STANDARD BANK GROUP LIMITED - Voluntary trading update and trading statement for the twelve-month period ending 31 December 2020

            
SBK SBKP SBPP
Voluntary trading update and trading statement for the twelve-month period ending 31 December 2020

Standard Bank Group Limited
Registration No. 1969/017128/06
Incorporated in the Republic of South Africa
JSE and A2X share code: SBK
ISIN: ZAE000109815
NSX share code: SNB
SBKP ZAE000038881 (First preference shares)
SBPP ZAE000056339 (Second preference shares)
(Standard Bank or the group)

Voluntary trading update and trading statement for the twelve-month period ending 31
December 2020

Trading update

Shareholders of Standard Bank (Shareholders) are advised that the trends highlighted in the groups
9M20 operational performance update published on the Johannesburg Stock Exchange News Service
(SENS) dated 20 October 2020 (9M20 SENS) continue. In summary, balance sheet growth has slowed,
margin pressure continues, as the impact of previous interest rate cuts filter through, and while credit
losses remain elevated, the group is capital generative. Africa Regions continues to outperform South
Africa. For reference, group headline earnings for the 9M20 were 39% lower than in the comparative
period. The resilience of the Standard Bank franchise is underpinned by the groups diversity, across
client, sector and geography.

The current surge in infections and ensuing lockdowns in the Northern Hemisphere are a concern.
While the broader impact thereof on the global economy, disruptions to trade and the potential knock-
on impact on Africa is unclear, it is expected to be milder than that seen in 2Q20. Across most of the
countries in which the group operates in sub-Saharan Africa, infection rates and lockdowns have
moderated, and economic activity has recovered. We do note, however, an unfortunate increase in
infections in Kenya, South Africa and Uganda.

While we are buoyed by the positive vaccine-related developments, we recognise that the rollout thereof
is likely to take some time. The safety and security of our employees remains a priority. At this point,
our business continuity plans remain in place. As we head into the holiday season, pandemic fatigue
and lapses in safety protocols pose a risk. The likelihood of further waves of infection in our countries
of operation remains high.

Like elsewhere, sub-Saharan African sovereigns have been required to fund unplanned Covid-19
related costs. For some, this has exacerbated existing difficult fiscal positions, including specifically in
Angola, South Africa (SA) and Zambia. On 20 November 2020, Moodys and Fitch downgraded SAs
sovereign ratings to Ba2 and BB- respectively, both with a negative outlook, and S&P maintained their
sovereign rating at BB- with a stable outlook. In the days that followed, the South African banks were
also downgraded. The Standard Bank Groups (SBG) ratings were downgraded to Ba3 (Moodys) and
BB- (Fitch), and The Standard Bank of South Africa Limiteds (SBSA) ratings were downgraded to Ba2
(Moodys) and BB- (Fitch). The downgrades, on their own, are not expected to have a material impact
on SBGs and SBSAs risk-weighted assets and capital adequacy.

The management of the client relief portfolios continues to receive attention. As at 31 October 2020,
the Personal & Business Banking (PBB) client relief portfolio in SA had declined further to R47 billion
or 8% of the PBB SA portfolio (30 June 2020: R107 billion, 30 September 2020: R61 billion).
Approximately 80% of the remaining client relief portfolio is secured, i.e. mortgages and VAF loans. The
lapsed client relief portfolio continues to reflect strong payment behaviour and has performed in line
with our previous expectations. Provisions on the remaining client relief portfolio remain elevated in line
with the risk associated with that portfolio and the total coverage increased from 2.5% as at 30 June
2020 to 4.0% as at 30 October 2020.

More broadly, we have identified pockets of pressure in the PBB SA portfolio, particularly within
personal unsecured lending. In addition, a continued increase in retrenchments has triggered additional
stage 3 provisions. In contrast, collection rate trends continue to improve, leading to positive transfers
from stage 2 to stage 1. Forward-looking provisions related to the macro-economic variables continue
to be monitored closely. Taking these trends into account, total coverage for the PBB SA portfolio
increased from 5.3% as at 30 June 2020 to 5.5% as at 30 October 2020.

