REINFORCING COLLECTIVE STRENGTH AND STABILITY - SOUTH AFRICA - MAJOR BANKS ANALYSIS - PWC
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Reinforcing
collective strength
and stability
South Africa –
Major Banks Analysis
PwC’s analysis of major
banks’ results to
31 December 2010
March 2011
II South Africa – Major Banks Analysis
Table of Contents
Overview 2
Combined results summary 4
Economic outlook 6
Net interest income 8
Non-interest income 9
Efficiency 10
Adapting to new realities in a post-crisis environment 12
Asset quality 14
Capital and funding 18
Key banking statistics – Annual 22
Key banking statistics – Semi 2010 23
Key banking statistics –Semi 2009 24
Industry statistics 26
Contact details 29
South Africa – Major Banks Analysis 1
Overview
Annual combined headline earnings up 12.9%
Average return on equity 14.5%
Bad debt expenses down 31.2%
Core earnings down 2.2%
Efficiency down 5.0%
Bank results – Revenue growth is • Pressure on fee income, partly due
overview challenging to less lending activity.
South Africa’s big four banks’ or The revenue growth outlook is less All of these trends suggest that the
major banks’ (Absa, FirstRand, rosy, and this points to the challenges pressure on bank revenues will
Nedbank and Standard Bank) full- faced by the banks as they come continue.
year results for the past year reinforce to grips with the new post-global
once again the collective strength financial crisis (GFC) reality, referred Expenses rose 11.5% in 2010 and
and profitability of the South African to by many as the ‘new normal’. There consequently, cost-to-income ratios
banking system. Although there are at least five separate sources of came under pressure, rising to 58.6%
were differences in the performances pressure on revenue for the banks, from 55.8% in 2009. All this means
of the individual banks, combined evident from their results: that core earnings (earnings before
headline earnings increased by 12.9% bad debt expenses) decreased by
to R33.9bn on an annualised basis. • Margin pressure as historically low R1.7bn (2.2%).
The average return on equity was interest rates are maintained.
14.5%, compared to 13.3% in 2009. No wonder then, that banks are
The largest single contributing factor • Low growth in both demand and giving serious attention to cost
to profit growth was the reduction in availability of credit given the control. All banks have stated that
bad debt expenses (down R10.9bn strength of economic activity in cost control and efficiency remain
or 31.2%) as lower interest rates general. among their top priorities for the
helped reduce the inflow of new current year as they battle to get their
non-performing loans and general • An increased cost of funding, efficiency ratios down to pre-2009
economic conditions improved. as banks’ funding profiles are levels. However, political turmoil
lengthened; with no reprieve on and other inflationary pressures
the cost of retail funding through will make this year tough going. But
deposits. cost control is an imperative – and
is one of the reasons why the banks’
• Subdued trading income, driven investment in technology to improve
by continuing low transaction efficiency is essential as they seek to
volumes and limited risk taking. reduce costs.
2 South Africa – Major Banks Analysis
The regulatory
environment continues The Minister 0f Finance surprised some
to play an important
role by saying, “I have met with the chief
executives of our banks to take up this
The banks are also having to cope
with a period of unprecedented issue (bank charges, the complexity of the
regulatory change, together with
levels of political scrutiny not seen payment system) and I believe it is time
before. Higher liquidity and capital
requirements under Basel III will to put in place measures that will ensure
inevitably increase funding costs
and put further pressure on returns that banking charges are fairly set, are
on equity. In South Africa’s case
in particular, it has been widely transparent and do not create undue
publicised that given the shortage
of highly liquid instruments and hardship.”
the structural imbalances in the
economy, many banks will likely be
unable to meet the new liquidity
requirements. As such, it is a positive
step that the banks, regulators and
National Treasury are working Banks could have supposed that the In a deleveraging world, and with
together to come up with the best new framework would be largely new capital and funding restrictions,
possible solution for South Africa. similar to what they have been South African banks will need to be
accustomed to, but for the mention more selective in finding new ways
In addition to dealing with the of bank fees in the new framework. to connect with customers to drive
requirements of Basel III, banks Most banks rely increasingly on non- revenue and profitable growth.
will have to contend with the new interest income (fees) to bolster their Large investments in technology to
‘Twin Peaks’ approach to financial revenue lines and any regulatory improve efficiency are clearly one
regulation as announced by the changes on this front would be a vehicle for this – and indeed the
Minister of Finance in the recent severe blow. depth of customer information that
Budget Speech. Under the revised will be available in a technologically–
regulatory framework, the South Given the regulatory uncertainty, it is enabled banking system will enable
African Reserve Bank (SARB) not surprising to see capital adequacy extraordinary precision in both
will be given lead responsibility ratios creeping upwards, with the marketing and credit assessment. The
for prudential regulation and the average for Tier 1 now at 12.8% banks are pushing the mobile handset
Financial Services Board (FSB) for (2009: 12.4%), which is well north of revolution for the same reasons as
consumer protection. As part of this the minimum required. Most banks this is seen as a potentially high
redistribution of responsibility, the are cautious when dealing with the growth area that does not require
mandate of the FSB will be expanded question of what will happen to their significant infrastructure investment,
to include the market conduct of excess capital. This is likely to remain given that the target market was
retail banking services, including an issue until there is more clarity on previously unbanked. In addition,
developing principles for how banks what the new rules will be. the big four banks are increasing
should set their fees, how these their focus on the lower income
fees should be reported and what sectors as the battle for market share
constitutes fair behaviour. Within the Looking ahead intensifies, given the importance of
FSB, a retail banking services market growth in this sector.
conduct regulator will be established. South Africa has been fortunate in
This new regulator will focus on that our banks avoided much of the In the pursuit of growth, offshore
structural market issues and banking fallout from the GFC experienced expansion into Africa remains very
fees and will work closely with the by banks elsewhere. However, our much in play, with each bank taking
National Credit Regulator, which has consumers and households were a different approach. Suffice to say,
a complementary role in regulating similarly over-leveraged and as history has shown that this is an
the extension of credit. The SARB’s this slowly returns to normal, they area where a precise understanding
mandate for financial stability will are looking to be more cautious in of the chosen market - in contrast
be underpinned by a new Financial relation to debt; which was a steady to ubiquity of scope and reach - is
Stability Oversight Committee, co- source of both revenue and profit fundamentally important.
chaired by the Governor of the SARB growth for the banks over the past
and the Minister of Finance. two decades. Increased demand for
commercial and corporate borrowing
may help offset this.
