset by strong disbursement consolidation and energy supply constraints remain Commercial and Wholesale clients), supported by revenue increased in Malawi and Mozambique due to growth and higher deposit balances. NIR also decreased over the key risks. dedicated group capabilities and corporate functions improved foreign exchange volumes and mark-to- period following lower transactional volumes. Credit impairment (refer to page 45 for further detail on our new market gains following the depreciation of the MZN as charges were 3 times higher than the prior year, reflective of the The recovery will bring opportunities to extend the capability model). This will better enable and well as improved volumes and margins in Zambia distressed financial status of clients. group’s balance sheet, facilitate business and support the group’s ambition to be truly digital and following the ZMW volatility. Credit impairment charges consumer activity and continue to build the truly human. In addition, in a fast-changing world, we declined following an improvement in internal risk franchise. While margins are expected to be lower recognise the need to adapt to evolving risks, grading on Mozambiquan government bonds and Currency impact (stabilising at or around 2H20 levels, balance sheet The rand depreciated by 14% against the US dollar in 2019. optimise resource allocation and drive returns (for treasury bills as well as recoveries on accounts growth should provide an offset and support NII detail on our revised resource allocation model refer previously written off in Botswana and Malawi. This GDP result growth. Higher activity levels should support NIR to page 40). In doing so, we will leverage our core was partly offset by higher impairment charges in GDP contracted by 7% (2019: 0.2%). growth, however this remains at risk from further strengths in financial services, while seeking new Zimbabwe and Zambia following the sovereign rating lockdown disruptions. 2020 trading revenue is a high ways to expand our offering and diversify our downgrade. Operating expenses increased, driven by base. Prolonged downturns will place additional revenue streams further. higher IT and licence costs and cost of living References: adjustments and the impact of the ZWL devaluation on GDP data – IMF WEO projections October 2020 US dollar-denominated costs in Zimbabwe. and January 2021 update. – Stats SA, 2021 MENU DELIVERING OUR STRATEGY
100 STANDARD BANK GROUP Annual integrated report 2020 101
SEE impact Africa trade and investment Our impact Our work to find and implement innovative ways and solutions to address SDGs
economic, social and environmental challenges in our markets, and to help We facilitate trade and investment flows between African Detailed disclosure our clients and employees achieve growth, prosperity and fulfilment, countries, and with key global markets, including China, through the provision of innovative trade finance and Read a summary on page 105. enables us to contribute to Africa’s advancement and earn the trust of our cross-border financial solutions. stakeholders. RTS Read more online.
Climate change and sustainable Education finance MEASURING OUR STRATEGIC PROGRESS SDGs Our impact SDGs Our impact
What success How we manage our SEE impact We work with our clients and Africa’s We support access to inclusive quality looks like Our focus is to leverage our business activities to drive Africa’s growth, and at the governments to develop appropriate education, promote lifelong learning We drive Africa’s growth same time make a positive impact on society, the economy and the environment. solutions that help them to mitigate and and invest in initiatives that help Africa and create shared value, Our selected impact areas align to our core business and are informed by the adapt to the effects of climate change. We gain the skills needed to compete in the delivering positive needs of Africa’s people, businesses and economies, as well as the UN SDGs, the develop innovative financial solutions that global economy and harness the outcomes across all our African Union’s Agenda 2063 and South Africa’s National Development Plan and support the green economy, reduce opportunities of the Fourth Industrial SEE impact areas. its Nationally Determined Contribution to the Paris Agreement. carbon emissions, increase resilience to Revolution. climate change impacts and enhance socioeconomic development. Detailed disclosure
Detailed disclosure Read a summary on page 108. Job creation and Financial inclusion RTS Read more online. enterprise growth Read a summary on page 106.
RTS Read more online. Our impact Our impact SDGs SDGs ESG Read more online.
We enable more people and businesses We work with our clients to understand to access financial products and their challenges, priorities and services, enabling them to manage aspirations so that we can provide Health day-to-day transactions conveniently them with appropriate financial and cost-effectively, save and plan for solutions that support their growth and the future, deal with unexpected expansion and digital solutions that SDGs Our impact emergencies and, for entrepreneurs, to meet their unique needs. This includes achieve business growth. These benefits, Detailed disclosure targeted support for SMEs. We contribute to better health outcomes for Africa’s people by financing in turn, support economic development healthcare providers, infrastructure and equipment, providing business and reduce inequality. Read a summary on page 109. Detailed disclosure development support to healthcare practitioners, and investing in the health, safety and wellbeing of our people and communities. RTS Read more online. Detailed disclosure Read a summary on page 104.
Read a summary on page 102. RTS Read more online.
RTS Read more online. How we measure our SEE impact We track and measure progress through our inclusion in global ESG indices.
RobecoSAM Corporate Knights Infrastructure Corporate JSE/ Global 100 most Sustainability FTSE4Good MSCI CDP sustainable Assessment Sustainability ESG climate Sustainalytics corporations SDGs Our impact score Index rating score ESG risk rating (first in Africa) 2020 60% included AA C 25.5 med risk (226 out of 975 banks) 53rd We finance large-scale infrastructure projects, enabling Detailed disclosure 2019 51% included AA B- 29.9 med risk (339 out of 943 banks) 51st inclusive and sustainable industrialisation and addressing 2018 46% included AA B- 32 med risk (226 out of 975 banks) n/a Africa’s infrastructure gaps. We partner with our clients to ensure environmental and social risks are appropriately Read a summary on page 103. During 2020, we further integrated our SEE strategy into the individual performance agreements of all employees, from managed and minimised. RTS Read more online. executives to front-line employees, across the group. Performance against our five value drivers, including SEE, is a consideration in remuneration committee discussions. ESG Read more online. MENU DELIVERING OUR STRATEGY SEE IMPACT CONTINUED
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Accountability for SEE The group social and ethics committee provides mandated oversight in governing our SEE value driver and Expanded or new digital services: we extended the contributes to creating and preserving value for our stakeholders. number of Instant Money cash-out points at major retailers in South Africa from 6 500 to over 15 000 and Group social and ethics committee: guides and monitors the group’s social, ethical, economic, environmental, rolled out the Standard Bank virtual card (pre-loaded transformation and consumer relationship initiatives in line with relevant legislation, codes and regulation, with funds from any Standard Bank account) in several ensuring sustainable value creation over the long term. African countries, making it easier and safer for clients to Read more about the purpose and activities of the board subcommittees here. shop online. We launched the Unayo global wallet, allowing subscribers to connect, trade and transact. For SMEs, we partnered with Mastercard and Google in Infrastructure South Africa to help them move online and accept digital We structure and provide appropriate payments with free access to our SimplyBlu e-commerce financial solutions to fund infrastructure projects and provide lending facilities to TRADE-OFFS solution. We also rolled out the Trader Platform Solution, providing stock advance loans for informal sector retail entities operating within key traders, to several additional African countries. infrastructure subsectors, in turn, indirectly contributing to the economic • Proactively introducing relief measures to support energy to support economic growth and poverty growth, job creation, human our clients during Covid-19, assisting individual alleviation. Supporting clients during Covid-19 through several development and improved living financial wellbeing, the sustainability of businesses • Finding ways to restructure debt for sectors initiatives: assisted 23% (21 187) of our affordable standards that infrastructure supports. and the preservation of jobs, while ensuring the impacted by climate change in a way that maintains housing clients in South Africa with payment holidays. Covid-19 required governments to divert soundness of our financial capabilities. the integrity of our loan book and the viability of our Despite these measures, 8.3% (7 560) went into default • Implementing new solutions that improve access to clients’ businesses. public funds to fight the pandemic, and we are working with them to help them keep their creating severe budgetary constraints finance for small businesses and entrepreneurs to • Ensuring our decisions uphold human rights, adhere homes. The group paid out R1.1 billion, excluding Liberty, and impacting our deal closure on a enhance their growth and potential to create jobs, to applicable laws and regulations and consider the in claims in the first half of 2020 and provided over number of large-scale development while managing the default risk which is generally most optimal strategies to mitigate environmental R50 million in fee waivers and moratoriums. In South higher for this client segment. projects. impacts, may not result in short-term profits but Africa, we engaged with clients struggling to make their • Balancing the challenges posed by climate change, align with our purpose to achieve overall growth for loan repayments and assisted 497 clients with loan and and the need to facilitate access to affordable all our stakeholders in the longer term. payment restructures worth R2.9 billion. Other relief measures in South Africa included rebates on car insurance premiums totalling R32 million, 10% excess KEY 2020 HIGHLIGHTS waiver for home loans of R1 million or less and for vehicles with a sum insured of R150 000 or less, additional leeway on missed funeral cover payments to Progress made in 2020 ensure clients retained their cover, waived credit life USD38 million premiums on all student loans for three months raised in Airtel Malawi’s initial public (delivering a total client saving of R1.4 million), and offering (IPO) facilitated by Standard expanded the retrenchment cover of some credit Bank. To date, this is the largest IPO on KEY 2020 HIGHLIGHTS insurance policies to include loss of income. Similar relief the Malawi Stock Exchange since its measures were implemented for clients in Africa Regions inception in 1994. and we reduced fees on electronic and digital channels. With more businesses moving online during the 3 million 45 million pandemic, we launched a cyber insurance product in Telecommunication: acted as the lead active clients using our individuals and entrepreneurs/SMEs South Africa. transaction advisor, sole bookrunner, transfer digital financial solutions in reached through WalletWise secretary and receiving bank for Airtel Malawi’s Financial South Africa. consumer education programme. inclusion Inclusive insurance and investment: launched Flexible landmark IPO. The proceeds will be used to Funeral in South Africa, allowing clients to select their invest in infrastructure, communication A key focus for the group is funeral cover and benefits based on affordability. By the networks and product initiatives, supporting to implement accessible end of 2020, 260 000 policies have been sold. We are Malawi’s transition to digitisation and and affordable digital participating in the AWIF initiative, launched in 2020, in enhancing its international competitiveness. financial solutions for our 95 379 22 747 collaboration with the UN Economic Commission for clients, for under-banked (2019: 99 500) affordable credit life claims paid in South Africa, Africa and its partners, to raise USD1 billion over ten Transport: provided asset finance and working and unbanked individuals housing clients in South enabling our clients to protect their years for women-owned and managed asset capital solutions to enable the purchase of – enabling them to transact Africa with 5 730 (2019: assets and ease their debt burden management firms. equipment to upgrade the roads in rural areas efficiently, safely and 5 667) new affordable home when facing unexpected events. of Malawi, improving local access to agriculture conveniently without a loans worth R3 billion (2019: markets. We also provided financial services to bank account – and for R2.6 billion) registered. Consumer education: all participating SMEs in the a Chinese power and infrastructure company entrepreneurs and small 34 035 WalletWise programme received tablets and data to undertaking major road projects in Kenya. businesses to support their 1 000 funeral claims paid in South Africa, enable their online training. Nearly 10 000 individuals valued at R550 million (a participated in the 110 Financial Fitness Academies held, business formalisation and (2019: 1 037) clients year‑on‑year increase of 20% in the receiving financial management advice. In Botswana, growth. participated in online home amount of funeral claims paid). four financial literacy programmes were hosted, ownership training. targeting the youth and journalists. MENU DELIVERING OUR STRATEGY SEE IMPACT CONTINUED