In PBB Africa Regions (PBB AR), the client relief portfolio declined to R4 billion (30 June 2020: R11
billion, 30 September 2020: R6 billion). While we have seen a decline in the total balance outstanding,
we have seen an uptick in balances in Stage 2 and 3 (relative to 30 June 2020) and associated
provisions. Total coverage on the remaining client relief portfolio has increased from 2.6% as at 30
June 2020 to 3.9% as at 30 October 2020.

The table below provides the PBB SA and PBB AR client relief portfolios at various dates:

 PBB  client relief loans                               South Africa, Rbn          Africa Regions, Rbn
 Outstanding as at 30 June 2020                                         107                           11
 As a % of total respective portfolios                                 18%                          12%

 Outstanding as at 30 September 2020                                      61                           6
 As a % of total respective portfolios                                  10%                           7%

 Outstanding as at 31 October 2020                                        47                           4
 As a % of total respective portfolios                                   8%                           4%

Requests for relief from Corporate & Investment Banking clients have tapered off. The cumulative year
to date total exposure to clients who have been granted relief totaled R78 billion (inclusive of undrawn
facilities). Importantly, the actual client relief provided, including but not limited to additional liquidity
lines, interest and/or capital holidays as at 31 October 2020, was R24 billion, up from the client relief of
R21 billion as at 30 June 2020 (and a marginal increase on the R23 billion as at 30 September
2020). Relief provided remains primarily liquidity-related with just over 30% of all relief requests
approved relating to covenant waivers or relaxations.

The group credit loss ratio for the ten months to 31 October 2020 was lower than the 169 basis points
reported at 30 June 2020. The outlook for credit impairment charges beyond FY20 remains very
uncertain.

ICBC Standard Bank plc remained profitable for the ten months to 31 October 2020. With regards to
Liberty Holdings Limiteds (Liberty) performance, please refer to Libertys voluntary operational update
announcement released on SENS on 19 November 2020.

The groups capital and liquidity levels remain well above regulatory minimums and internal risk
appetite thresholds. This positions the group well to weather any additional turbulence and provides
the financial resources to continue to support our clients. The groups common equity tier 1 ratio
(including unappropriated profits) was 13.2% as at 30 September 2020 (30 June 2020: 12.6%)
Additional capital and liquidity information can be found in the groups Pillar 3 Report available on the
groups Investor Relations website.

The groups position on the declaration of a final dividend for FY20 has not yet been decided. In March
2021, the Board will review the groups capital position, the outlook and the groups capital demand
expectations, as well as regulatory guidance, and decide on the final dividend.
There remains considerable uncertainty and forecast risk. The group will update the market on expected
FY21 trends when it reports results in March 2021. The group will provide an update on the groups
medium-term financial targets in due course.

Trading statement

In terms of the Listings Requirements of the JSE Limited, a listed company must publish a trading
statement once it is satisfied that a reasonable degree of certainty exists that the financial results for
the period to be reported will differ by at least 20% from reported financial results for the previous
corresponding period.

Shareholders are advised that Standard Banks headline earnings per share (HEPS) and earnings per
share (EPS) for the twelve-month period ending 31 December 2020 are expected to be more than 20%
lower than the reported HEPS and EPS for the comparable period (FY19 HEPS: 1766.7 cents, FY19
EPS: 1593.5 cents). A further trading statement with specific guidance relating to the ranges will be
released once reasonable certainty regarding the extent of the decline relative to the prior year has
been achieved.

Standard Banks results for the twelve months ended 31 December 2020 are expected to be released
on 11 March 2020.

Investor call

Standard Bank will host an investor call at 17h00 (South Africa time) on 30 November 2020. The call
registration details are available on the Standard Bank Group Investor Relations website -
https://reporting.standardbank.com/

A replay will be available on the Investor Relations website shortly after the end of the call.

Shareholders are advised that the information contained in this voluntary trading update and trading
statement have not been reviewed or reported on by the groups external auditors.

Queries:

Investor Relations
Sarah Rivett-Carnac
Email: sarah.rivett-carnac@standardbank.co.za


Johannesburg
30 November 2020

Lead sponsor
The Standard Bank of South Africa Limited

Independent sponsor
JP Morgan Equities South Africa Proprietary Limited

Namibian sponsor
Simonis Storm Securities (Proprietary) Limited

Date: 30-11-2020 08:00:00
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