South Africa – Major Banks Analysis 3
Combined results summary
Combined annual results
Rm 2010 2009 2010 v 2009 2H10 1H10 2H10 v 1H10
Net interest income 85,279 82,341 3.57% 43,338 41,941 3.33%
Non interest income 105,322 97,951 7.53% 54,787 50,535 8.41%
Total operating income 190,601 180,292 5.72% 98,125 92,476 6.11%
Total operating expenses -116,468 -104,467 11.49% -61,550 -54,918 12.08%
Core earnings 74,133 75,825 -2.23% 36,575 37,558 -2.62%
Impairment charge -24,262 -35,254 -31.18% -11,063 -13,199 -16.18%
Other income/(expenses) 1,206 1,600 -24.63% 618 588 5.10%
Income tax expenses -13,517 -10,706 26.26% -7,155 -6,362 12.46%
Profit for the period 37,560 31,465 19.37% 18,975 18,585 2.10%
Attributable earnings 40,697 29,435 38.26% 23,884 16,813 42.06%
Headline earnings 33,914 30,029 12.94% 17,070 16,844 1.34%
Return on equity 14.5% 13.3% 14.8% 14.3%
Return on average assets 1.1% 0.9% 1.1% 1.0%
This analysis presents the combined trading counterparties, and shares FirstRand in particular had a
results of the major banks in South owned by policyholder funds. significant headline earnings
Africa (Absa, FirstRand, Nedbank and adjustment in the last six months of
Standard Bank). Investec, the other A number of banks refer to these 2010 as it concluded the unbundling
major player in the South African adjustments as ‘normalised’ of Momentum to MMI Holdings
market, has not been included in adjustments. We have used these shareholders. This impacts the
this comparison due to its unique normalised results in our analysis in comparability of numbers as the
business mix, different reporting this document. comparative earnings of Momentum,
currency and period. in accordance with IFRS 5, are
Headline earnings is a way of excluded from the amounts presented
The results of the banks analysed dividing the IFRS-reported profit and disclosed as assets held for sale.
contain a number of complexities between re-measurements that are
that require explanation. In order to more closely aligned to the operating
present information that reflects the and trading activities of the entity,
underlying trends and performance and the platform used to create those
of their businesses going forward, the results.
banks seek to eliminate once-off or
non-recurring items in order to assess For South African banks this gives
their performance in the course of rise to a number of adjustments,
normal operations. This includes the including the removal of gains and
reinstatement of gains and/or losses losses relating to hedge contracts
on the banks own shares held by that do not meet the requirements
group entities that are not permitted of International Accounting
to be recognised under International Standard 39 for hedge accounting
Financial Reporting Standards or are not fully effective, permanent
(IFRSs) (known as Treasury shares) impairments of equity investments
which result from hedged share and goodwill, and gains or losses
remuneration schemes, own shares on transactions outside the normal
purchased to hedge derivative course of business such as disposals
transactions entered into with of business investments.
4 South Africa – Major Banks AnalysisCombined results of six month periods
Combined results Comparative movement
Rm 2H10 1H10 2H09 1H09 2H 1H
Net interest income 43,338 41,941 42,411 39,930 2.2% 5.0%
Non-interest income 54,787 50,535 52,611 45,340 4.1% 11.5%
Total operating income 98,125 92,476 95,022 85,270 3.3% 8.5%
Total operating expenses -61,550 -54,918 -55,023 -49,444 11.9% 11.1%
Core earnings 36,575 37,558 39,999 35,826 -8.6% 4.8%
Impairment charge -11,063 -13,199 -15,539 -19,715 -28.8% -33.1%
Other income 618 588 176 1,424 251.1% -58.7%
Income tax expenses -7,155 -6,362 -6,472 -4,234 10.6% 50.3%
Profit for the period 18,975 18,585 18,164 13,301 4.5% 39.7%
Attributable earnings 23,884 16,813 16,293 13,142 46.6% 27.9%
Headline earnings 17,070 16,844 16,750 13,279 1.9% 26.8%
Return on equity 14.8% 14.3% 14.8% 12.0% -0.4% 19.3%
Return on average assets 1.1% 1.0% 1.1% 0.8% 8.3% 28.2%
South Africa – Major Banks Analysis 5Economic outlook
By Dr Roelof Botha
The global economy entered 2011 GDP growth forecasts for 2011 for selected high-income countries and
with the knowledge that the recovery emerging markets
had gained substantial momentum
during the second half of the High-income countries (%) Emerging Markets (%)
previous year. Sweden 4.2 China 8.9
Australia 3.3 India 8.6
Within five quarters of the official
US 3.0 Chile 5.9
end of the recession, annualised real
economic growth surged to above Germany 2.4 Brazil 4.5
or close to its long-term potential in UK 1.9 Turkey 4.5
several high-income countries and France 1.5 Singapore 4.1
emerging markets. Japan 1.4 Russia 4.0
Spain 0.4 South Korea 3.9
Although it is evident that a number
of European countries may require Ireland -1.1 South Africa 3.7
fiscal discipline for at least two to Greece -4.1 Mexico 3.0
three fiscal cycles (including Greece,
Portugal, Ireland and Spain), the
European Union’s initial bridging Sources: Economist poll, national budgets
facility of €750bn has already
provided hope for a relatively swift
return to financial soundness for the
Eurozone as a whole. Economy poised for higher growth
Global recovery well- despite some obstacles
entrenched
Further proof of the sustainability Welcome recovery of The SARB even expressed its concern
of the global economic recovery credit extension at the slow rate of recovery of the
from the short but sharp recession economy in a recent policy statement,
comes from the news of a return to specifically singling out the “strict
formal sector job creation in most The stubbornness of credit extension lending criteria” applied by banks
economies (including the US). in responding to the return to positive as a constraint on the growth of
real GDP growth (which occurred as household consumption expenditure.
The World Bank estimates global early as the third quarter of 2009),
Gross Domestic Product (GDP) clearly defeated the objective of Growth in credit extension by
to have increased by 3.9% in monetary policy during 2010. The banks started slowing in 2007 and
2010, whilst authoritative global most accommodating monetary continued decelerating until it
macroeconomic forecasting agencies policy in almost four decades was reached negative territory in 2009.
are forecasting healthy growth rates called into being by the lethargy of The stagnation in loan activity by
for virtually all of the emerging money supply growth and private financial institutions was consistent
markets and the largest high-income sector credit extension over the past with the fairly dramatic decline in
countries. two years. money supply growth during 2009.