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KEY 2020 HIGHLIGHTS R129 billion Over Job creation the value of relief measures R27 million provided to personal and SME allocated to SMEs in funding and enterprise clients. agreements with various KEY 2020 HIGHLIGHTS growth government entities and 111 The hard lockdowns to curb SMEs benefitted from credit the spread of Covid-19 meant R24.8 billion rehabilitation, creating 880 Implemented digital that many of our business worth of loan restructures assisted jobs (South Africa). matchmaking to connect 960 000 our corporate clients with Covid-19 our clients to trade clients were unable to operate quality masks (worth related risk exposures. opportunities, and or their supply chains were USD1.4 million) sourced supported African disrupted, followed by the from China to protect our frontline Africa trade and importers to source and slowing down of economic employees using ACIS and validate quality goods, activity, impacting USD3 investment imported and distributed to productivity. Our relief including PPE, from SMEs received coaching Our presence in major Standard Bank branches across 11 measures include payment 69 pre-screened Chinese and mentoring and 550 young million international markets, our countries of operation using our holidays, waiver of electronic committed over two years to suppliers through ACIS. people participated in virtual ability to access international Trade Suite solution. processing transaction fees, support 50 000 women bootcamps in South Africa. pools of capital, our strong term extensions, loan farmers in Malawi, Nigeria, client relationships with global 19 startups in sub-Saharan Africa restructures and reduced South Africa and Uganda, in multinationals and our strategic supported by our collaboration banking fees. Clients also had partnership with the UN partnership with the ICBC, Facilitating intra and inter-African trade: continued to leverage our with Founders Factory Africa, access to online support, Women Climate Smart positions us to assist African trade solutions, including the Trade by Standard Bank platform (connects which aims to nurture startup advice and tools to help them Agriculture Flagship governments and businesses clients to vetted buyers and suppliers in over 60 countries), ACIS (enables businesses and attract foreign respond to these impacts. Programme. access global value chains and African importers to source and validate quality goods, safely and capital to local ideas. investment. Our commitment to efficiently, from pre-screened Chinese suppliers) and Trade Suite (a single providing seamless end-to-end point of contact for South African importers, meeting their import and digital trade services for requirements from order to delivery). African importers proved highly Supporting industry initiatives during Covid-19: in South Supporting business growth: collaborated with beneficial for many of our Digitising trade services: we are working with the AfCFTA Secretariat Africa we contracted SME loans worth R7.4 billion under the Glencore Operations South Africa to enable small clients who had to manage and other banks to support the digitisation of trade, and testing digital SME Guarantee Loan Scheme and facilitated the payments businesses in their value chain to access funding at a challenging logistics arising out trade services with regulators in Ghana, South Africa and Uganda, including of SASSA grants and the government’s special grant through favourable rate. One beneficiary is a 100% black of the Covid lockdown the use of AI, blockchain, cloud computing and data analytics. These Instant Money. The R250 million assigned to SBSA by the women-owned mining services company which used regulations. solutions improve turnaround times and reduce paper consumption South African Future Trust was allocated within six weeks to the loan to purchase equipment and vehicles valued and the risk of errors. employees of qualifying SMEs, who were at risk of losing at over R50 million. In Kenya, we provided the their jobs or income. We partnered with the Small Enterprise farmer-owned Meru Central Dairy Cooperatives Union Finance Agency to help spaza shops in South Africa with various financial solutions, enabling it to increase Facilitating investment in Africa: we facilitated the following investments purchase stock through government funding at discounted its production capacity and the number of farmers in in 2020: prices, to address food shortages in townships and rural its supply chain. With our support, the cooperative • Assisted the African Export-Import Bank to gain access to international communities. In Ghana, we partnered with Investing for also educates farmers on productivity and modern markets, solving its immediate liquidity requirements with a R2 billion Employment to facilitate grants worth USD7 million for SMEs dairy farming techniques. In Uganda, we developed a bilateral amortising term facility to provide funding to corporates in need of assistance, benefitting 40 SMEs across sectors. range of financial solutions for Crown Beverages in Southern Africa. Limited, enabling it to open a new plant and develop • Acted as sole advisor to Africa Oil, helping it acquire a 50% equity stake Covid-19 relief loan: SBSA signed a USD185 million its supplier and distributor value chain to support its in Petrobras Oil and Gas BV. The USD1.5 billion deal supports Nigeria’s oil three-year loan agreement with the IFC. The proceeds are business growth and job creation. and gas sector, a major contributor to the country’s economy, and being used to provide relief and ongoing support for eligible will contribute to job creation and infrastructure development. SMEs and corporates in South Africa impacted by Covid-19, Partnering with small-scale farmers: enhanced the • Acted as joint lead managers for the Republic of Ghana’s USD3 billion including the healthcare industry. OneFarm Agri platform in Uganda, which connects Eurobond placement, the longest bond issued by a sub-Saharan issuer at smallholders to an ecosystem of startups and the time of the issuance, with tenors of six, 14 and 40 years. The bond will be used to facilitate energy infrastructure projects and manage the Enterprise development: continued to operate our enterprise services, refining the model and data- budget deficit for 2020. incubators in Botswana, Mozambique, Zambia and intelligent selection criteria and expanding the client Zimbabwe, as well as our enterprise development base from 200 to 500. In Mozambique, we are programmes and youth bootcamps in Lesotho, Nigeria and working to address fragmented value chains, provide South Africa, providing SMEs and entrepreneurs with access to finance and support farmers with new capacity building, business development support, mentoring technology, in eSwatini we partnered with the Women and coaching, training and access to market opportunities Farmer Foundation to fund production tunnels and finance, among other benefits. We launched a Targeted (benefitting 1 000 women) and in Nigeria we have Enterprise Development Fund in South Africa disbursing disbursed R2.2 billion to agri-businesses for the loans totalling R5.8 million (at 0% interest and 0% initiation Central Bank of Nigeria Intervention Fund programme. fee) to support SME job preservation. MENU DELIVERING OUR STRATEGY SEE IMPACT CONTINUED
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KEY 2020 HIGHLIGHTS
USD200 million green bond issued, Africa’s largest green bond and South Africa’s first offshore green bond. The capital raised will be Climate change and used to finance eligible renewable energy, energy and water sustainable finance efficiency and green building projects. Developing sustainable finance solutions, including green and social Covid-19 loan: SBSA signed a USD185 million three-year bonds, impact investing and ESG- loan agreement with the International Finance ACCOLADES linked products and services, to drive Corporation. The proceeds are being used to provide The group is the African market leader sustainable and inclusive economic relief and ongoing support for eligible SMEs and USD2.8 billion in sustainable finance. development in Africa is a key priority allocated to funding the construction of new power projects in corporates in South Africa impacted by Covid-19, for the group, and received substantial Africa since 2012, with 86% being renewable energy projects. including the healthcare industry. Global Finance: Best Investment Bank attention from the board and executive Award 2019 management during the year. We are progressively managing and shaping Sustainable investing: Standard Bank Isle of Man Best Global Investment Bank for our portfolio in a manner that is Limited and Standard Bank Jersey Limited launched sustainable finance March 2020 consistent with achieving a low-carbon the ESG Deposit Issue 1, where return on the US dollar deposit is linked to the market performance of the and climate-resilient economy needed More than 189 to limit global warming to below 2 small-scale commercial solar projects funded in South Africa S&P 500 ESG Index over a 5.5 year term. degrees, by supporting a just transition since 2018, amounting to over 32 megawatt peak installed away from non-renewable energy Local Currency Bond Deal of the Year capacity. Energy: developed the PowerPulse platform, which sources. December 2019 connects business and industrial-scale energy users to solar photovoltaic engineering, procurement and NGN8.5 billion Green Bond Sustainable bond framework: published our sustainable bond construction partners. The platform launched in South (North South Power) framework under which the net proceeds of the green, social or Africa in 2021 and expanded to additional African sustainable bonds issued will be used to fund projects aligned to our countries thereafter. SEE impact areas. Direct environmental impact: Standard Bank Group supports the expansion of affordable renewable energy Project Finance Deal of the Year Strengthening governance: adopted a fossil fuel finance policy, December 2019 which sets parameters lending in this area, and complements the solutions across Africa. Since 2012, we have financed the coal-fired power finance policy and thermal coal mining finance policy construction of new power projects to the value of adopted in 2019, all available online. USD2.77 billion in Africa. 86% of this funding KES4.3 billion Green Bond (Acorn) (USD2.38 billion) was for renewable energy. We have not financed any new coal-fired power stations since 2009. Sustainability-linked loans: issued sustainability‑linked loans, We did not finance any large-scale energy projects (green structured to incentivise borrowers to improve their sustainability or or brown) during 2020. transformation profiles. These included a R2 billion sustainability-linked loan for the Vodacom Group, the first real estate sustainability-linked loan (R1.6 billion) in South Africa for Equites Property Fund, the first B-BBEE performance incentive linked loan (globally) for Isanti Glass and a sustainability-linked facility for Maersk in the shipping sector (USD130 million). MENU DELIVERING OUR STRATEGY SEE IMPACT CONTINUED
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KEY 2020 HIGHLIGHTS
KEY 2020 HIGHLIGHTS Around R27 Over Over Health 50% of million R80 The focus of our health interventions (South Africa) and employees R47 500 in 2020 naturally centred around USD2.7 million (Africa employees in South million managing the Covid-19 pandemic – participated in a groupwide survey Regions) spent on Africa registered for Education (South Africa) million introducing interventions to protect to understand how they were health interventions, and USD1.1 million virtual volunteering, with specific focus on Covid-19 highlighted the raised through the our employees and clients during this coping with the new working (Africa Regions) including mentoring providing vulnerable depth of the digital divide in Feenix crowd unprecedented time, providing environment. Of those working invested in and tutoring school communities and the Africa, impacting school and sourcing platform financial solutions for healthcare from home, 95% felt they had education children, healthcare sector with tertiary education learners, over the past three providers and manufacturers of adapted well. Working longer hours programmes proofreading assistance during as well as workforces. We years, supporting medical equipment and sanitisers, and balancing work and home (2019 total: training materials, Covid-19. support initiatives that around 1 300 and responding to the needs demands were key challenges. R92 million). reading to children develop our people and university students of communities. in South Africa. and providing prepare individuals for a financial education. rapidly evolving world, including access to funding for university students and Stakeholder health, safety and wellbeing: quickly Covid-19: healthcare CSI spend was used to provide Employee development: see page 73 of the employee engagement section. early childhood implemented stringent protocols to protect our PPE, medical equipment and medical supplies, development and future‑fit employees, their loved ones and our clients. Over improve Covid-19 testing and screening capacity, skills development Student financing: since 2016, we have been managing the Medical Student 75% of the group’s employees were seamlessly create awareness of the disease, enhance hospital programmes. Loan Guarantee Fund on behalf of The Discovery Foundation. The Fund provides switched to home-based working within days and infrastructure and deliver food, humanitarian relief, surety for students who would otherwise not be able to access finance. We have interventions put in place for employees at water and sanitisers to vulnerable communities. In disbursed R47.4 million to 302 medical students at the universities of Pretoria increased risk of severe illness from Covid-19. Onsite partnership with ICBC, PPE worth USD1.4 million and Witwatersrand. A similar initiative in partnership with the University of employees were split across multiple locations to was sourced from China. In South Africa, our CSI Stellenbosch has assisted 116 medical students with loans totalling R16.5 million. ensure social distancing, increased hygiene funds are focused toward education. Given the Student loans were also provided to learners for the purchase of laptops, tablets protocols were introduced in all sites, daily symptom urgent health and humanitarian needs created by and software during the pandemic. checks were implemented for all onsite employees the Covid-19 pandemic, we established a Covid-19 and PPE was provided in our branches and offices. response programme and allocated an additional Digital literacy: partnered with Microsoft and Pioneering Solutions Studio to Increased employee communication, information R27 million in charitable donations to relevant NGOs deliver a learning programme on basic computer skills, cybersecurity and MS office, platforms and wellbeing programmes provided and government initiatives, over and above our reaching 11 600 South Africans with 47% having completed the course by access to credible and reliable information and annual CSI budget of 0.6% of net profit after tax, November 2020. helped our employees to manage stress, anxiety and calculated as part of our socioeconomic the new ways of working. 83% of our employees development spend. accessed Covid-19 information using our Covid-19 Corporate social investment (CSI): helped our CSI partners, adapt their Connect App or Intranet Information Hub. programmes to online and radio services and extend their services to include the Addressing food shortages: in response to the provision of sanitation, PPE and food. In partnership with Microsoft urgent need for food relief arising from the pandemic, Philanthropies, we provided 17 non-governmental organisations in South Africa Financial solutions: foreign currency allocations we introduced OneFarm Share, a digital mechanism with free Microsoft software and trained their employees on how to use the were provided to Tongaat Hulett Zimbabwe, enabling that collates food requests from registered charity software and teach using online platforms. Our other initiatives assisted learners it to continue producing ethanol – the key ingredient organisations and matches these to perishable and tertiary students impacted by school and university closures, supported in alcohol-based sanitisers – and to CAPS produce from farmers and food producers unable to parents who were home-schooling, provided development training to teachers Pharmaceuticals, enabling it to purchase the raw sell to their traditional markets due to unpredictable and delivered youth development programmes for young leaders. We also materials required to produce medicines despite the demand. The food is made available to beneficiary supported the National Education Collaboration Trust’s 21st Century Sandbox difficult conditions created by Covid-19. organisations at a reduced cost or as a donation. In Schools initiative with the aim of creating a future-fit public education system for its first three weeks, the initiative distributed over South Africa. 40 tonnes of produce across KwaZulu-Natal. The initiative will be expanded to other provinces in 2021. The value chain is verified, accredited and audited, with complete transparency on how donations are distributed.
