RESULTS ANNOUNCEMENT

for the year ended 31 December 2023

“In 2023, Standard Bank Group delivered earnings growth of 27% and a return on equity of 18.8%. This strong performance is underpinned by our robust and growing franchise and is reflective of the positive momentum in all our businesses.” GROUP RESULTS

In the twelve months to 31 December 2023 (FY23), the group recorded headline earnings of R42.9 billion, up 27% relative to the twelve months to 31 December 2022 (FY22) and delivered a return on equity (ROE) of 18.8% (FY22: 16.3%). This strong performance is underpinned by our robust and growing franchise and reflective of the good momentum in our business. Our Africa Regions franchise contributed 42% to group headline earnings. The top eight contributors to Africa Regions’ headline earnings were Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda, Zambia and Zimbabwe.

In FY23, the group effectively defended and grew its banking franchise and improved banking earnings and returns. Client franchise health showed improvements across a number of metrics. Active customers grew by 6% to 18.8 million, with growth recorded in both South Africa and Africa Regions. In addition, digital retail clients in South Africa increased by 8% as more clients transitioned to our convenient digital channels. In the year, the group recorded over 2.8 billion digital transactions for retail clients, up 30% year on year, and distributed over R41.1 billion on behalf of our South African clients via our digital wallet platform. Client satisfaction scores improved across various channels, particularly digital in South Africa.

The Insurance & Asset Management franchise recorded an improved insurance performance and growth in its assets under management year on year. Since the announcement of the Liberty minority buyout, the group has received over R5.7 billion in distributions related primarily to capital optimisation. In FY23, the group successfully bought out the minorities of Liberty2Degrees (L2D). L2D holds an attractive portfolio of commercial properties.

The group ended the year with a common equity tier 1 ratio of 13.7% (31 December 2022: 13.4%). This positions the group well to reward shareholders and continue to grow. The SBG board approved a final dividend of 733 cents per share which, when combined with the interim dividend, equates to a dividend payout ratio of 55% for FY23.

In 2023, the group mobilised over R50 billion of sustainable finance for corporate clients and provided over R2 billion in loans to SMEs to help business owners access affordable and reliable alternative energy products. In addition, the group disbursed over R145 million to homeowners and over R840 million to businesses for solar installations in South Africa.

OPERATING ENVIRONMENT

In 2023, uncertainty remained elevated globally. The year was one of two halves. In the six months to 30 June 2023 (1H23), inflation remained elevated and interest rates continued to rise. In the second six months to 31 December 2023 (2H23), central banks paused whilst monitoring inflation trends and developing geopolitical risks. Across most markets, inflation was stickier than forecast and interest rate cuts were delayed. The International Monetary Fund (IMF) forecast global real gross domestic product (GDP) growth of 3.1% in 2023.

Sub-Saharan Africa also experienced inflationary pressures and monetary policy tightening. Higher debt costs increased fiscal pressures and sovereign risks in certain countries, which in turn, drove currency weakness. There was progress on Ghana’s debt restructure, Kenya’s funding outlook improved, and Nigeria took steps to liberalise the Naira. While currency movements were mixed across the group’s portfolio of countries, they were weaker on average by the end of the year.

In South Africa, inflation peaked in March 2023 at 7.1%, and then declined to end the year at 5.1% in December 2023. The South African Reserve Bank increased interest rates by a cumulative 125 basis points by the end of May 2023 and then paused.

The repo rate closed the year at 8.25%. While electricity disruptions and logistics constraints placed pressure on businesses and corporates, and in turn on the economy, progress was made during the year, particularly in the last quarter, towards delivering sustained improvements on both fronts. South Africa’s real GDP grew at 0.6% in 2023.

PROSPECTS

In 2024, while global risks are expected to persist, the IMF is forecasting a soft landing. Inflation is expected to continue to fall providing scope for interest rate cuts. The IMF expects global real GDP growth to be 3.1% in 2024, in line with 2023.

Real GDP growth in sub-Saharan Africa is expected to accelerate from 3.3% to 3.8% as higher levels of growth in East Africa more than offsets lower growth in South Africa and Nigeria. The interest rate outlook is mixed. While some markets may still see interest rate increases in 1H24 (Angola, Kenya, Nigeria and Zambia), most markets are expected to start cutting interest rates in 2H24. Overall, the outlook is positive, but the region remains at risk of global shocks and climate events. In addition, 13 countries in sub-Saharan Africa will hold elections in 2024, including six where the group operates, namely Botswana, Ghana, Mauritius, Mozambique, Namibia, and South Africa.

In South Africa, inflation is expected to decline to 5.0% on average in 2024, supported by a lack of demand-driven inflation, a lack of wage pressure and favourable base effects. The repo rate is expected to decline to 7.50% by year end (Standard Bank Research: 3 cuts of 25 basis points each starting in July 2024 and one 25 basis point cut in 2025). The electricity shortfall is expected to ease notably, relative to that experienced in 2023, driven by an increase in Eskom supply and the ongoing expansion of private sector generation capacity. Actions to ease the logistics constraints are also expected to gather pace. Together, this should support an improvement in real GDP growth to 1.2% in 2024. The South African election outcome is not expected to drive a change in policy direction. Accordingly, the continued gradual policy reform should be growth-supportive over time. Any acceleration in resolving the electricity, road, rail, and port constraints would aid this further.

While organic growth (in constant currency) is expected to remain relatively robust, the group’s year-on-year trends in reported currency (ZAR) will be dampened by the currency devaluations experienced in certain of our Africa Regions’ countries in 2023 and forecast for 2024. The guidance that follows is based on yearonyear movements in reported currency (ZAR).

For the twelve months to 31 December 2024 (FY24), we expect average interest rates to be marginally down and pricing to remain competitive. Balance sheet growth to remain slow in 1H24, but improve in 2H24. Accordingly, net interest income is expected to be up low-to-mid single digits year on year. Fee and commissions are expected to grow at mid-single digits supported by a larger client base, increased client activity and higher client spend. Trading revenue is likely to decline off a high base in FY23, but will be subject to market developments and client flow. While there is a heightened focus on costs, we need to continue to invest in our business to remain competitive and grow. Banking revenue growth is expected to be similar to banking cost growth and Jaws flat to positive.

Our clients are likely to remain constrained until interest rates start to decline. Credit impairment charges are expected to peak in the first six months of 2024, driven primarily by ongoing strain in Personal & Private Banking. For FY24, the credit loss ratio is expected to remain within but near the top of the group’s through- the-cycle credit loss ratio range of 70 to 100 basis points. A continued improvement in IAM earnings is expected to be partially offset by a decline in ICBCS earnings (off a high base). The group’s FY24 ROE is expected to remain well anchored inside the group’s target range of 17% to 20%.

While uncertainty is expected to remain elevated, our business is well diversified, growing, and resilient. We are focused on delivering against our strategic priorities and remain on track to deliver on our 2025 targets. The group is also on track to deliver against its ambitious sustainable finance and renewable energy targets.

In 2024, we will continue to support our clients, develop our employees, and deliver sustainable growth and value to our shareholders and other stakeholders. In addition, as a leading financial institution on the continent, we recognise our responsibility to deliver positive impact. We do so by delivering against our purpose of driving Africa’s growth.

The forecast financial information above is the sole responsibility of the board and has not been reviewed and reported on by the group’s auditors.