6 South Africa – Major Banks AnalysisRecovery of private sector credit extention
(percentage annualised growth)
25.0
20.0
15.0
10.0
5.0
0
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009 2010
Source – SARB
According to the SARB, the Growth drivers • The lowest money market interest
continuation of subdued money rates in almost four decades
market activity during the first half of Since the second half of 2010, the
2010 was related, inter alia, to a low equity market has also witnessed • An upward trend in commodity
inflationary environment, relatively higher levels of activity, with its value prices (particularly metals,
low returns on money market of market capitalisation growing at minerals and oil)
deposits and impaired balance sheets healthy rates. This growth reflects
in both the corporate and household the impact of lower bond yields, • A continuation of the recovery of
sectors. lower money market rates, higher inventory levels
profit expectations and progress in
A welcome return to positive growth reducing the government’s budget • Continued progress with
in credit extension by the banking deficit. government infrastructure
sector was made in the second programmes
quarter of 2010, although the rate Prospects for a swift return to the pre-
of expansion has remained rather recession economic growth trajectory • An expansionary fiscal policy
muted. All types of bank loans began of above 4% have been buoyed by stance, particularly in terms of job
recording positive growth during the the presence of a number of rather creation initiatives
third quarter of 2010. impressive macroeconomic growth
drivers, including the following: • A return to formal sector
employment creation
• Prospects for relatively low
inflation during 2011 Against these positives, however,
the potential impact of higher oil
• A return to healthy real growth and commodity prices fuelled by the
rates for household disposable political turmoil in the Middle East
incomes should be considered.
South Africa – Major Banks Analysis 7Net interest income
Combined results
2H10 1H10 2H09 1H09
Gross loans and acceptances (Rm) 2,215,547 2,205,122 2,179,754 2,179,665
Net interest margin (% of average interest 3.8% 3.7% 3.6% 3.4%
bearing assets)
Net interest income
Rm %
800,000 4.5%
700,000 4.0%
600,000 3.5%
3.0%
500,000
2.5%
400,000
2.0%
300,000
1.5%
200,000 1.0%
100,000 0.5%
- 0.0%
1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10
ASA FSR NED SBK
Gross loans and acceptances Net interest margin (% of average interest earning assets)
Source – PwC Analysis
Net interest income remains a • Deposit re-pricing – To attract • Credit impairment – A significant
principal revenue driver for the major funds from both new customers reduction in credit impairment as
local banks, contributing on average and to extend the term of the a result of the relief afforded to
46.6% of their total annual income. funding profile, banks continue to consumers by lower interest rates
Although the total interest earned pay increased rates on deposits. improves their ability to repay
has increased to R43.3bn from debt. This is evidenced by lower
R41.9bn in 2H10, and to R85.3bn • Limited asset growth – Loans levels of interest in suspense.
from R82.3bn for the full year, net advanced have started to increase
margins continued to be impacted again but growth remains subdued • Retail deposits – Relatively higher
negatively by the significant drop and below the levels experienced deposit volumes of traditionally
in the repo rate and the resulting prior to the GFC. cheaper retail deposits.
endowment effect as well as
increased funding costs. The net There has, however, been some relief • Hedging activities – Some banks
interest contribution to total income on bank margins, as a result of: have successfully protected
before impairments decreased to margins by hedging portions of
46.2% for 2H10, from 47% in 1H10. • Asset re-pricing – Re-pricing the endowment impact, but there
related to credit risk provided is a concern that as rates start to
Contributing factors to decreasing some relief for bank margins. increase this may slow the net
bank interest margins are: However, by now much of this interest income they are able
asset re-pricing activity should to produce as their hedges turn
• Endowment effect – Decreasing have been completed and its against them.
interest rates have a significant impact fully reflected in interest
impact on bank earnings as the income.
interest received on assets does not
fully compensate for the increased
costs associated with deposits and
longer term funding.
8 South Africa – Major Banks AnalysisNon-interest income
Increased reliance on Of particular interest is the strong significantly impacted earnings.
growth in electronic banking fees, Competition for derivative flows in
non-interest income generally considered to be a cheaper emerging markets remains intense,
alternative to other transaction and has increased as international
Non-interest income for 2H10 was up channels. The continued migration banks seek to grow in emerging
8.4% on 1H10 and 4.1% up on 2H09. of customers to electronic banking markets, resulting in a compression
It now represents 53.8% of total channels could significantly impact of margins. Equity markets have
income, up from 53.0% in 1H10. This the net fee and commission income however been buoyant as fears over
demonstrates the increased reliance earned in future periods. the GFC abated.
of banks on non-interest income as a
source of earnings. Fair value income Insurance and
Bancassurance income
Net fee and
air value income decreased by 1.9%
commission income on 1H10 and by 12.5% on 2H09. Insurance and Bancassurance
Proprietary trading and customer income increased by 64.7% in 2H10
Net fee and commission income demand for Interest Rate and Foreign against 1H10 and by 19.1% on 2H09,
increased by 9.0% on 1H10 and Exchange risk management products albeit from a relatively low base.
increased by 5.8% on 2H09. This remained relatively low. Uncertainty This dramatic increase is primarily
growth is largely attributable to regarding the market direction, attributable to strong premium
transactional volume growth, especially following the sovereign growth as a result of stronger cross-
coupled with inflationary increases debt crisis in Europe in 1H10, selling and the launch of more
offset by lower knowledge-based fees innovative products. Increased
on the back of reduced deal flow in investment returns following the
Investment Banking. recovery of the global financial
markets have also significantly
contributed to this growth.
Non-interest income
Rm
60,000
50,000
40,000
30,000
20,000
10,000
0-
1H09 2H09 1H10 2H10
-10,000
Net f ee and commission income Fair value income
Insurance & Bancassurance income Other income
Source – PwC Analysis
South Africa – Major Banks Analysis 9Efficiency
Combined results
2H10 1H10 2H09 1H09
Cost-to-income ratio 59.9% 57.1% 55.7% 56.1%
Compared to the prior period, banks’ FY10 – Operating expenditure
operating expenses increased by
12.1 % while total operating income
Total staf f costs
increased by 6.1%. Consequently
the banks’ combined cost-to-income
ratio deteriorated from 57.1% in 41% Inf ormation Technology
1H10 to 59.9% in 2H10. The banks 47%
have continued to place significant
Depreciation,
emphasis on tightly managing their amortisation and
expense base. Given the subdued impairments
growth in total operating income, 5% Other
7%
these cost containment strategies
have paid dividends and limited the -
Source – PwC Analysis
impact on the cost-to-income ratio.