¹ Over and above SBSA’s annual CSI budget, calculated at 0.6% of NPAT. MENU
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BEING ACCOUNTABLE
Describes our approach to good governance outcomes, 112 128 and how we reward our leaders, to continue to create Governing Rewarding and protect sustainable shared value. value creation value creation MENU BEING ACCOUNTABLE
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Governing value creation
Our governance structures are well-defined and embedded to support the group's OUR GOVERNANCE PHILOSOPHY ability to create and protect value in the short, medium and long term.
PRIMARY ROLE OF LEADERSHIP
Our approach to corporate governance promotes • Promoting transparency, accountability and integrated thinking and decision-making that balances empathy in managing our stakeholder relationships Ensure accountability, Oversee and monitor strategic outcomes over time, to reconcile the interests of and ensuring that our clients are treated fairly and Establish and steer compliance with corporate performance, including the group, stakeholders and society in creating and consistently. strategic direction policies, standards managing risk protecting sustainable shared value. • Delivering a positive impact on society, the economy and procedures The resilience of our governance structures was evident and the environment through our business activities. in 2020, where they ensured the board's swift response • Adhering to the highest applicable regulatory and to Covid-19. governance standards. • Instilling an ethical and risk-aware culture that Strategic value As an integral part of the societies in which we operate Purpose Vision Values Key focus areas recognises that the trust our stakeholders have in us is drivers and on which we depend for our licence to operate, we the foundation of our legitimacy and the basis on which recognise our duties as a responsible corporate citizen to we are able to compete, collaborate and change. act in a manner that benefits these societies, especially Achieved through during these times. Our corporate governance approach, therefore, rests on the following clear commitments: COUNSEL CONTROL
Values-based strategic Board and Compliance with legal and Ongoing performance and ethical leadership committee oversight regulatory requirements evaluation Our governance philosophy and framework Our ability to anticipate and respond effectively to change underpins our governance philosophy and supports the acceleration of our strategy, including how the board provides counsel and Stakeholder engagement Transparency and accountability Policies and procedures oversight. Our philosophy supports the digital enablement of governance, allowing the group to adequately introduce new operating models, understand the opportunities and risks associated Supported by with accelerating the strategy and managing constraints to effectively allocate our resources in an ever-changing world to deliver and protect sustainable shared value. King IV forms the cornerstone of our governance approach. Our application of its principles is Stakeholder PRINCIPLES Leadership, ethics and embedded throughout our governance framework and this allows us to achieve good governance relationships OF KING IV corporate citizenship outcomes of ethical culture, good performance, effective control and legitimacy.
GOV/REM Details on how the group applied the 16 principles of the King Code are in the full governance report available online. Governing structures Governance and delegation of Strategy, performance Our board-approved governance framework is embedded in all the group’s operations and is of functional areas authority and reporting designed to provide clear direction for responsive decision-making and support responsible behaviour. We implement our framework principles to:
Ensure that we pursue strategic opportunities within the board-approved risk appetite, supporting a prudent balance of risk and return. TO CREATE AND PROTECT SUSTAINABLE SHARED VALUE Through the diligent execution of our strategy, as measured by our strategic value drivers
Provide effective control to avoid financial loss or reputational damage due to misconduct or unethical behaviour.
CLIENT EMPLOYEE RISK AND FINANCIAL SEE Embed the principle of doing the right business, the right way to ensure ethical business FOCUS ENGAGEMENT CONDUCT OUTCOME IMPACT practices are embedded within and across our markets.
Support our legitimacy as a responsible corporate citizen that enhances the resources and relationships we rely on today for the future benefit of the group, our stakeholders and society. MENU BEING ACCOUNTABLE GOVERNING VALUE CREATION CONTINUED
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ACHIEVING GOVERNANCE OUTCOMES THAT DRIVE SUSTAINABLE SHARED VALUE The challenges presented by Covid-19 underscored the importance of STRATEGY, corporate governance and how the board executes its duties. The PERFORMANCE embedded practices ensured that the board maintained its commitment AND REPORTING to achieving high standards of corporate governance, through transparency, good performance, effective controls, integrity and a Offering effective counsel sound ethical culture across the group’s operations. In approving the group’s strategy, the board During the year, the board held 11 meetings. Key matters considers the group’s purpose, vision, values discussed by the board in addition to standard board agenda and legitimacy, external environment, the items included: group’s operating model, infrastructure and • Considered the group’s response to the Covid-19 crisis, STAKEHOLDER RELATIONSHIPS resources, and its performance against the noting regular feedback from executives and the crisis metrics associated with our value drivers, to management team, including items on page 116. Stakeholder engagement is governed by the group’s stakeholder ensure the long-term success and sustainability • Considered and supported the group’s updated organisational engagement principles and is overseen by the group social and of the group. structure, its new capability model, as well as the group chief ethics committee. These principles provide a guideline for the Setting the agenda and board meetings executive officer’s constitution of the GLC and its intended group’s operations across geographical areas and recognises the focus on clients. Up to the implementation of lockdown need to accommodate local contexts. restrictions, board and committee meetings • Attended the two-day annual board strategy summit which outlined the group’s short- to long-term plans, the revised ESG Read more about how we engage with our stakeholders were held in-person on the group’s premises. in our material issues section and in our ESG report. For the rest of the year, all board and approach to strategic resource planning, the group’s position in committee meetings were held virtually to a competitive landscape and achieving its strategic priorities ensure the safety of board members and while keeping the client at the centre of operations. employees. The board met more frequently in • Considered and approved the board and board committees’ Balancing our value 2020 to discuss the impact of Covid-19 on the compositions to ensure that they are appropriate and in line outcomes with the group’s strategy and future plans. group, as well as the group’s response. During the year, the board LEADERSHIP, ETHICS AND • Considered the group’s going concern, liquidity and solvency approved a re-imagined CORPORATE CITIZENSHIP assessment for the interim and year end periods. 1 • Considered business plans and feedback during the business approach to resource line performance reviews from business line chief executives, allocation for the group. Our board is responsible for the ethical and effective leadership of including in-country subsidiaries. Following a consultation the group. The chairman and the board set the ethical tone for the A forward planner with standing group. Our purpose, values and ethics are the basis on which we agenda items is prepared. • Considered and approved the internal capital adequacy targets process to establish the institutionalise an ethical culture across the group and in the and risk appetite levels in line with the provisions of SARB new approach, the board delivery of our strategy. Our code of ethics provides our people with Directive 2/2020. was updated on the practical guidance on how to behave, outlines acceptable conduct • Approved the declaration of preference dividends and outcomes, including the key and empowers them to make faster, more confident decisions 2 supported the non-declaration of ordinary dividends during trade-offs and investment 2020 in line with the SARB Prudential Authority within clearly defined parameters. The board and committee constraints that arose in Directive/2020. effectiveness assessments and executive management The chairman considers emerging assessing the future performance evaluations measure conduct against the group’s issues affecting the group. • Noted quarterly feedback from the group chief information values and code of ethics. officer on the number of IT incidents and status of the group’s allocation of resources to IT resilience. deliver the group’s Our overarching governance framework supports the • Received regular feedback from the chairmen of the board accelerated strategy. institutionalisation of an ethical culture which in its focus on the 3 subcommittees. governance of our conduct as individuals, in our markets and in Read more on page 41. society, provides the cornerstones for the group’s legitimacy. This • Received feedback on the group’s engagement with key
enables the board to oversee and monitor how the consequences of stakeholders, including clients, employees, investors and Care is taken to ensure the board has the the group’s activities affect its status as a responsible corporate shareholders, and regulators. appropriate time to consider matters citizen that understands the expectations of our stakeholders and • Considered the new people promise: to support our people. critical to the group, including compliance, acts to balance their interests, thereby ensuring positive outcomes • Considered the results from the annual ‘Are you a Fan’ administrative and governance matters. in each of our strategic value drivers. employee survey.
Our ethics framework The matters discussed above demonstrate how the board and its Our ability to achieve our purpose depends on our legitimacy and subcommittees influence and monitor the strategic direction of reputation as a trusted partner to our clients, is underpinned by the 4 the group. ethics and values which shape our organisational culture and the GOV/REM Further detail of key board discussions and decisions is included in conduct of our people. Our approach to ethics is based on three the full governance report online. pillars, namely personal conduct, market conduct and societal After each board meeting, a closed session conduct. The board and executive leadership are responsible for is held for non-executive directors that ensuring an appropriate focus on ethics, conduct and positive client provides them with an opportunity to test outcomes. We continue to review our approach to ethics to ensure thoughts and raise matters considered that it remains relevant and evolves as we transform the group. inappropriate for discussion in the presence of the executive directors. The chairman provides feedback to the group chief executive officer. MENU BEING ACCOUNTABLE GOVERNING VALUE CREATION CONTINUED
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Effective oversight during the pandemic
2020 has undoubtedly been an extraordinary employees’ safety and wellbeing, and helping our local year. As South Africa entered a national communities. The board met more frequently this year to lockdown in March, the board transitioned devote the time needed to address these challenges and ensure continued effective board oversight, partnering smoothly and seamlessly to virtual meetings. with management to find solutions and taking of The group chief executive officer and his team kept the time‑critical decisions in the group’s response to board well informed about the group’s response to the pandemic. Covid-19 even as they accelerated the group strategy, all The board and its committees considered the impact of the while focusing on supporting our clients during a the ongoing pandemic on the group. Some of the actions period of intense uncertainty and fear, prioritising our taken by the board are highlighted below.
CLIENT FOCUS OUR EMPLOYEES RISK AND CONDUCT FINANCIAL OUTCOME SEE IMPACT Client support has been a The board considered The board ensured oversight of the impact The board is committed to achieving sustainable returns As one of Africa’s largest financial services critical focus for the board employee wellbeing to be of Covid-19 across all risk areas. The group for the group over the long term. It took this into account providers, the group has a large footprint across throughout this period. The paramount throughout the risk and capital management committee together with the soundness of the group and the the continent and it was during these board considered updates pandemic. The board noted noted an overview of global and domestic preservation of its balance sheet in its oversight unprecedented times its role as a corporate from business on their the support provided to regulatory interventions in response to the responsibilities. It reviewed the financial performance of citizen became even more pronounced. The approach to assist and employees working on group pandemic, including globally available the group, the impact of Covid-19 on the macroeconomic board recognised the importance of engaging support clients during the premises in ensuring that economic and financial mitigants, as well as outlook and considered the updated 2020 financial with society and the different actions needed to pandemic and in ensuring the working environments were sovereign response and funding across forecasts, together with headline earnings projections, help them prosper during these times and build a health and safety of those as safe as possible, with jurisdictions in which the group operates. It credit impairment charges, ROE, CLR, cost-to-income more sustainable future, with increased focus on accessing branches. While appropriate health and safety reviewed the impact of the pandemic on ratio and capital and liquidity ratios. supporting the economy. ensuring that the conduct of the group’s risk appetite, earnings at risk, protocols implemented, as While the board fully recognises the importance of paying The board considered management updates on the group was appropriate, capital adequacy and the liquidity position well as support provided for dividends to shareholders, it also recognises the need to the different initiatives undertaken to support the the board also paid keen of the group based on various scenarios employees working remotely. support the real economy by providing funding to communities in which the group operates. It attention to client satisfaction and assumptions and the board resolved to The group social and ethics households and businesses amid the pandemic and considered feedback from stakeholder results and was pleased to approve a temporary recalibration of committee monitored the recognises the importance of ensuring the stability of the engagements and took the outcomes of these note that feedback on the internal capital adequacy targets, in line psychological wellbeing of group in the short, medium and long term. In issuing engagements into account when deliberating on group’s support during 2020 with SARB Directive 2/2020. The outcome employees and considered ordinary dividends, it considered the recommendations board decisions. had been positive. of detailed portfolio risk assessments and employee survey results outlined in Guidance Note 4/2020 issued by the SARB about how employees were the various management actions taken as a The board was pleased to note the positive The board continues to Prudential Authority on the distribution of dividends to coping throughout the year. It result were considered by the board. external feedback received in relation to the monitor the overall impact of ordinary shareholders. It approved the payment of the also considered the group’s support initiatives to communities both the group’s activities on The group audit committee reviewed and group’s 2019 final ordinary dividend and resolved not to appropriateness of through maintaining stable financial services and clients. approved changes to the 2020 internal pay any 2020 interim ordinary dividends. The board management’s support in audit plan as part of an in-depth review of concluded that this was the right and prudent thing to do the different CSI initiatives. assisting employees to cope Read more in client focus from internal audit’s risk assessment and audit in order to preserve capital and allow the group to with some of the personal page 44. prioritisation session. The group continue to serve the needs of its clients during the Read more in SEE impact from page 100. challenges the pandemic technology and information committee pandemic. The board approved a final ordinary dividend created. assessed the vulnerability of the group’s for 2020 of 240 cents per share. systems, technology and information- Read more in employee engagement from page 66. related risks associated with employees Read more in financial outcome from page 86. working from home. The board also considered the effectiveness of the group’s ‘Always On, Always Secure’ strategy.
Read more in risk and conduct from page 74.
GOV/REM More information on the activities of the board and its committees can be found in the full governance report online. MENU BEING ACCOUNTABLE GOVERNING VALUE CREATION CONTINUED
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are likely to influence unduly or cause bias in decision- Assessing the effectiveness of the board making when judged from the perspective of a reasonable and informed third-party. The performance of the board and its committee are assessed through: Board composition and skills Provision 8.1.2.8 of the directive deems non-executive The collective background of the board members directors who have served on the board for a period of provides a balanced mix of skills, demographics, genders, nationalities, experience and tenures to Mandate reviews Effectiveness evaluation One-on-one nine years or more as not independent. In 2019, the group applied for and was granted exemption by the Prudential enable it to fulfil its governance role and discussions A detailed assessment of The chairman, the board and its Authority from the effects of this provision until May responsibilities objectively and effectively. The the board and each committees undergo an Evaluation of 2023 for directors who had served on the board for board considers its size and composition to be subcommittee’s effectiveness evaluation annually individual longer than nine years. The exemption is subject to the appropriate. compliance with the in terms of the Section 64B 2(b) director annual external independent assessment classifications provisions of their (iv) of Banks Act. The board performance is We apply a skills matrix to ensure our directors have made. Thulani Gcabashe, Myles Ruck and Kgomotso the relevant range of skills and experience in the respective mandates is alternates every other year carried out by Moroka have all served for periods longer than nine years. done annually. The between an externally facilitated the chairman in short term and to identify specific skills required to Taking into account the above exemption and following a protect and create value in the long term. group’s external auditors independent evaluation, and an one-on-one rigorous annual review, including independent external conduct a limited internal evaluation facilitated by discussions with assessment confirmation, the board confirmed that To complement the board's current skill set, assurance assessment on the chairman supported by the individual Thulani Gcabashe and Myles Ruck continue to be Paul Cook, Priscillah Mabelane and Nonkululeko the review and express an group secretary. Directors also directors. independent in character, demonstrated behaviour and Nyembezi were appointed to the board. opinion in this regard. participate in peer reviews. contribution to board deliberations and judgement, Hao Hu and Priscillah Mabelane resigned and Peter notwithstanding tenure. For the period under review Sullivan retired from the board during 2020. Kgomotso Moroka, and ICBC’s nominated directors Xueqing Guan replaced Hao Hu. André Parker will Xueqing Guan and Lubin Wang were not considered The annual board evaluation provides an opportunity dynamics and to deepen the relationship with the retire from the board at the conclusion of the 2021 independent. to identify greater efficiencies, maximising strengths executives. This has helped enhance focus on AGM, having reached the mandatory non-executive and highlighting areas of further development to matters, quality of conversations and relationships director retirement age. enable the board to continuously improve its between directors. performance and that of the group. • The board has navigated the logistical complexities Board skills of the Covid-19 pandemic well. The group chief The 2020 board effectiveness review was externally executive officer played a key role in deliberately conducted by an independent service provider, with strengthening the relationship between the board the following key findings: and management, and worked hard to ensure 72% 78% 89% 83% 67% • Overall board performance and that of its Universal Financial services / Doing business in Capital / risk Accounting / directors were kept abreast of all developments banking / insurance / asset sub-Saharan management and auditing committees was considered effective. The board is within the group and engagements with banking management Africa controls a high-performing board, and members expressed stakeholders, especially during the early stages of appreciation, enjoyment and pride at being part of the pandemic. it. There is a solid relationship of mutual respect • Sub-committees were considered an effective and trust between non-executives and executive element of the overall governance framework and directors, which enables productive interactions. were led by high quality chairmen. 67% 100% 89% 95% 83% • The chairman has extensive chairing experience Digital and Leadership of a Voice of the Culture/ conduct / People and has done much to strengthen boardroom innovation large complex customer / client ethics development / organisation centricity diversity and inclusion
95% 89% 83% 83% 44% Remuneration / Governance / Stakeholder ESG Business GOVERNING STRUCTURES AND DELEGATION OF AUTHORITY reward regulation / public relations/ transformation/ policy corporate digital platform reputation businesses The board retains effective control through the governance making process. Executive directors and the group’s framework and delegates certain functions to its prescribed officers attend board meetings, increasing the committees according to clearly defined mandates and contact between the board and management. Indicates the percentage of board members who rate themselves as skilled in these areas. decision-making rights set by the framework. This allows The board has appointed the lead independent director, the board to allocate sufficient attention to the matters whose role is to further strengthen the independence of reserved for its decision-making, while also ensuring that the board and maintain an additional channel for delegated matters receive in-depth focus. Committee Topics covered in 2020 included shareholders to raise any concerns. chairmen are accountable for the effective functioning of Board education and board committees. training Diversity and independence The group’s ESG approach and An overview of the Continuing board education The board delegates the management of the day-to-day The board-approved promotion of gender and diversity journey, focusing on emerging policy, finalisation of Basel sessions are scheduled in advance business and affairs of the group to the group chief policy sets a voluntary target of 33% female regulatory frameworks, key role III Reform and the to ensure full board participation. executive officer, with full power on behalf of and in the representation on the board by the end of 2020, which players and stakeholders. impacts thereof. name of the board. The GLC provides counsel to the has been achieved. In line with King IV, the board aims to Ongoing director education group chief executive officer, acting as a sounding board pursue the race diversity targets included in the ensures that the board has both and ensuring overall coordination across the group, legal management control scorecard as set out in the the awareness of relevant trends ESG guidance by the Institute of S&P Global ratings entities, and other key stakeholders. Members of the GLC Amended Financial Sector Code of 2017. The board and the appropriate skills to offer International Finance. for ESG. exercise powers in accordance with their delegated considers these targets in the implementation of its relevant counsel and provide authority. succession plans and is satisfied with the progress made. effective oversight as the group An annual assessment of directors' independence is delivers its strategy and Separation of roles and responsibilities The digital economy and accelerating performed, including a self-assessment by each director transforms to be truly human and The roles of chairman and group chief executive officer truly digital. digitisation of the financial sector. are separate. The allocation of responsibilities is clearly and the consideration of each director’s circumstances set out in the board mandate, ensuring that no single by the board. Consideration is also given to whether director has unfettered powers in the board decision- directors’ interests, position, association or relationships, MENU BEING ACCOUNTABLE GOVERNING VALUE CREATION CONTINUED
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Board committees
Board committees in 2020 included:
GROUP RISK AND CAPITAL GROUP DIRECTORS’ AFFAIRS GROUP REMUNERATION GROUP MODEL APPROVAL MANAGEMENT COMMITTEE COMMITTEE COMMITTEE COMMITTEE Attendance Attendance Attendance Attendance Chair: Myles Ruck Chair: Thulani Gcabashe Chair: Trix Kennealy Chair: Jacko Maree 100% 98% 100% 100%
Purpose Purpose Purpose Purpose • To provide independent and objective • Determines the appropriate corporate • Assists the board with ensuring fair and • Assists the board in managing model risk oversight or risk and capital management governance structures and practices. responsible remuneration. according to the advanced internal ratings- across the group. • Maintains the board continuity programme. • Develops the group’s remuneration philosophy based approach for measuring exposure to • Reviews and assesses the adequacy and • Ensures compliance with all applicable laws, and policy in line with best practices and credit risk stipulated by the Banks Act. effectiveness of the risk and capital regulations and codes of conduct and practice. engages key stakeholders in this regard. • Performs functions set out in the associate management governance framework and • Assesses and ensures the effectiveness of the regulations, including inspecting risk evaluation ensures that associated standards and policies board and its committees. Key activities performed models for approval. are clear, appropriate and effective. remuneration; incentive schemes, share-based • Reviews model risk governance processes and • Evaluates and agrees the nature and extent of Key activities performed payments and other benefits; subsidiary monitors the group's model universe and model opportunities and ensures discipline and risk appetite. succession planning and board composition; remuneration committees; governance control in managing the associated risks in corporate governance; board performance review; pursuit of the group’s strategic objectives. Key activities performed group subsidiary governance framework model approvals; model risk oversight; model Key activities performed governance oversight of the impact of Covid-19 on the group's risk portfolio; financial and non-financial risk GROUP TECHNOLOGY AND INFORMATION COMMITTEE management; capital and liquidity risk Attendance GROUP SOCIAL AND ETHICS management; internal capital adequacy Chair: John Vice % COMMITTEE 98 assessment process; regulatory matters; Attendance Driving innovation governance; oversight Chair: Kgomotso Moroka 100% The board understands that information and Purpose technology is an integral part of the group’s strategy and transformation. The group • Ensures prudent governance of technology Purpose technology and information committee oversees and information and oversees related the governance of information and technology and • Ensures that social conscience is embedded governance mechanisms to support the group’s ensures that appropriate steps are taken to in the way the group does business. achievement of its strategic objectives. GROUP AUDIT COMMITTEE achieve the group’s strategic objectives, including • Ensures the development of appropriate Attendance monitoring of IT investment and expenditure. The Chair: Trix Kennealy policies relating to stakeholder and reputation Key activities performed % day-to-day administration and implementation of 100 management. oversight of the impact of Covid-19 on technology; IT is delegated to management and is integrated • Guides and monitors the group’s social, ethical, technology strategy; technology governance; into the group’s risk management processes. Purpose economic, environmental, transformation and cybersecurity and cyber resilience; technology consumer relationship initiatives in line with investment; enterprise data management; In the current year, the board approved • To monitor and review the adequacy and relevant legislation, regulation, standards governance and assurance management’s proposal to create a group that is effectiveness of accounting policies, financial and codes. ready for the future, to become a digital business. and other internal control systems and • Ensures material stakeholder issues receive Consideration was also given to how the executive financial reporting processes. attention from the board and management. would be organised internally to achieve the • Provides independent oversight of the group’s group’s longer term vision. The 2020 annual assurance functions, including reviews of the Key activities performed two-day strategy summit allowed for engagement independence and effectiveness of the external on the group's accelerated strategy execution to audit, internal audit and compliance functions. stakeholder engagement; transformation; transform into a digital financial services business • Assesses compliance with applicable legal, employee engagement; ethics; reporting; with executives and heads of business segments, regulatory and accounting standards and corporate citizenship; impact on environment client solutions, innovation and engineering. Other policies in the preparation of fairly presented topics discussed included: understanding the financial statements and external reports. competitive landscape and market dynamics; outlining the transformation programme and Key activities performed feedback on the progress made to date; oversight of the impact of Covid-19 on the internal capabilities per client segments, client solutions control environment and financial results; internal and engineering. audit; compliance; tax; financial accounting and external reporting; financial control; non-audit services; interim and annual financial statements; GOV/REM Read more in our full governance report online. external audit; oversight MENU BEING ACCOUNTABLE GOVERNING VALUE CREATION CONTINUED
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Our leadership The group board Our directors have deep experience and diverse skills, enabling the board to provide informed counsel, rigorous oversight and independent interrogation in leading integrated thinking in the group and in guiding the GLC in the design and delivery of the group's strategy.