All of the banks have stated at their
results presentations that this will FY09 – Operating expenditure
remain a strategic priority in 2011.
Total staf f costs
Of particular interest is the continued
significant investment made in
information technology, from an 40% Inf ormation Technology
47%
already high base in prior periods.
The banks have cited several reasons
Depreciation,
for this:
amortisation and
impairments
• There has been ongoing upward 6%
Other
7%
pressure on banking technology
costs in terms of security, business
Source
- – PwC Analysis
continuity, and recoverability. The
complexity and threats in these
areas have risen exponentially in
recent years, alongside the cost of most recent year banks have made Staff costs, which represented 47%
staying ahead of the game. investments to replace or enhance of total expenses, continue to grow at
core banking systems both levels well above inflation, reflecting
• The importance of technology locally and abroad. Changes in an 11.8% increase in 2010 from
to the banks’ operations has regulatory and risk requirements 2009. As a result, staff costs are the
been on a long-term upward have also necessitated, and will subject of more and more discussion
trend. While this has generated continue to necessitate, various in boardrooms. Banks have begun to
efficiencies in many areas, it has system enhancements as banks respond to external pressures on staff
also consequentially increased require access to more historic and costs by increasing amounts paid in
technology costs. detailed data on a more regular shares and extending vesting periods.
basis.
• Most importantly of all in the
10 South Africa – Major Banks AnalysisOperating expenses were also Banks will continue to place
favourably impacted by the strong considerable focus on reducing their
Rand during the period. The average cost base over the next few years.
USD/ZAR rate strengthened from Because we expect that margins will
8.42 in 2009 to 7.32 in 2010. As remain compressed, and beyond
South African banks continue 2011 lending volumes may improve
to expand into Africa and other only modestly, we expect that cost
emerging markets, currency management will rise further in
fluctuations are having a more terms of relative importance and
pronounced impact on earnings. may well be a distinguishing factor
between the relative performances of
the banks.
South Africa – Major Banks Analysis 11Adapting to new realities in a post-crisis
environment
Confidence is back – this is the banking and capital markets CEOs reported that their single best
overwhelming message from CEOs are clearly in this camp. 61% think opportunity for growth lay in better
in PwC’s 14th Annual Global CEO that emerging markets will be more penetration of their existing markets.
survey released in the first quarter important to their organisation’s Now they are just as likely to focus
of this year. More specifically, CEOs future than developed markets. on the innovation needed for new
are nearly as confident of growth However, success will be hard won products and services.
this coming year, as they have ever as emerging economies respond to
been in the history of our survey. international interest. For example, We believe that changing customer
Realising growth aspirations will not interest in the African continent behaviour and accessible banking
be easy; however, as companies will from international players has not are two of the key drivers that will
have to respond to new challenges been lost on African CEOs: 28% have fundamentally influence the business
in the post-crisis environment. PwC changed their strategy because of models of South African banks.
explored some of these new realities competitive threats, compared to a
and the mega trends that will affect global average of 10%. South African banks
the Global and South African banking
industry in a study called Project Responding to
Blue. Many believe the previously
changing customer unbanked market represents a
Top-line growth main requirements significant opportunity for revenue
growth in South Africa. To date this
concern for South More CEOs are responding to the market has largely been serviced by
African banks rise of middle-class consumers in Tier 2 banks, with limited inroads
emerging economies by developing being made by the bigger banks.
As mentioned earlier, South African products and services tailored to However, these large banks have now
banks are struggling to grow top-line those high-growth markets, while started to tailor their service offerings
revenue as consumers are reluctant also looking to serve the changing to enable them to provide banking
to borrow due to over-indebtedness, needs of more mature markets. services to the mass market. Inability
inflation fears and anticipated Our CEO Survey reveals that CEOs to do so will result in a loss of market
interest rate increases. As a result, are placing a higher premium on share and stagnating revenue growth
many believe South African banks innovation today. Since 2007, over the long term.
will have to tap into the rapidly business leaders have consistently
increasing emerging-to-emerging
market trade flows if they want to
realise their growth aspirations. It “In the same way, for the younger people
is therefore not surprising to see the
banks focusing their attention on who went through this recession, it will
expansion into Africa to capture these
trade flows. forever have an impact on the way they
This is supported by our economic behave, the way they incur debt, the way
forecast, which suggests that the GDP
of E7 emerging economies could be they spend, the way they save. It will be a
bigger than that of the G7 economies
by 2020, and that China may permanent change”
overtake the US before the end of
the decade. Many Western banks are – Richard K. Davis,
looking to offset slow growth in their
home markets by strengthening their President and CEO of U.S. Bancorp
presence in South America, Africa,
Asia and the Middle East. Most of the
12 South Africa – Major Banks AnalysisIt is notable that 87% percent of
global banking and capital market
CEOs believe that innovations will “We expect that governments will not
lead to operational efficiencies and
provide them with a competitive only be looking to the private sector
advantage. 64% also believe that
their IT investments will help for the provision of capital, but for
them tap into new marketing and
transactional opportunities such as increasing the delivery of a whole
mobile devices and social media.
With more than 40 million mobile range of social services. For example,
devices in operation in South Africa,
this is clearly a distribution channel in the UK the government is looking at
that will be explored further by South
African banks as they penetrate the different ways to provide services from
mass market.
the private sector in terms of meeting the
Growth opportunities,
especially in emerging
government’s objectives.”
markets, prompt Nicholas Moore,
changes to talent CEO of the Macquarie Group
strategies
As they look to expand globally, CEOs a concern for global CEOs. For respond to opportunities quickly.
recognise that they require a more South African banks, changes to
diverse workforce, including more Basel III, particularly the proposed Political interference in banking is
women and different geographic new liquidity requirements, could much less common in South Africa,
leaders as they look to expand fundamentally change the business given that none of its banks had to be
globally. Filling the skills gaps in models of the banks and may bailed out. However, there has been
emerging markets begins with banks negatively impact on banks’ ability to ongoing support by the South African
making themselves more attractive grow. However, it is the positive step government for community banks
to potential and current employees; that the National Treasury is leading and the Postbank to ensure access to
as well as looking for better ways to a task force investigating how best to banking services for the unbanked
develop and deploy staff globally. deal with the challenges of Basel III. market. Although the debate around
Becoming the employer of choice nationalisation currently focuses
is a vital advantage in dynamic The majority of global on mines, banks have also been
markets where top talent has the pick mentioned in this context not too
of jobs from domestic and foreign banking CEOs regard long ago. All of these factors could
employers. political instability as profoundly change the South African
the most significant banking environment in future.
We have noted in Project Blue that
South African banks will have to global risk It is clear that South African banks
reconsider the remuneration policies will have to contend with a number
and development opportunities they Western banks will need to adjust of new realities if they wish to
offer in order to attract and retain key to governments exerting greater remain relevant in the post-crisis
talent. The role that organisational control over their activities and the environment. The most successful
culture plays in talent retention real economy. In developed markets, banks are likely to be those which can
should also not be underestimated. the crisis necessitated a rapid respond to the opportunities, while
increase in state intervention and, in at the same time making the most of
Overregulation many people’s eyes, has legitimised their principal competitive strengths.
ongoing intervention. Project Blue This will accelerate the move towards
continues to rank highlights the rise of state-directed precision as banks become ever
amongst the top 3 capitalism as one of the mega trends more ruthless in the defence and
risks on CEOs’ minds that will have an impact on banking optimisation of their core franchises.
globally. Western banks’ ability to As one CEO put it, the bank that can
respond to opportunities in emerging implement its strategy in the most
Nearly three quarters of CEOs told markets will largely depend on the efficient way will be the winner.
us they would actively support new risk appetite of governments of
government policies that promote the jurisdictions from which they
growth that is economically, socially operate. This creates opportunities
and environmentally sustainable. for emerging market banks to capture
However, overregulation remains market share if they are able to
South Africa – Major Banks Analysis 13Asset quality
Rm %
2,400,000 6.0
5.0
2,350,000
4.0
2,300,000 3.0
2.0
2,250,000
1.0
2,200,000 0
- 1.0
2,150,000
- 2.0
2,100,000 - 3.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2008 2009 2010
Loans and advances (LHS) Loans and advances – year-on-year growth (RHS)
Source – SARB (all banks)
Levels of gross Total non-performing
advances loans (NPLs)
Given the subdued global sentiment An analysis of NPLs as a percentage
and the strained economic of gross advances at 2H10 follows:
environment in 2010, it is not
surprising that there was limited Growth NPLs/Advances
overall growth in advances for the in NPL (%)
full year 2010. advances
(%)
The growth in total advances across 2010 2009
the Corporate and Retail sectors for
Personal and Business Banking/ -1.2% 7.5% 7.9%
2010 was 2.2%. Retail
Mortgage loans -1.5% 9.4% 9.7%
Total advances as at 2H10 increased
Instalment sale and finance leases 5.8% 5.5% 5.3%
to R2.2tn compared to R2.1tn as at
2H09. This increase was made up Card debtors -6.9% 8.8% 9.5%
of an increase in total advances of Other loans and advances -4.2% 3.7% 4.6%
approximately 5.1% in the Retail Corporate and Investment Banking -1.4% 3.0% 3.0%
sector (total retail advances as at Corporate lending -0.5% 3.0% 3.0%
2H10 amounted to R1.4tn compared
Commercial property finance 1.7% 3.0% 3.1%
to R1.3tn as at 2H09), a 0.3%
marginal decrease in the Corporate
Banking sector, and a decrease in the Central and Other -130.7% 0.3% 2.5%
‘Other’ advances category amounting
to R18bn during the year. Total -1.3% 5.9% 6.1%
14 South Africa – Major Banks AnalysisThe High Court stated in its judgement that “to allow a credit
provider to unilaterally terminate the consumer’s protection at
the precise moment when he or she may need it the most can only
be construed as absurd. It would be like providing the consumer
with an umbrella and then snatching it back the moment it starts
raining.”
Although the levels of inflows into within banks. Given the volumes of the Western Cape High Court ruled
the early arrears categories seem to loans designated as NPLs, banks will that a credit provider could not
have decreased, the level of NPLs in need to reassess their expectations terminate the debt review process
the banks’ balance sheets remains of when these properties will be where an application for a debt re-
sticky with a marginal decrease in recovered. This may have an impact arrangement had been lodged by the
NPL levels across the banks. Total on the timing of these recoveries and debt counsellor with the magistrate
NPLs amounted to R130bn, around ultimately Loss Given Default (LGD) court and was still pending. The High
5.9% of total gross advances (R2.2tn) assumptions used in estimating Court judgement demonstrated that
in 2H10 (compared to a ratio of 6.2% mortgage book impairments. if consumers and debt counsellors
in 2H09). The marginal decrease in fulfilled their duties by submitting
NPL levels was made up of growth The numbers of debt counselling an application for debt review to the
in ABSA’s NPL book by 9.8%, offset clients in the non-performing magistrate’s court within 60 days
by decreases in the NPL books of categories seem to have reached of receiving such application, the
the other banks (Nedbank’s and a peak in 2010. We saw inflows credit provider could not unilaterally
FirstRand’s NPL books decreased into the debt counselling process terminate the debt review process.
by 1% and 8.7% respectively, and starting to show a more stable trend
Standard Banks’ decreased by in 2H10. During 2010, banks across The High Court stated in its
11.7%). the industry placed an emphasis judgement that “to allow a credit
on terminating clients that had not provider to unilaterally terminate the
The high NPL levels are as a result of stuck to their debt counselling terms. consumer’s protection at the precise
the large number of client accounts The incentive for banks to terminate moment when he or she may need
that were previously in arrears, which clients and place them back into it the most can only be construed as
are now working their way through the legal recovery process is that absurd. It would be like providing the
the banks’ legal departments. The recoveries are made sooner by this consumer with an umbrella and then
combined level of NPLs now stands means, which positively impacts snatching it back the moment it starts
at R76bn for the Mortgage Portfolio’s impairments. raining.” The High Court implied
alone. The number and value of that a typical debt review often takes
loans subject to legal remedy will no The manner in which banks longer than 60 business days before it
doubt increase the workloads of the terminate clients was recently called results in an order by the magistrate’s
collections, legal and recovery teams into question, where a full bench in court.
Rm %
50,000 40
45,000 35
40,000
30
35,000
30,000 25
25,000 20
20,000 15
15,000
10
10,000
5,000 5
0 0
1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10
ASA FSR NED SBK
NPLs (LHS) Specif ic impairment of NPLs (RHS)
Source – PwC Analysis
South Africa – Major Banks Analysis 15“A year-on-year increase of 24.8% (from 206 to
257) in company liquidations was recorded for
January 2011 compared with January 2010”.