Chairman and deputy Lead independent director experience, including capital and chairmen liquidity management, at group and subsidiary level. Trix 4 Appointed: 2016 Thulani Kennealy 61 1 1 Thulani 2 Xueqing 3 Jacko Gcabashe 63 Lead independent director, SBG and Non-executive directors Gcabashe Guan Maree Chairman and independent non- independent non-executive director executive director, SBG and SBSA SBSA Paul Key strengths: Extensive 7 Key strengths: Business leadership; Cook 40 executive management of a complex operational and strategic business; solid strategic planning management experience across a Independent non-executive director, experience. variety of industries and sectors; SBG and SBSA over 30 years’ experience in Key strengths: Use of digital Appointed: 2003 corporate governance; broad Appointed chairman: 2015 tools to reach customers, creating experience in strategic financial disruptive brands, and improve management, including the back-office; venture capital Xueqing restructuring, acquisitions and investment, entrepreneurial support 2 57 Guan integrations. and incubation, pan-Africa macro- Senior deputy chairman, SBG and Appointed: 2016 and micro-trends experience. non-executive director, SBG and Appointed: 2021 SBSA Executive directors Key strengths: Proven leadership in Maureen 8 large international group; extensive 60 4 Trix 5 Sim 6 Arno Sim Erasmus board experience; strong strategic 5 Kennealy Tshabalala Daehnke Tshabalala 53 Independent non-executive director, management experience in banking. SBG and SBSA Appointed: 2020 Group chief executive officer, SBG and executive director, SBSA Key strengths: Seasoned investment banker with international Key strengths: Extensive groupwide Jacko experience in emerging markets; 3 leadership experience; leading Maree 65 strategy development and execution strategy formulation and execution; Deputy chairman, SBG skills; firmwide risk management proven track record of enhancing and independent non-executive and capital allocation. competitiveness and ensuring director, SBG and SBSA sustainability. Appointed: 2019 Key strengths: Over 40 years’ Appointed: 2013 Geraldine experience in banking and 9 leadership; deep insight into the role Fraser-Moleketi 59 Arno of a chief executive and the 6 53 Independent non-executive director, challenges faced; skilled team Daehnke SBG and SBSA Chief financial and value builder. Key strengths: Experience in management officer, SBG and Appointed: 2016 international, regional (Africa) executive director, SBG and SBSA and national politics; strong 7 Paul 8 Maureen 9 Geraldine Key strengths: Detailed strategic, ethical and oversight Cook Erasmus Fraser-Moleketi understanding of banking skills; experience in human regulations; financial management, resources oversight. budgeting and forecasting skills; Appointed: 2016 balance sheet management
Non-executive directors provide independent and objective judgement. They constructively challenge and monitor the executive management’s delivery of strategy within the approval framework and risk appetite agreed by the board.
Committees: SBSA large exposure credit committee, an SBSA subcommittee Group directors’ affairs committee Group social and ethics committee Group technology and information committee Group risk and capital management committee Group remuneration committee (remco) Group model approval committee Group audit committee Committee chairman MENU BEING ACCOUNTABLE GOVERNING VALUE CREATION CONTINUED
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Martin Myles Non-executive directors 13 16 (continued) Oduor-Otieno 64 Ruck 65 Independent non-executive director, Independent non-executive director, SBG and SBSA SBG and SBSA Nomgando 10 58 Key strengths: Over 18 years’ Key strengths: Strong banking Matyumza extensive banking experience; experience with a career spanning Independent non-executive director, strategy development and execution over 30 years; experience in running SBG and SBSA skills; strong leadership and a large and complex business; Key strengths: Strong financial and governance experience. extensive risk management executive management skills; Appointed: 2016 experience. experience in strategy development Appointed: 2002 and execution; seasoned non- André 14 executive director in several sectors. Parker 69 John 17 68 10 Nomgando 11 Kgomotso 12 Nonkululeko Appointed: 2016 Independent non-executive director, Vice SBG and SBSA Independent non-executive director, Matyumza Moroka Nyembezi Kgomotso SBG and SBSA 11 66 Key strengths: Extensive Moroka experience of running businesses in Key strengths: Extensive Non-executive director, Africa and Asia; strong brand experience in auditing, accounting, SBG and SBSA management experience in fast- risk and practice management; Key strengths: Strong business moving consumer goods markets; experienced IT advisor and leadership skills; extensive non-executive director experience in consultant in IT strategy, risk, audit experience in governance, regulation South African corporates. and controls; knowledge and and public policy; significant Appointed: 2014 experience of running businesses in legal experience. South Africa and other African Appointed: 2003 Atedo countries. 15 65 Peterside CON Appointed: 2016 Nonkululeko 12 Independent non-executive director, Nyembezi 61 SBG and SBSA Lubin 18 47 Independent non-executive director, Key strengths: Strong business and Wang SBG and SBSA banking experience, as the founder Non-executive director, 13 Martin 14 André 15 Atedo Key strengths: Leadership across and former chief executive of the SBG and SBSA multiple sectors; strategy planning Investment Bank and Trust Key strengths: Senior management Oduor-Otieno Parker Peterside CON and execution; governance and Company Limited (IBTC); seasoned experience in multiple geographies; corporate stewardship. investment banker and economist. experience in a variety of corporate Appointed: 2020 Appointed: 2014 functions, including finance, IT, procurement and administration; strong ability to adapt to different environments. Appointed: 2017
Independence Tenure (years) 13 3 2 4 9 2 3
independent non-independent <3 3 – 6 6 – 9 >9 executives 16 Myles 17 John 18 Lubin Ruck Vice Wang Gender Race Age 7 5 6 2 6 10
white black non-South African between 51 – 59 >than 60 12 6 between 40 – 50
Committees: SBSA large exposure credit committee, an SBSA subcommittee Group directors’ affairs committee Group social and ethics committee Group technology and information committee Group risk and capital management committee Remco Group model approval committee Group audit committee Committee chairman MENU BEING ACCOUNTABLE GOVERNING VALUE CREATION CONTINUED
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Group leadership council
The group chief executive officer, supported by the 7 Alpheus 8 Zweli members of the GLC, is accountable for the Mangale Manyathi implementation of strategy and the performance of the group. The skills and experience of committee members underpin the group’s ability to deliver its strategy. The previous group executive committee was replaced by the GLC. Changes have been made to the structure of the committee and certain members' responsibilities to enable the transformation of the group, in line with its strategy. 1 Sim 2 Arno 9 Funeka 10 David 11 Margaret 12 Rod Tshabalala Daehnke Montjane Munro Nienaber Poole
3 Sola 4 Kenny 5 Lungisa 6 David 13 Thulani 14 Sharon 15 Adrian David-Borha Fihla Fuzile Hodnett Sibeko Taylor Vermooten
Sim Sola Lungisa Alpheus David Thulani 1 3 5 7 10 13 Tshabalala David-Borha Fuzile Mangale Munro Sibeko Group chief executive officer, Chief executive officer, Africa Regions Chief executive officer, SBSA Chief engineering officer Chief executive, Liberty Chief brand and marketing officer SBG and executive director, SBSA Qualifications Qualifications Qualifications Qualifications Qualifications Qualifications BSc Economics (University of Ibadan), MCom (UKZN), AMP (Harvard) NDip Computer Systems BCom, PGDip Accounting (UCT), BSc Bus Admin (California State BA, LLB (Rhodes University), LLM MBA (University of Manchester), AMP Engineering (TUT), PG management CA(SA), AMP (Harvard) University, US), MBA (Henley), (University of Notre Dame, US), (Harvard), GCP (IESE, Wharton, David (Henley), EDP (CCL), AMP (Harvard) Graduate Certificate (Harvard) 6 HDip Tax (Wits), AMP (Harvard) CEIBS) Margaret Hodnett 11 Zweli Sharon Chief risk and corporate 8 Nienaber 14 Arno Kenny 2 4 affairs officer Manyathi Chief executive officer, Client Taylor Daehnke Fihla Qualifications Chief executive officer, Business & Solutions Chief people and culture officer Chief financial and value Chief executive officer, Commercial Clients BCom (Wits), BAcc Qualifications Qualifications management officer, SBG and Wholesale Clients (cum laude), CA(SA), Qualifications BCompt (Hons) (University of the BCom (UKZN), BCom (Hons) executive director, SBSA Qualifications MBA (Manchester Business School/ BCom (Hons) (UNISA), PDP (New Free State), CA(SA) (UNISA) Qualifications MSc (University of London), MBA Wits), Advanced Diploma in Banking York), SEP (Wits & Harvard) BSc, MSc (UCT), PhD (Vienna (Wits) Rod Adrian 12 15 University of Technology), MBA Funeka 9 Poole Vermooten (Milpark Business School), AMP Montjane Chief change and business Chief innovation officer (Wharton) Chief executive officer, Consumer & transformation officer Qualifications High Net Worth Clients Qualifications MBA New Venture Creation Qualifications BCom (UNISA) (Bond University, Australia) BCom (Hons) (Wits), MCom (UJ), CA(SA)
Wits: University of the Witwatersrand. UCT: University of Cape Town. UJ: University of Johannesburg. UNISA: University of South Africa. UKZN: University of KwaZulu-Natal. TUT: Tshwane University of Technology. MENU BEING ACCOUNTABLE
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Against this backdrop, the group’s personal, business and corporate clients took heavy strain, particularly in South Africa and our financial results did not emerge unscathed. Performance against our strategic value drivers These dynamics severely impacted the group’s financial outcome. However, there was improvement across most of the other metrics associated with the group’s strategic value drivers. This should give shareholders some Rewarding value creation comfort in the group’s resilience. Excluding the effect of the group’s credit impairment charges, operating income declined by only 6%. This demonstrates the underlying resilience of the group’s client franchises. Furthermore, the group was able to preserve its liquidity buffers in line with regulatory, prudential and internal “The implications of the Covid-19 crisis have greatly complicated our deliberations stress testing requirements. The group remains in robust good health, with adequate liquidity and capital flexibility in rewarding the people of Standard Bank Group for the shared value they created to support the recovery in earnings and returns we expect in the years ahead. for our stakeholders over the last year – under extraordinary duress. In particular, TRIX KENNEALY – CHAIRMAN OF we thought deeply about how to recognise our executives for their balanced THE REMUNERATION COMMITTEE The group’s financial performance, and the corresponding erosion of financial value during the year, contribution, and how best to incentivise them in securing the group’s ability to was therefore not a true reflection of effort. Despite the generate sustainably higher returns into the future, as promised to our major impact of uncontrollable exogenous factors, significant achievement was made; for example, our shareholders.” Africa Regions performed well, and our client and employee net promoter scores (NPS and eNPS) mostly improved or remained above target. Another important consideration for remco is that skilled Aligning shareholder and executive It is of course vital that leadership anticipates the apply disciplined and discretionary judgement by and respected leaders are in high demand. It is therefore interests in an extraordinary year prevailing trends and urgently makes the necessary assessing the metrics that the board had previously imperative that we retain top talent and reward the changes – however difficult – to succeed in the most approved for each of these value drivers in respect of I am confident that our performance-related pay policy behaviours that deepen our resilience and secure our likely future scenario. In considering the group’s strategy, business and individual performance. and its implementation has helped the group withstand future relevance. This is fundamental both to protecting the reader will discern the theme of transition as we value, by holding on to our competitive edge, and to the challenges of a one in a hundred-year event. Covid-19 accelerate along our strategic path to offer a wider range and its effects have tested the resolve of group leadership Enduring the worst economic conditions creating greater value by effectively delivering on our of related services to achieve our ambition of being ambitious strategy, and the uplift in financial and SEE and demanded heightened flexibility. For our part, remco Africa’s leading digital financial services business. Our in a century returns it envisages. has had to make difficult discretionary decisions that strategy is centred on transforming client experience and The Covid-19 crisis has been the largest single shock to otherwise would not have arisen. operational excellence, by combining human skill and the world economy and to human society in recent times. Despite the volatility occasioned by the Covid-19 The loss of life and human capacity, and of income in The circumstances in which we sought to fulfil our digital capabilities to secure the group’s competitiveness pandemic, our people stayed focused on serving and both formal and informal sectors, is simply impossible to fiduciary duty were different to any other year in living in a radically changing context, while caring for society protecting the interests of our clients, shareholders, quantify. The IMF estimates that the global economy memory, but our underlying philosophy remained the and the environment. This will position the group to earn communities, regulators and other stakeholders, while higher revenues and better margins, while driving contracted by 3.5% and sub-Saharan Africa by 2.6%. same: to align executive behaviour with long-term adapting to new ways of remote working. In the midst of inclusive and sustainable growth in, for and across Africa. South Africa’s economy declined by 7.0% in 2020, shareholder interest. Shareholders have asked that the the disruption, our executive teams designed and began according to Stats SA. executives share in the negative impact of the Covid-19 For an overview of the group’s strategy and our objectives to implement plans to accelerate the delivery of the crisis on group performance, and we have heard their over the short, medium and long term, refer to page 32. In South Africa, the pandemic was more pronounced and group’s strategy. To keep up the momentum, it has been request. See page 136 of this report and in the full stringent lockdowns significantly disrupted social and essential to retain and motivate the current leadership Our growth story promises shareholders superior and remuneration report online for more detail. economic activity. As the economy contracted, already team to achieve our intended strategic outcomes with sustainable returns premised on creating measurable critically high unemployment levels escalated. Despite foresight, diligence and urgency. value for our clients (client focus), for our people fiscal and monetary policy actions and temporary social Measuring and rewarding shared value (employee engagement), and for all stakeholders by More detail on the group’s performance in 2020: chief executive grants and funding support, the added pressure resulted officer’s review from page 14, and the financial outcome chapter outcomes protecting the systemic integrity of both the group and starting on page 86. in further downgrades to the country’s sovereign credit Any measure of success in business must include the financial system of which we are part (risk and ratings. resilience to change and future relevance. This is truer conduct). The group’s strategies in these areas are SBG progress against strategy than ever for the group as Covid-19 accelerates the global designed to balance targeted financial outcomes with Elsewhere on the continent, although the public health The detail on page 38 provides a useful snapshot of the forces that are reshaping our competitive landscape and positive SEE impact that responds to Africa’s most impact was less severe allowing for more moderate group’s performance against the measures that underpin amplifying the expectations of our stakeholders. Of pressing needs, broadly commensurate with the restrictions, the socioeconomic effects were marked and the executive scorecards, the full details of which are particular importance to the work of remco, stakeholders UN SDGs. government capacity to provide economic stimulus and included in the implementation report section of the full expect outcomes that not only demonstrate balanced, relief programmes was limited. Weak sovereign and fiscal In rewarding these value outcomes, remco initially applies remuneration report online. fair and responsible consideration of their interests, but positions were exposed, with less diversified economies a formulaic approach to calculate short-term incentives that also seek to harmonise them over time. fairing worse than their more diversified peers. (STIs) for executive directors and prescribed officers, For an assessment of the risks and opportunities in the group’s operating context, refer to page 22. based on the group’s financial outcome and that of the business line (where applicable). In evaluating progress against the other four strategic value drivers, we then MENU BEING ACCOUNTABLE REWARDING VALUE CREATION CONTINUED
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Implementation of our remuneration • The reader will notice that there have been no forward- Engaging with shareholders to improve corporations, ESG principles are increasingly informing policy in a year defined by Covid-19 looking adjustments to fixed pay for executives and remuneration disclosure investment decisions. The work underway to develop non-executive directors for 2021 with only one meaningful measures of ESG performance, in line with In view of this performance, what then are the significant The 2020 AGM returned an 88% (2019: 92%) and 86% exception relating to an executive due to a change in global standards, is important in this regard. Remco will implementations, shifts and themes for the concerned (2019: 94%) vote of approval on our remuneration policy responsibilities and therefore role size. over time seek to codify such measures in the PRP, which reader to investigate in the group’s remuneration report? and its implementation, respectively. We are confident will require greater overlap between the mandates of that this in part reflects recognition of our ongoing The main theme is that we are more committed than ever More broadly, it is important to note that the group is an remco and the social and ethics committee. commitment to engage with and act on shareholder to incentivising leadership to grow shareholder value over important employer in the countries it operates, providing concerns and we have attempted to address the Furthermore, as the group seeks to differentiate itself the long term. The other is that remco will not resort to – otherwise scarce – opportunities for socioeconomic concerns our shareholders have raised. The matters through a broader suite of client solutions, innovation ‘box-ticking’. It is our duty to engage in nuanced debate advancement. We minimised the impact of Covid-19 on raised by them during our engagements are valuable and becomes ever more important. Commensurate to this, on policy and implementation in attracting and retaining our people with various measures. These included not echo in our meetings and remuneration response. remco must develop its ability to measure return on talent in key leadership positions. This begins with reducing employees’ fixed pay on account of periods of investment in innovation; this includes sufficient room for offering market-related remuneration and extends to unproductivity brought about by the mandatory This year we have streamlined the remuneration report to development failure so that innovation is not stunted, ensuring that employees are not unfairly prejudiced for lockdowns and attempting to ensure productive enhance and simplify our reporting, with clearer appropriate investment intensity and guarding against circumstances beyond their control while ensuring contribution during this time. delineation between the remuneration policy and runaway costs. Balancing these considerations will alignment with shareholders. That said, the single figure implementation report. We look forward to engaging We also recognised the extraordinary effort of our require careful and responsible assessment. total reward outcomes for 2020 for executive directors employees and continued to award performance-related further with our shareholders, and also hearing the views and prescribed officers have reduced by up to 55% on STIs in March 2021 in respect of 2020, albeit significantly of other stakeholders, on this year’s remuneration Also, with strategic partnerships being a cornerstone to the prior year due to the failure of the performance reduced to reflect the group’s performance. We made disclosure. the group’s strategic ambition to progress towards conditions of the long-term incentives (LTI) awarded in offering a wider range of related services, measuring the a special once-off recognition 'National Service Remco obtained independent advice from Bowman 2018 and reduced short-term incentives (STI) awarded quality of these relationships in combination with Appreciation' award to all general employees and Gilfillan on a range of remuneration policy and for 2020 in line with group and business line results. The managing the significant potential risk to our service managers who worked outside the safety of their homes implementation issues during 2020, as well as obtaining STI awarded to the executive directors are fully aligned levels and reputation, will also be critical to measure and delivering essential banking services during the first wave independent remuneration benchmark analysis from a to group results. reward effectively. of lockdowns in South Africa and Africa Regions. Special range of survey providers. I am satisfied that the discussions by which we arrived at leave and benefits were introduced to assist with school In closing, I wish to reiterate remco’s philosophy that GOV/REM Read more in the full remuneration report online. our decisions were conducted in a spirit of transparency, closures and for self-quarantine purposes to support ethical leadership is non-negotiable. It is clear, given the fact-seeking and fairness. And at all times in the interests employees and ensure sustainable productivity during history of unethical corporate decision-making destroying of the organisation, and by definition those of all our these trying times. Future focus for remco both value and opportunity, that profits derived from stakeholders, were foremost in our minds. The balance we seek between the interests of our people As the group’s system of value measurement evolves and unethical decisions will turn into losses for shareholders and stakeholders. Not only this: unethical decisions also Temporary amendments noted in our implementation and our shareholders is reflected in the diagram below matures in line with changes to the business, remco must damage the legitimacy of business in general, which we report were as follows: that shows the relative growth in HE and incentive pools. adapt accordingly. The group is committed to developing The shaded area shows the bias to shareholders over metrics that give substance to our non-financial strategic can ill afford in these fractious times. Therefore, we will • We amended the way performance conditions of the the period. priorities; metrics that are simple, clear and credible in continue to situate our remuneration policy and its March 2020 performance reward plan (PRP) award guiding management and are accountable to our implementation within an ethical leadership culture, (our LTI scheme) would be evaluated, so that remco RELATIVE HEADLINE EARNINGS stakeholders. understanding that our success is in large part derived would be able to evaluate relative performance at the AND INCENTIVE POOLS from the trust of our stakeholders. end of the three-year performance period – the market More detail on the group’s priorities is included on page 33. was notified of this intention in December 2020 via a I know my colleagues on remco share my confidence, in SENS announcement following engagement with 300 the thoughtful work we have done this year to apply our performance-related pay policy; to assist the group to shareholders on the matter in November 2020. As this development runs its course, some elements of 250 come out of this crisis stronger and more ready for the • We extended the exercise periods for the equity growth the balanced scorecard that apply to our PRP will contain future than before. scheme (EGS), group share incentive scheme (GSIS) .200 a higher degree of subjectivity than would ordinarily be and share appreciation rights plan (SARP) awards that 150 the case. While this may cause some discomfort among were due to expire between 27 May 2020 and 28 shareholders, we will continue to engage transparently, February 2023 to 31 March 2023. Considering that 100 supporting our decisions with reason and evidence. these share-linked awards had vested but had not been 50 exercised and therefore had become valueless due to As readers will be aware, the reputational risk to an event unrelated to performance after an extensive 0 prioritising short-term profits over long-term blended holding period, we believe this change to be fair to 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 value are becoming increasingly untenable in our employees who had held vested share-linked awards HE growth (indexed) Incentive pool growth (indexed) globalised world, in which financial and non-financial risks for up to ten years prior to the extension. Shareholder bias are inextricably linked. With ‘stakeholder capitalism’ redefining conventional thinking on the purpose of MENU BEING ACCOUNTABLE REWARDING VALUE CREATION CONTINUED
132 STANDARD BANK GROUP Annual integrated report 2020 133
Remuneration policy summary
CHIEF EXECUTIVE OFFICER People are at the heart of our business. To satisfy our clients, meet their needs and accelerate our STANDARD BANK GROUP strategy to achieve higher growth and efficiency, our people must be highly skilled, experienced and R’000 80 65 711 engaged. Our responsibility to them is to ensure that they have the resources and advanced 70 capabilities needed to support our ambitions and are recognised and rewarded for their performance 60 54% 44 036 and the value they create for our stakeholders. 50 40 40% 17% The remuneration policy sets out our methodology, agreed by remco, to remunerate our employees and it ensures that 30 value is appropriately shared among our shareholders, senior executives and employees. 20% 20 13% 10 586 16% 10 Read more in employee engagement on page 66. 100% 24% 16% 0 CHIEF EXECUTIVE OFFICER, BUSINESS & Minimum On-target Stretch COMMERCIAL CLIENTS
The above scenarios include conditional LTI awards of R17.8 million and R’000 R35.5 million for on-target and stretch respectively. 70 Key objectives guiding our remuneration policy Fixed remuneration Deferred incentive 60 Cash incentive Long-term incentive 50 45 250 Measure and reward for Be competitive in the Reward our people 40 1 value created for all 2 global marketplace 3 fairly while avoiding 30 575 53% 30 stakeholders over the short, for skill. a bonus-centric GROUP CHIEF FINANCIAL AND 39% 20 medium and long term. culture that distorts VALUE MANAGEMENT OFFICER 19% 17% motivations and may 10 7 875 16% 13% R’000 100% 26% 17% encourage excessive 70 0 and irresponsible Minimum On-target Stretch Promote and 60 The above scenarios include conditional LTI awards of R12 million and 4 reward teamwork. risk-taking. 50 125 50 R24 million for on-target and stretch respectively.