– Statistics SA
The press suggests that the National Retail vehicle and asset finance some success in realising outstanding
Credit Regulator has a large backlog categories for financial reporting balances. Our industry experience
of unresolved cases due to capacity purposes, whilst other banks include shows that post-write-off recoveries
constraints in the court system. the Business and Corporate vehicle in the current year have been more
This is not good news for banks as asset finance business under their favourable across this portfolio
an extension of this process means Corporate operations. This means compared to previous years and
higher LGD percentages as a result of that direct comparisons of key Retail would most likely taper off in the
potentially lower recovery rates in the vehicle and asset portfolio ratios is future.
future. not always possible.
Analysis of gross
How banks resolve the current levels Notwithstanding the above, it
of NPLs and those NPLs in the debt appears that vehicle and asset advances and non-
review process needs to be monitored finance advance growth was performing loans in
in 2011. approximately 1.8% for the year the wholesale portfolio
since 2H09, with most of the growth
Analysis of gross coming from retail advances as car
sales increased in 2H10. NPLs as a Corporate advances decreased
advances and non- percentage of advances are close to slightly by 0.3% for the year since
performing loans in 5.5% and have increased slightly 2H09.
the mortgage loan in 2H10 compared to 2H09, when
they were 5.3%. Coverage ratios NPLs as a percentage of advances
portfolio have generally increased as the were 3.0% for 2H10 and were at
average age of the accounts with NPL similar levels for 2H09. The implied
Mortgage loan advance growth has status has increased. The implied LGD rate increased to approximately
been 2.2% for the year since 2009. LGD decreased to approximately 40.3% across all of the banks (from
46.5% across all of the banks (from approximately 26.4% for 2H09).
NPL as a percentage of advances is approximately 48.8% during 2H09).
9.4% and has decreased slightly for A review of the latest liquidation
2H10 compared to 2H09, when it was Analysis of gross numbers shows that Corporate
9.7%. Coverage ratios have increased clients may not be out of the woods
as the average age of accounts advances and non- yet. More companies closed their
with NPL status has increased. The performing loans in doors in January this year compared
implied LGD (calculated by dividing the card portfolio to the same month in 2010, Statistics
the specific impairment amounts by SA said recently. “A year-on-year
the NPL book) remained relatively increase of 24.8% (from 206 to
consistent at 18.6% across all banks, Card advances growth has been 0.1% 257) in company liquidations was
compared to approximately 18.5% as for the year since 2H09. recorded for January 2011 compared
at 2H09. with January 2010”. Over the
NPLs as a percentage of card same period, closed corporation
Analysis of gross advances are 8.8% and have liquidations rose from 110 to 143,
decreased slightly for 2H10 compared and company liquidations increased
advances and non- to 2H09, when they were 9.5%. from 96 to 114.
performing loans in Coverage ratios have increased as
the vehicle and asset the average age of accounts with NPL
status has increased. The implied
finance portfolio LGD decreased to approximately
75.6% across all of the banks (from
Certain South African banks include approximately 77.7% as at 2H09).
their Corporate or Business vehicle The improvement in LGDs in this
asset finance books within the portfolio implies that banks have had
16 South Africa – Major Banks AnalysisTotal income The levels of income statement Total coverage ratios
statement impairment impairment seem to have reached its
highs in 2009 and are now starting The coverage ratios (calculated as
charge ratio to decline, albeit at a much slower specific impairment divided by NPL
(impairments to the rate than many had anticipated. book) across all products decreased
income statement The low interest rate environment slightly during the year. This trend
coupled with relatively strong salary is not surprising given that the
divided by average increases left consumers with more average age of loans included in
advances) disposable income in 2010, which the NPL category has not decreased
resulted in fewer inflows into the substantially.
The total income statement arrears categories. As noted earlier,
impairment charge across the external inflationary pressure and The average NPL coverage ratios
major banks was R24.3bn for 2010 rises in interest rates will have a across certain products were as
compared to R35.3bn for 2009. negative impact which may possibly follows:
There is therefore a noticeable result in new NPL volumes increasing
improvement in the impairment over time. • Mortgage loans – 18.6%
credit charge ratio, which varied (FirstRand was the highest at
from 0.9% to 1.4% for 2010. This 19.64% and Standard Bank the
varied from 1.3% to 1.7% in 2009. lowest at 17.43%).
• Instalment sales business – 46.5%
(Standard Bank was the highest at
57.91% and FirstRand the lowest
at 41.19%).
• Cards – 75.6% (Nedbank was the
highest at 96.53% and Standard
Bank the lowest at 67.16%).
%
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10
ASA FSR NED SBK
Specif ic impairment % Portf olio impairment %
Source – PwC Analysis
South Africa – Major Banks Analysis 17Capital and funding
Basel III – a significant
Deposits Capital
concern for banks
Optimising the mix of the deposit The individual Capital Adequacy
book remains a key focus in reducing Ratios (‘CAR’) for the major banks One of the main issues that has been
the high cost of wholesale and longer continued to improve in 2H10. The preoccupying many banks is the
term funding. This is critical as average CAR increased from 15.2% impact of Basel III and other local
banks compete more aggressively for to 15.3% over the comparable period, regulatory changes to the capital
lower-cost deposit pools with longer reinforcing the upward trend on structure of South African banks. The
behavioural duration and as they higher capital ratios. Slightly more banks’ conservative approach has set
start to work towards the potential pronounced, however, is the rise in them up well to face the challenges
Basel III liquidity ratios. Tier 1 capital where the combined of compliance with the new rules.
average ratio increased from 12.5% However, their dependence on
Low interest rates, coupled with to 12.8%. short-term wholesale funding and
low domestic savings levels and the the limited supply of South African
deleveraging of consumers, led to government securities will make
modest growth in retail deposits compliance with the liquidity rules
during 2010. As noted above, the more challenging.
increased competition and duration
negatively impacted on net interest This latter challenge is well
margins earned during 2H10. recognised, to the extent that the
Basel Committee is now developing
a separate standard for jurisdictions
which do not have sufficient high
quality government securities
available.
Rm %
2,500,000 50
45
2,000,000 40
35
1,500,000 30
25
1,000,000 20
15
500,000 10
5
- 0
2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Government Wholesale Corporate Retail Other
% Government % Wholesale % Corporate % Retail % Other
Source – SARB
18 South Africa – Major Banks AnalysisFundamental to the Basel III rules • A ‘counter-cyclical buffer’ ranging As well as these requirements for
are the requirements for the banks to from 0 – 2.5% of common equity, common equity, the banks are also
hold more capital of higher quality. In determined by SARB as required, required to hold Tier 1 capital to a
particular: for instance in times of excessive minimum of 8.5% (i.e. including
credit growth. the conservation buffer, of which
• All banks must hold a minimum at least 7% is common equity) and
common equity (common The result of all these measures is total capital (i.e. Tier 1 and Tier 2)
shares and retained earnings that the new common equity (core of at least 10.5%. In South Africa,
less deductions, some of which Tier 1) ratio will be at least 7%. In additional capital requirements
were previously taken against addition, the banks will want to hold could push the total minimum capital
lower forms of capital) of 4.5% their own internal buffer, over and requirement to 12% due to the Pillar
of risk weighted assets, which above this regulatory minimum, as 2 (a) add-on of 1.5% for banks.
may be supplemented by Pillar 2 part of normal risk management;
requirements (set by SARB based particularly as the sanctions for going
on individual bank risk profiles) under 7% will involve restrictions
on their ability to pay dividends.
• A ‘conservation buffer’ of 2.5%, We suspect that banks may view the
above the 4.5% minimum, must buffers as de facto minima due to the
be created to absorb losses negative market signals associated
during periods of financial and with holding less capital than the
economic stress. Drawing on this required buffers.
buffer during times of stress will
result in constraints on earnings
distributions
%
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10 1H09 2H09 1H10 2H10
ASA FSR NED SBK Combined results
Total Tier 1 capital Total Tier 2 capital
Source – PwC Analysis
South Africa – Major Banks Analysis 19As Lord Turner (Chairman of the UK’s Financial Standards
Authority) is reported to have said, “If we were philosopher
kings designing a banking system entirely anew for a
greenfield economy, should we have set still higher capital
ratios than in the Basel III regime? Yes I believe we should.”
Banks adopting the internal rating not take into consideration the fact Both these measures create
based (IRB) approach to credit risk that the CAR under the current Basel challenges for the South African
would be particularly concerned II rules is not the same as the Basel III banks. The stable funding
about the proposed re-introduction CAR, as the Basel III rules are stricter. requirement is a challenge because
of the 6% scaling factor to credit risk It also does not take into account the it allows minimal funding of assets
weighted assets. This is not strictly additional capital requirements from through short-term liabilities,
a Basel III amendment but has been Pillars 2(a) or (b) or indeed what whereas in the years leading up to
proposed in draft amendments to these add-on ratios may be. Therefore these new rules, the banks relied
the South African regulations to the it would appear to be premature to fairly heavily on short-term funding.
Banks Act and will be implemented suggest that the banks should return
along with the other Basel III capital to their shareholders. Analysts’ research reports suggested
amendments. This proposed 6% that as of July 2010 (and before
scaling factor could drastically We also suspect that there will be recently announced modifications),
increase the capital requirement of some upward pressure on equity the South African banks had a net
banks that apply IRB approaches to levels globally. For instance, NSFR range of 40% to 60%, short of
credit risk. It is estimated that the Switzerland has announced capital the benchmark of 100%.
6% scaling factor could result in a requirements on its banks in the high
reduction of 45 to 60 basis points teens. We believe that the Basel III The liquidity coverage ratio is a
in the capital adequacy ratio of the requirements represent something challenge in South Africa because
banks adopting this approach. of a compromise on the part of the assets most liquid during periods
regulators in order to minimise any of market stress are government
In addition to being a reminder adverse impact on economic growth. securities, and the strong financial
of how much common equity the position of South Africa’s public
banks have raised in recent years, Will the new liquidity sector means there is a small pool of
the table shows that the major government securities relative to the
banks are in good shape in relation rules bite credit size of bank balance sheets.
to the requirements. Based on our growth?
estimates, collectively the banks The challenge for the South African
would meet the 7% ratio for common The new liquidity rules are aimed to banks in meeting these requirements
equity as at 31 December 2010 and ensure that banks’ funding is on a has been made somewhat less
even the 11 % minimum Tier 1 more sustainable, long-term basis, daunting in the past few months by
ratio (including the counter-cyclical thus enabling better liquidity during Basel Committee announcements
buffer of 2.5%). The major banks times of market turbulence. They which make the requirements less
have an average of 12.75% Tier 1 involve two ratios: onerous to meet.
ratio based on the current Basel II
regulations. This has prompted many • The net stable funding
commentators to suggest that the requirement (NSFR) will target
banks are currently over-capitalised. better duration matching of
The results presentations of the major assets and liabilities. This will be
banks have all addressed this issue introduced from 2018, following
in varying levels of detail. What is an observation period starting in
clear is that given the uncertainty 2012.
as to how the Basel III rules will be
implemented in South Africa, the • The liquidity coverage ratio
major banks have been cautious in (LCR) will require banks to hold
returning capital to shareholders or sufficient high quality assets to
in setting their capital targets for the survive periods of severe market
years ahead. Our analysis of the issue stress. This will be introduced from
is that the apparent “surplus” of Tier 2015, following an observation
1 capital above the minimum does period starting in 2011.
20 South Africa – Major Banks AnalysisFor instance, for the LCR: issue for South African banks. For GDP. On current specifications, this
example, pension funds are currently risk cannot be ruled out, but we
• The run-off rates of certain retail limited in terms of Regulation 28 of believe in practice it is a low risk – the
and small and medium enterprise the Pension Funds Act in terms of National Treasury and the SARB are
deposits during periods of market investing in bank debt instruments. acutely aware of this risk and, given
stress have been reduced. They are currently limited to the long lead times, the transition can
allocating 20% of their total assets be managed.
• Likewise, assumed outflows of to banks debt instruments. In many
certain funding from central banks cases this 20% already includes the
and government have also been liquid assets required by the pension
reduced. funds for operational purposes,
thereby further limiting the amount
• A new category of ‘level 2’ liquid of longer term investment in banks
assets (e.g. bonds of certain public liabilities. This has the effect of
sector enterprises and covered reducing the availability of additional
bonds of other banks) has been longer term funding to banks,
introduced and may account for up exacerbating the problem for the
to 40% of the requirement. NSFR.
Despite these changes, the core The project by the National Treasury
issue for the South African banks to investigate potential reforms to
regarding the LCR is the shortage of various regulations such as those
South African Government Bonds. relating to pension funds, collective
The Basel Committee is currently investment schemes and tax
determining its response to this regulations could potentially unlock
challenge for jurisdictions such as some of the liquidity that is not
South Africa. currently available to banks.