40 Fixed remuneration Deferred incentive 33 100 56% Cash incentive Long-term incentive 30 43% 20 17% 20% 10 7 000 16% 13% 100% 21% 14% Remuneration scenarios for 0 CHIEF EXECUTIVE OFFICER, CLIENT SOLUTIONS Minimum On-target Stretch R’000 executive directors and prescribed officers The above scenarios include conditional LTI awards of R14 million and R28 million for on-target and stretch respectively. 70 Fixed remuneration Deferred incentive 60 King IV requires disclosure of the potential consequences – The scenario assumes around 55% of the STI will be Cash incentive Long-term incentive 50 48 225 on the forward-looking total remuneration for executive deferred in share-linked awards. 40 33 450 directors and prescribed officers on a total single figure 46% – In line with King IV, the LTI value is the fair value at 30 33% basis by applying the remuneration policy under grant for the most recent PRP award. 20 25% 22% minimum, on-target and stretch performance outcomes. CHIEF EXECUTIVE OFFICER, WHOLESALE CLIENTS 10 7 350 20% 17% • Stretch reward outcome R’000 100% 22% 15% Remco considers the level of remuneration under these 0 – STIs have been set on the basis of exceeding targets 70 Minimum On-target Stretch scenarios to ensure that remuneration is considered (using both financial and non-financial metrics over a 60 appropriate in terms of the group’s performance and the 55 205 The above scenarios include conditional LTI awards of R11 million and multi-year period) for the group, client segment R22 million for on-target and stretch respectively. value created for stakeholders. 50 Fixed remuneration Deferred incentive (where applicable) and the individual. 40 37 835 44% The graphs alongside show hypothetical values of total Cash incentive Long-term incentive – This scenario also assumes around 55% of the STI 30 31% remuneration under the following scenarios: will be deferred in share-linked awards. 24% 20 27% • Minimum reward outcome – In line with King IV, the LTI is set at the maximum 10 7 935 21% 18% – This outcome depicts a scenario in which only the achievement of the performance conditions of the 100% 21% 14% 0 fixed remuneration of the relevant individual would most recent PRP award. This outcome would deliver Minimum On-target Stretch be paid. significant value for shareholders. The above scenarios include conditional LTI awards of R12 million and R24 million for on-target and stretch respectively. The scenario outcomes presented are for illustrative • On-target reward outcome Fixed remuneration Deferred incentive – This outcome depicts a scenario in which STIs (cash purposes and should be seen as a range of possible Cash incentive Long-term incentive and deferred) and LTIs are paid in addition to fixed remuneration outcomes rather than an estimate for the remuneration. 2021 single figure outcomes. The target and stretch outcomes set out in the graphs below are lower than the – STIs have been set on the basis of meeting targets equivalent outcomes disclosed in the 2019 remuneration (using both financial and non-financial metrics over a report as these scenarios are using the 2020 STIs as a multi-year period) for the group, client segment base reference. (where applicable) and the individual. MENU BEING ACCOUNTABLE REWARDING VALUE CREATION CONTINUED
134 STANDARD BANK GROUP Annual integrated report 2020 135
Fair and responsible remuneration Implementation report summary Remco believes that fair and responsible remuneration means ensuring that remuneration is externally competitive, internally equitable and supports the delivery of the group’s short-, medium- and long-term objectives. Our reward process is independently governed to enhance fairness and is applied with the same vigour and principles across the group. Implementation and shareholder alignment
This section of our remuneration report sets out the reward decisions taken by remco in 2020 FAIR REMUNERATION DECISIONS ARE: pertaining to the group’s executive directors, prescribed officers and the general workforce. Remco is satisfied that it has achieved its mandate and that the group’s remuneration policy remains appropriate, evidenced by its ability to stand the test of Covid-19. The committee is also satisfied that • Impartial, free from • Pay differentiation is • Horizontal fairness – • Vertical fairness – implementation of its remuneration policy has been carefully deliberated to achieve the best and discrimination, free based on transparent employees performing differences in total fairest outcomes for our shareholders and executives. from self-interest, and trusted the same or similar job remuneration between favouritism or processes to assess requirements at the job levels can be prejudice on grounds performance and same or similar level of explained and justified Remco’s inclusive approach to remuneration requires Implementation of the remuneration policy including race, gender identify and match performance receive on a consistent basis, it to listen to the concerns of our shareholders and engage in response to Covid-19 and sexual benchmarks. This the same or similar for example, according with them on the challenges it faces. The committee chair and the head of reward have met with institutional The background statement (starting on page 128 ) provides the orientation. results in a reporting levels of total to factors such as risk shareholders with significant holdings twice in 2020. context and challenges of a one in a hundred-year event. While • Rational and system that provides remuneration, allowing and complexity of the the remuneration policy has broadly withstood this challenge, objective. remco with for variations such as job, level of The impact of Covid-19 on the group’s financial remco has used its discretion to implement temporary • South Africa: aligned performance length of service, responsibility of performance and the interests and views of our amendments to ensure that there are sufficient incentives for with the Employment outcomes and qualifications, decision-making and shareholders were considered when agreeing the reward leadership to protect shareholder value over the long term and Equity Act’s principle reward proposals performance and consequence and outcomes for the group, and particularly for the group’s to achieve the best and fairest outcomes for shareholders, executives and other stakeholders. of equal pay for work that are equitable scarcity of relevant impact on the executive directors and prescribed officers. This alignment of equal value. and transparent. skills. organisation. with shareholder interests is demonstrated in the graphs below, which track HE against the group CEO’s STI awards TEMPORARY AMENDMENTS IMPLEMENTED since 2015 and total shareholder return against the group CEO’s single figure total remuneration for the same period. RESPONSIBLE REMUNERATION DECISIONS ARE: Fixed remuneration for group leadership council Headline earnings members HEADLINE EARNINGS VERSUS GROUP CEO’S Remco decided not to award fixed remuneration • Remuneration is • Variable remuneration is • All remuneration falls under the ambit of remco. STI AWARDS increases unless there has been a change in funded by, and clearly correlated with the • Senior executive remuneration is: responsibilities. linked to, the achievement of criteria – Approved by remco and recommended to the 180 creation of value that measure performance board. over the long term, and value creation over the 150 – Benchmarked to market. Non-executive directors’ fees in a way short, medium and long Remco decided not to increase fees for non-executive – Managed using a rigorous process to review risk 120 that is transparently term, aligned to the group’s directors to ensure there is alignment with the group and control issues. All share plans contain reported to internal strategy and strategic 90 leadership council members and shareholders. forfeiture and clawback clauses. and external value drivers which include stakeholders. non-financial measures. • Senior executives are subject to a minimum 60 shareholding requirement. 30 March 2020 PRP award performance conditions
0 Remco noted in the 2019 remuneration report that it 2015 2016 2017 2018 2019 2020 would consider the impact that Covid-19 had on its HE (indexed) Short term incentive (indexed) remuneration policy in due course. In the December 2020 SENS announcement, remco confirmed that it The wage gap and minimum salaries Minimum shareholding requirements Total shareholder return would retain the conditional nature of the March 2020 Our remuneration policy is to pay for value delivered Executive directors and prescribed officers are required PRP awards but that it would be in the best interests of while ensuring that remuneration is competitive. The to maintain personal shareholdings valued as a multiple TOTAL SHAREHOLDER RETURN VERSUS the group to amend the related performance conditions, outcome of these two principles is that remuneration of fixed remuneration. GROUP CEO’S SINGLE FIGURE to an evaluation by remco at the end of the three-year differs across levels, roles and geographies, creating a TOTAL REMUNERATION performance period. vertical wage gap. Three times fixed The December 2020 SENS announcement also noted Group CE remuneration. 300 that the performance conditions for the March 2018 Mindful of income gaps and our commitment to fair and and March 2019 awards would not be amended even responsible remuneration, our minimum incomes enable 250 though the threshold performance conditions have not employees in the lowest employment band to participate 200 been met for the March 2018 awards and there is high with dignity in the economies of the countries where they Executive directors and Two times fixed probability that the March 2019 awards will not vest. reside. Remco keeps abreast of the minimum levels of prescribed officers remuneration. 150 income in each country of operation, even if no prescribed minimum income exists, and compares these 100 Extension of expiry period for historical share- minimum levels against financial service/banking Where the required personal shareholding falls short, the 50 linked awards minimums. full after-tax value of senior executives’ deferred compensation that vests is applied in acquiring additional 0 Remco decided to extend the expiry period for a small Remco is aware of the various pay gap ratios that are in shares until the required shareholding is in place. This 2015 2016 2017 2018 2019 2020 number of historical awards that have already vested in use in other jurisdictions and is aware of the reviews and provision applies to incentive awards granted from March Total shareholder return (indexed) the EGS, GSIS and the SARP. The extension is up to Single figure total remuneration (indexed) recommendation by various bodies on pay gap 2012, or from when the senior executive becomes a 31 March 2023. These share-linked awards that had already been held for up to ten years had become disclosure. When such guidance or regulations have been prescribed officer or executive director. Shareholdings are valueless due to an event unrelated to performance just finalised, remco will make the appropriate disclosures. monitored annually. prior to expiry. MENU BEING ACCOUNTABLE REWARDING VALUE CREATION CONTINUED
136 STANDARD BANK GROUP Annual integrated report 2020 137
Sim Tshabalala Chief executive officer, Standard Bank Group
Performance against: Individual performance • Financial strategic value driver – below target rating and remuneration of • Non-financial strategic value drivers – overall on-target rating SINGLE FIGURE TOTAL REWARD FOR 2020 executive directors and IN RELATION TO MINIMUM, ON-TARGET AND STRETCH PROJECTED EARNINGS prescribed officers Sim’s performance has been based on the group’s 2020 R’000 financial results, the strategic progress made under the 70 Context to awards other four value drivers and on how he has contributed to 62 010 60 The impact of Covid-19 dominated 2020. It affected all ensuring the group has remained sound, sustainable and 31% 50 the economies in which the group operates in. It affected socially relevant during the pandemic. 46 032 Covid-19 impact and remuneration 40 21% our businesses, our leaders, our clients and our people. 26% actions in respect of our employees 30 28% Our financial results reflect the economic damage caused Link between performance and reward 24 049 To help employees manage the impact of Covid-19, 20 30% by the pandemic, but these results also reflect the • In line with the approach taken for executive directors and 28% 26% the following reward actions were taken: 10 999 25% strength of the group. They demonstrate our capacity to prescribed officers, there is no increase to fixed 10 100% 45% 23% 17% • Maintained fixed remuneration for all employees support our clients and communities during the most remuneration with effect from March 2021. The year-on- 0 during periods of temporary unproductivity difficult 12 months in living memory. They demonstrate year increase in fixed pay of 8% from 2019 to 2020 is a Minimum 2020 On-target Stretch brought about by the mandatory Covid-19 the strength of our Africa-wide portfolio and sum up the consequence of adjustments made with effect from Fixed remuneration lockdowns. extent of the damage to the South African economy. 1 March 2020. Cash incentive • In line with all other GLC members, STIs are proposed Deferred incentive • Continued to award STIs to employees who met No pre-determined executive performance contract or the required performance standards albeit after considering HE and the achievement of strategic Long-term incentive goals set in January 2020, could have captured value drivers. For executive directors, the financial significantly reduced to reflect the group’s 2020 everything the GLC were asked to do in 2020. performance. performance is fully anchored around group performance. DEFERRED AWARDS AS PERCENTAGE Consequently, the performance of these individuals was Consequently, STI awards have been reduced by 44%, in • Made a special ‘National Service Appreciation’ based on the group’s 2020 financial results, their own line with group HE, which reduced by 43%. OF TOTAL REWARD (%) recognition award (R5 000 or local equivalent) to business line results where applicable, the strategic • 55% of the STI award will be deferred in share-linked the general employees and managers who progress they made in 2020 under the other four value awards that will vest in three equal tranches in continued to work from the bank’s premises to drivers, and on how they have contributed to ensuring the September 2022, 2023 and 2024. deliver essential banking services to our clients group has remained sound, sustainable and socially • The conditional LTI award in the PRP has been increased during the first wave of national lockdowns in relevant during the pandemic. by R1.1 million from the prior year to incentivise the 2019 South Africa and Africa Regions. In this context, remco determined that 2020 reward for execution of future strategy after considering market • Introduced special leave policies including executive directors and prescribed officers had to reflect information on pay mix and LTI awards. Any delivery is parental leave during school closures and leave for subject to performance conditions being met as assessed the impacts of Covid-19 on financial performance. This 2019 by remco. self-quarantine purposes. led to a below target rating on the financial strategic value Deferred for up to 3.5 years 59 • Repatriated our international assignees, where driver, which has been directly linked to STI awards. This • The table below shows that total remuneration awarded by Paid in cash 41 remco of R41.8 million (of which R17.75 million is at risk possible and if they wished to do so, ahead of then allowed remco to objectively assess the other four and may not deliver any value) is 17% lower than the prior border closures and travel bans and supported value drivers on their merits knowing that STIs were DEFERRED AWARDS AS PERCENTAGE year. those that chose to remain. determined solely on financial outcomes for 2020. OF TOTAL VARIABLE REWARD (%) • Single figure awards are 51% down on the prior year, STI outcomes for executive directors are 100% aligned reflecting the non-delivery of the March 2018 PRP award with group performance and STI outcomes for prescribed evaluated on the three-year performance period ending officers are aligned to group performance (50%) and December 2020 and a significant reduction in the STI their respective business line performance (50%). award awarded for 2020. • The graph alongside shows that this year’s single figure 2019 The group's material issues for each of its strategic value total reward of R24.1 million is 52% of on-target projected drivers are on page 31. The individual disclosures for each earnings and 39% of projected stretch earnings. executive director and prescribed officer detail the individual achievements against each strategic value 2019 driver and the link between performance and the reward Deferred for up to 3.5 years 74 Paid in cash 26 outcomes. Remuneration awarded by remco for 2020 AWARDED SINGLE FIGURE % % R’000 2019 2020 Increase R’000 2019 2020 Increase Fixed remuneration 10 222 10 999 8 Fixed remuneration 10 222 10 999 8 Cash incentive 10 525 5 900 (44) Cash incentive 10 525 5 900 (44) Deferred incentive 12 725 7 150 Deferred incentive 12 725 7 150 PRP awarded 16 650 17 750 7 PRP awarded 15 724 – (100) Total reward 50 122 41 799 (17) Total reward 49 196 24 049 (51)
GOV/REM The full performance scorecard is detailed in the remuneration report online. MENU BEING ACCOUNTABLE REWARDING VALUE CREATION CONTINUED
138 STANDARD BANK GROUP Annual integrated report 2020 139
Dr Arno Daehnke Kenny Fihla Group chief financial and value management officer Chief executive officer, Wholesale Clients (previously group financial director) (previously Chief executive, CIB)
Performance against: Performance against: • Financial strategic value driver – below target rating • Financial strategic value driver – below target rating • Non-financial strategic value drivers – overall • Non-financial strategic value drivers – overall on-target rating SINGLE FIGURE TOTAL REWARD FOR 2020 on-target rating SINGLE FIGURE TOTAL REWARD FOR 2020 IN RELATION TO MINIMUM, ON-TARGET AND IN RELATION TO MINIMUM, ON-TARGET AND STRETCH PROJECTED EARNINGS STRETCH PROJECTED EARNINGS
Arno’s performance has been based on the group’s 2020 R’000 Kenny’s performance has been based on the group’s 2020 R’000 financial results, the strategic progress made under the 50 financial results, CIB’s business line results and the strategic 60 53 723 other four value drivers and on how he has contributed to 41 894 progress made under the other four value drivers. 50 ensuring the group has remained sound, sustainable and 40 26% 39 520 30 816 33% 40 socially relevant during the pandemic. 30 Link between performance and reward 17% 22% 30 30% 25% • In line with the approach taken for executive directors and 24 527 31% 20 17 239 27% Link between performance and reward prescribed officers, there is no increase to fixed 20 36% 32% 25% remuneration with effect from March 2021. The year-on- 31% 30% • In line with the approach taken for executive directors and 10 7 139 27% 27% 8 227 30% year increase in fixed pay of 6% from 2019 to 2020 is a 10 prescribed officers, there is no increase to fixed remuneration 100% 41% 24% 17% 100% 34% 21% 14% with effect from March 2021. The year-on-year increase in 0 consequence of adjustments made with effect from 0 Minimum 2020 On-target Stretch Minimum 2020 On-target Stretch fixed pay of 11% from 2019 to 2020 is a consequence of 1 March 2020. adjustments made with effect from 1 March 2020 after Fixed remuneration • In line with all other group leadership council members, Fixed remuneration remco considered appropriate market data. Cash incentive STIs are proposed after considering HE and the Cash incentive • In line with all other GLC members, STIs are proposed after Deferred incentive achievement of strategic value drivers. As a chief executive Deferred incentive Long-term incentive Long-term incentive considering HE and the achievement of strategic value of a business line, the financial performance is anchored drivers. For executive directors, the financial performance is on 50% CIB business line and 50% group. fully anchored around group performance. Consequently, DEFERRED AWARDS AS PERCENTAGE • The 25% reduction in the STI award to R16.3 million takes into account the following metrics: DEFERRED AWARDS AS PERCENTAGE STI awards have been reduced by 44%, in line with group HE, OF TOTAL REWARD (%) OF TOTAL REWARD (%) which reduced by 43%. – 50% weighting to the group’s HE reduction of 43%. • 54% of the STI award will be deferred in share-linked awards – 50% weighting to CIB’s HE reduction of 6%. that will vest in three equal tranches in September 2022, • 55% of the STI award will be deferred in share-linked 2023 and 2024. awards that will vest in three equal tranches in September • The conditional LTI award in the PRP has been increased by 2022, 2023 and 2024. R2 million from the prior year to incentivise the execution of 2019 • The conditional LTI award in PRP has been increased by 2019 future strategy after considering market information on pay R0.85 million from the prior year to incentivise the mix and LTI awards. Any future delivery is subject to execution of future strategy after considering market performance conditions being met as assessed by remco. 2019 information on pay mix and LTI awards. Any future delivery 2019 • The table below shows that total remuneration awarded by Deferred for up to 3.5 years 60 is subject to performance conditions being met as assessed Deferred for up to 3.5 years 56 remco of R31.2 million (of which R14.0 million is at risk and Paid in cash 40 by remco. Paid in cash 44 may not deliver any value) is 14% lower than the prior year. • The table below shows that total remuneration awarded by • Single figure awards are 48.1% down on the prior year, DEFERRED AWARDS AS PERCENTAGE remco of R36.5 million (of which R12 million is at risk and DEFERRED AWARDS AS PERCENTAGE reflecting the non-delivery of the March 2018 PRP award OF TOTAL VARIABLE REWARD (%) may not deliver any value) is 10% lower than the prior year. OF TOTAL VARIABLE REWARD (%) evaluated on the three-year performance period ending • Single figure awards are 34% down on the prior year, reflecting the non-delivery of the March 2018 PRP award December 2020 and a significant reduction in the STI award awarded for 2020. evaluated on the three-year performance period ending December 2020 and a significant reduction in the STI • The graph alongside shows that this year’s single figure total award awarded for 2020. reward of R17.2 million is 56% of on-target projected earnings 2019 2019 and 41% of projected stretch earnings. • The graph alongside shows that this year’s single figure total reward of R24.5 million is 62% of on-target projected earnings and 46% of projected stretch earnings. 2019 2019 Deferred for up to 3.5 years 73 Deferred for up to 3.5 years 70 Paid in cash 27 Paid in cash 30
Remuneration awarded by remco for 2020 Remuneration awarded by remco for 2020 AWARDED SINGLE FIGURE AWARDED SINGLE FIGURE % % % % R’000 2019 2020 Increase R’000 2019 2020 Increase R’000 2019 2020 Increase R’000 2019 2020 Increase Fixed remuneration 6 409 7 139 11 Fixed remuneration 6 409 7 139 11 Fixed remuneration 7 734 8 227 6 Fixed remuneration 7 734 8 227 6 Cash incentive 8 150 4 600 (44) Cash incentive 8 150 4 600 (44) Cash incentive 10 025 7 400 (25) Cash incentive 10 025 7 400 (25) Deferred incentive 9 850 5 500 Deferred incentive 9 850 5 500 Deferred incentive 11 725 8 900 Deferred incentive 11 725 8 900 PRP awarded 12 000 14 000 17 PRP awarded 8 804 – (100) PRP awarded 11 150 12 000 8 PRP awarded 7 548 – (100) Total reward 36 409 31 239 (14) Total reward 33 213 17 239 (48) Total reward 40 634 36 527 (10) Total reward 37 032 24 527 (34)
GOV/REM The full performance scorecard is detailed GOV/REM The full performance scorecard is detailed in the remuneration report online. in the remuneration report online. MENU BEING ACCOUNTABLE REWARDING VALUE CREATION CONTINUED
140 STANDARD BANK GROUP Annual integrated report 2020 141
Zweli Manyathi Chief executive officer, Business and Commercial Clients Margaret Nienaber (previously Chief executive, PBB) Chief executive officer, Client Solutions (previously Chief executive, Wealth)
Performance against: Performance against: • Financial strategic value driver – below target rating • Financial strategic value driver – below target rating • Non-financial strategic value drivers – overall • Non-financial strategic value drivers – overall on-target rating SINGLE FIGURE TOTAL REWARD FOR 2020 on-target rating SINGLE FIGURE TOTAL REWARD FOR 2020 IN RELATION TO MINIMUM, ON-TARGET AND IN RELATION TO MINIMUM, ON-TARGET AND STRETCH PROJECTED EARNINGS STRETCH PROJECTED EARNINGS
Zweli’s performance has been based on the group’s 2020 R’000 Margaret’s performance has been based on the group’s 2020 R’000 financial results, PBB’s business line results and the 60 financial results, Wealth’s business line results and the strategic 50 41 915 strategic progress made under the other four value drivers. 49 151 progress made under the other four value drivers. 50 40 28% 33% Link between performance and reward 40 36 761 Link between performance and reward 30 838 30 19% Fixed remuneration has increased by 5% with effect from 22% • In line with the approach taken for executive directors and 30 • 28% 19 710 25% prescribed officers, there is no increase to fixed 30% March 2021 to reflect increased responsibilities following an 20 27% remuneration with effect from March 2021. The year-on- 20 16 534 internal restructuring of the client portfolios. Margaret has 35% 28% 27% 25% 29% 30% 10 7 160 29% year increase in fixed pay of 4% from 2019 to 2020 is a 10 7 834 24% been appointed chief executive officer, Client Solutions. She consequence of adjustments made with effect from 100% 47% 21% 16% is the only exception to the no increase determination. 100% 36% 24% 17% 0 0 1 March 2020. Minimum 2020 On-target Stretch • The year-on-year increase in fixed pay of 11% from 2019 to Minimum 2020 On-target Stretch • In line with all other GLC members, STIs are proposed after 2020 is a consequence of adjustments made with effect Fixed remuneration considering HE and the achievement of strategic value Fixed remuneration from 1 March 2020. Cash incentive Cash incentive drivers. As a chief executive of a business line, the financial Deferred incentive • In line with all other GLC members, STIs are proposed after Deferred incentive performance is anchored on 50% PBB business line and Long-term incentive considering HE and the achievement of strategic value Long-term incentive 50% group. drivers. As a chief executive of a business line, the financial • The 59% reduction in the STI award to R8.7 million takes performance is anchored on 50% Wealth business line and into account the group’s HE reduction of 43%, and DEFERRED AWARDS AS PERCENTAGE 50% group. DEFERRED AWARDS AS PERCENTAGE significant reduction in PBB’s HE. OF TOTAL REWARD (%) • The 28% reduction in the STI award to R12.55 million takes OF TOTAL REWARD (%) • 55% of the STI award will be deferred in share-linked into account the following metrics: awards that will vest in three equal tranches in September – 50% weighting to the group’s HE reduction of 43%. 2022, 2023 and 2024. – 50% weighting to wealth’s HE reduction of 13%. • The conditional LTI award in PRP has been increased by • 55% of the STI award will be deferred in share-linked awards R0.85 million from the prior year to incentivise the that will vest in three equal tranches in September 2022, 2019 2019 execution of future strategy after considering market 2023 and 2024. information on pay mix and LTI awards. Any future delivery • The conditional LTI award in PRP has been increased by is subject to performance conditions being met as assessed R500 000 from the prior year to incentivise the execution of by remco. 2019 future strategy after considering market information on pay 2019 • The table below shows that total remuneration awarded by Deferred for up to 3.5 years 57 mix and LTI awards. Any future delivery is subject to Deferred for up to 3.5 years 58 Paid in cash 43 remco of R28.5 million (of which R12.0 million is at risk and performance conditions being met as assessed by remco. Paid in cash 42 may not deliver any value) is 29% lower than the prior year. • The table below shows that total remuneration awarded by • Single figure awards are 56% down on the prior year, DEFERRED AWARDS AS PERCENTAGE remco of R30.7 million (of which R11 million is at risk and DEFERRED AWARDS AS PERCENTAGE reflecting the non-delivery of the March 2018 PRP award OF TOTAL VARIABLE REWARD (%) may not deliver any value) is 11% lower than the prior year. OF TOTAL VARIABLE REWARD (%) evaluated on the three-year performance period ending • Single figure awards are 46% down on the prior year, December 2020 and a significant reduction in the STI reflecting the non-delivery of the March 2018 PRP award award awarded for 2020. evaluated on the three-year performance period ending • The graph alongside shows that this year’s single figure December 2020 and a significant reduction in the STI award total reward of R16.5 million is 45% of on-target projected 2019 awarded for 2020. 2019 earnings and 34% of projected stretch earnings. • The graph alongside shows that this year’s single figure total reward of R19.7 million is 64% of on-target projected earnings and 47% of projected stretch earnings. 2019 2019 Deferred for up to 3.5 years 70 Deferred for up to 3.5 years 72 Paid in cash 30 Paid in cash 28
Remuneration awarded by remco for 2020 Remuneration awarded by remco for 2020 AWARDED SINGLE FIGURE AWARDED SINGLE FIGURE % % % % R’000 2019 2020 Increase R’000 2019 2020 Increase R’000 2019 2020 Increase R’000 2019 2020 Increase Fixed remuneration 7 520 7 834 4 Fixed remuneration 7 520 7 834 4 Fixed remuneration 6 431 7 160 11 Fixed remuneration 6 431 7 160 11 Cash incentive 9 900 3 950 (59) Cash incentive 9 900 3 950 (59) Cash incentive 7 900 5 675 (28) Cash incentive 7 900 5 675 (28) Deferred incentive 11 600 4 750 Deferred incentive 11 600 4 750 Deferred incentive 9 600 6 875 Deferred incentive 9 600 6 875 PRP awarded 11 150 12 000 8 PRP awarded 8 176 – (100) PRP awarded 10 500 11 000 5 PRP awarded 12 567 – (100) Total reward 40 170 28 534 (29) Total reward 37 196 16 534 (56) Total reward 34 431 30 710 (11) Total reward 36 498 19 710 (46)
GOV/REM The full performance scorecard is detailed GOV/REM The full performance scorecard is detailed in the remuneration report online. in the remuneration report online. MENU ADDITIONAL INFORMATION
142 STANDARD BANK GROUP Annual integrated report 2020 143
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