The position regarding the Another potential source of liquidity
NSFR is much the same. Recent for South African banks that has
announcements have eased the not received much public debate is
impact of the proposals in relation covered bonds, i.e. banks issuing
to jurisdictions such as South Africa, bonds secured by ring-fenced
for instance in how mortgages are (inevitably very high quality) assets
treated. on their balance sheet. Covered
bonds have received a lot of attention
Nonetheless the postponement and debate in countries such as New
of their application until 2018 Zealand and Australia. Covered
(following an observation phase) bonds could provide South African
is an indication of the extent of banks with another option to access
transition required. long-duration wholesale funding,
and additionally the bonds could
One of the major contributors to the potentially be treated as ‘eligible
challenges in meeting the NSFR in securities’ for LCR purposes.
South Africa is that a large portion
of the savings pool is being held The worst-case scenario would
within pension funds and other fund be where the NSFR requirements
managers. This, together with the can only be met through the banks
structural challenges to unlocking rationing credit (assets) to less than,
such liquidity, has exacerbated this say, the rate of growth in nominal
South Africa – Major Banks Analysis 21ASA FSR NED SBK Combined Growth
Key banking statistics – Annual 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 09/10
Rm
Balance sheet
Total assets 716,470 710,796 695,809 802,389 608,718 570,703 1,341,420 1,297,788 3,362,417 3,381,676 -0.57%
Gross Loans and acceptances 537,414 555,353 461,503 422,129 486,499 460,099 730,131 742,173 2,215,547 2,179,754 1.64%
Total deposits 393,517 392,906 543,713 487,929 490,440 469,355 796,635 768,548 2,224,305 2,118,738 4.98%
Risk weighted assets 413,013 386,264 378,490 346,049 323,681 326,466 620,064 599,822 1,735,248 1,658,601 4.62%
Asset quality & provisioning
Non-performing loans 39,641 36,089 21,117 23,121 26,765 27,045 42,701 48,376 130,224 134,631 -3.27%
Impairments -13,902 -13,158 -9,844 -10,991 -11,226 -9,798 -17,106 -18,666 -52,078 -52,613 -1.02%
Collective provisions -2,087 -3,222 -3,117 -3,703 -2,154 -1,968 -4,884 -5,588 -12,242 -14,481 -15.46%
Individually assessed provisions -11,815 -9,936 -6,727 -7,288 -9,072 -7,830 -12,222 -13,078 -39,836 -38,132 4.47%
22 South Africa – Major Banks Analysis
Non-performing loans (% of advances) 7.4% 6.5% 4.6% 5.5% 5.5% 5.9% 5.8% 6.5% 5.8% 6.1% -4.39%
Impairment charge (% of average advances) 1.2% 1.7% 0.9% 1.5% 1.4% 1.5% 1.0% 1.3% 1.1% 1.5% -25.78%
Impairment coverage ratio 35.1% 36.5% 46.6% 47.5% 41.9% 36.2% 40.1% 38.6% 40.9% 39.7% 3.07%
Implied loss given default 29.8% 27.5% 31.9% 31.5% 33.9% 29.0% 28.6% 27.0% 31.0% 28.8% 7.94%
Profit & loss analysis (i)
Net interest income 23,340 21,854 16,404 12,688 16,608 16,306 28,927 31,493 85,279 82,341 3.57%
Non interest income 19,474 20,232 28,579 24,193 13,215 11,906 44,054 41,620 105,322 97,951 7.53%
Total operating income 42,814 42,086 44,983 36,881 29,823 28,212 72,981 73,113 190,601 180,292 5.72%
Total operating expenses -24,949 -23,227 -26,955 -22,113 -17,045 -15,538 -47,519 -43,589 -116,468 -104,467 11.49%
Core earnings 17,865 18,859 18,028 14,768 12,778 12,674 25,462 29,524 74,133 75,825 -2.23%
Impairment charge -6,005 -8,967 -4,545 -7,556 -6,188 -6,634 -7,524 -12,097 -24,262 -35,254 -31.18%
Other income/(expenses) -9 -50 816 980 -90 679 489 -9 1,206 1,600 -24.63%
Income tax expenses -3,262 -2,340 -3,926 -2,439 -1,364 -1,307 -4,965 -4,620 -13,517 -10,706 26.26%
Profit for the period 8,589 7,502 10,373 5,753 5,136 5,412 13,462 12,798 37,560 31,465 19.37%
Attributable earnings 8,118 6,840 16,994 6,715 4,811 4,826 10,774 11,054 40,697 29,435 38.26%
Headline earnings 8,041 7,621 10,004 6,878 4,900 4,277 10,969 11,253 33,914 30,029 12.94%
Key data
Other operating income (% of total income) 45.5% 48.1% 63.5% 65.6% 44.3% 42.2% 60.4% 56.9% 53.4% 53.2% 0.42%
Net interest margin (% of total assets) 3.2% 2.9% 2.1% 1.5% 2.9% 2.9% 2.6% 3.2% 2.7% 2.6% 3.16%
Net interest margin (% of average interest earning advances) 4.0% 3.7% 3.6% 2.5% 3.4% 3.4% 3.8% 4.5% 3.7% 3.5% 4.52%
Standardised efficiency ratio 56.5% 53.0% 59.1% 59.3% 55.7% 53.5% 63.1% 57.3% 58.6% 55.8% 4.99%
Return on equity 14.3% 15.1% 19.9% 13.8% 11.1% 10.8% 12.6% 13.4% 14.5% 13.3% 9.09%
Return on average assets 1.1% 1.0% 1.3% 0.8% 0.8% 0.8% 1.0% 1.0% 1.1% 0.9% 17.92%
Total number of staff* 36,770 36,150 38,657 38,760 27,525 27,037 48,125 45,937 151,077 147,884 2.16%
Capital ratios
Tier 1 12.80% 12.80% 13.60% 13.50% 11.70% 11.50% 12.90% 11.80% 12.75% 12.40% 2.82%
Tier 2 2.70% 2.70% 1.70% 2.10% 3.30% 3.30% 2.40% 2.80% 2.53% 2.73% -7.34%
Total 15.50% 15.50% 15.30% 15.60% 15.00% 14.80% 15.30% 14.60% 15.28% 15.13%
* - Staff numbers for Firstrand were not repeated in December 2H10You can also read
