STANDARD BANK GROUP INVESTOR BRIEFING
February 2024
Contact details
Jan Brits
Head: Group Capital Management
Tel: +27 82 856 4669
Email: Jan.Brits2@standardbank.co.za
Sasha Cook
Head: Sustainable Finance
Tel: +27 21 401 2783
Email: Sasha.Cook@standardbank.co.za
Praveshni Sewmohan
Manager: Sustainable Finance
Tel: +27 11 721 6410
Email:
Praveshni.Sewmohan@standardbank.co.za
Paul Burgoyne
Head: Treasury and Money Markets
Tel: +27 11 415 6010
Email: Paul.Burgoyne@standardbank.co.za
Carl Wiesner
Head: Syndicate (SA) Debt Capital Markets
Tel: +27 82 757 5395
Email: Carl.Wiesner@standardbank.co.za
Vuwani Nthakheni
Senior Manager: Balance Sheet and Liquidity Management
Tel: +27 11 415 8209
Email: Vuwani.Nthakheni@standardbank.co.za
This is the size of body copy.
Marc Hearn
Head: Strategic Funding
Tel: +27 74 138 4085
Email: Marc.Hearn@standardbank.co.za
John de Beer
Head: NBFI
Tel: +27 11 415 7844
Email: John.deBeer@standardbank.co.za
Chuma Dick
Manager: Execution NBFI
Tel: +27 11 415 7833
Email: Chuma.Dick@standardbank.co.za
P2
Agenda
1. Market update | Page 4 |
2. Funding and liquidity | Page 8 |
3. Regulatory update | Page 11 |
4. Capital management | Page 17 |
5. Sustainable finance | Page 20 |
6. Term sheet | Page 26 |
P3
1.0
Market update
South African macroeconomic outlook
- Gradual SA policy reform to be growth-supportive over time
- CPI expected to average 5.0% in 2024, supported by a lack of demand- driven inflation and wage pressure and favourable base effects
- Expectations for rate cutting cycle from Q2:24 with the repo rate at 7.25% by year end
% y/y
8
6
4
2
0 -2-4-6-8
SA GDP to improve to 1.2% in 2024
1.2
0.6
Inflation expected to moderate; rate cuts expected in 2024
10 | |||||||
8 | |||||||
6 | |||||||
% y/y | 4 | ||||||
2 | |||||||
0 | |||||||
-2 | |||||||
-4 | |||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
CPI | Repo | Real repo |
• | Scope for the rand to | Rand likely to strengthen by year-end | |||||||||
strengthen towards | 24 | ||||||||||
R18.10/$ by year end | 19 | ||||||||||
• | Adverse growth impact | R/$ | 14 | ||||||||
from electricity shortfall | |||||||||||
should ease notably in | 9 | ||||||||||
2024 given expected | |||||||||||
increase in Eskom supply | 4 | ||||||||||
and ongoing expansion of | 1Q00 | 1Q03 | 1Q06 | 1Q09 | 1Q12 | 1Q15 | 1Q18 | 1Q21 | 1Q24 | ||
private sector generation | Actual | Fair value | |||||||||
capacity | |||||||||||
Sources: Eskom, Standard Bank Research, Stats SA, SARB, Bloomberg
Loadshedding to ease this year
20000 | ||||||||||||||||||||||||||
GWh | 15000 | |||||||||||||||||||||||||
10000 | ||||||||||||||||||||||||||
5000 | ||||||||||||||||||||||||||
0 | ||||||||||||||||||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Stage 4 | Stage 5 | Stage 6+ | |||||||||||||||||||||
P5
Market update
NCD Issuances and Pricing Levels (NCD vs Treasury Bills)
200 | ||||||||||||||
180 | ||||||||||||||
160 | ||||||||||||||
140 | 123 | 138 | 145 | 174 | 176 | 186 | 199 | 182 | ||||||
120 | ||||||||||||||
100 | ||||||||||||||
80 | 91 | 86 | 91 | 94 | ||||||||||
60 | ||||||||||||||
Mar-21Jun-21 | Sep-21Dec-21Mar-22Jun-22Sep-22Dec-22Mar-23Jun-23Sep-23Dec-23 | |||||||||||||
Ave bal | 12m ave spread above 3m J | Tbill asw pricing | ||||||||||||
180 | 5-year Bank Senior vs NCD Pricing Levels | |
160 | ||
140 | ||
120 | ||
100 | ||
80 | 5y NCD (ask) | 5y Bank Senior |
60 | ||
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
- Demand for bank credit risk by institutional investors was strong in 2023, driving spread compression in pricing on the shorter end of the curve
- SBSA is the largest issuer of NCDs in the local market with a year-to-date market share of 33% (2023: 36%)
- Increase in NCD pricing levels in Q4'23 is primarily due to seasonal illiquidity in wholesale funding markets
- Treasury bill pricing remains high as National Treasury continues to rely on this market to fund its liquidity requirements
- Robust demand for bank bonds with most public auctions clearing near the bottom of pricing guidance
- Senior vs NCD spreads compressed in 2023. Low supply of issuances in the local debt primary markets is a key contributing factor
P6
Market update
SARB and NT updates
Gold and Foreign Exchange Contingency Reserve Account ("GFECRA")
- SA's reserve account has grown over the recent years on the back of sharp currency weakness. Profits in the account arising from valuation gains on the SARB's foreign reserves have grown to approximately USD27bn (R500bn)
- Given the fiscal shortfall noted by NT and growing demands on the fiscus to support SOEs, these gains could be considered to close the funding gap
- Monetising the reserves does not need to result in selling of the FX reserves. It is expected that monetisation and drainage will be done using CPD and MPIF quotas
- SARB has confirmed that they are engaging with National Treasury. It is broadly expected that the Minister of Finance will announce some form of access to GFECRA in the budget
- It is unclear to what extent the account might be used in the short-term
Monetary Policy Implementation framework
-
In Jan'24, the market liquidity surplus peaked at R99.3bn compared to R85.7bn in Dec'23, marginally below the SARB surplus target of
R100bn - This has had a stabilising effect on short-term basis markets, at levels marginally above Jibar
ZARbn
MPIF - Impact on market pricing
120
100
80
60
40
20
0
80
70
60
50
40
30
20
10
0
-10
bps
ZAR Market Liquidity | 3m Basis (RHS) | |
Source : SARB; Standard Bank Group | P7 |
2.0
Funding and liquidity
Strong liquidity position
Exceeding Basel III regulatory requirements
Liquidity Coverage Ratio (LCR)
- SARB directive proposing the removal of the ability to use foreign currency HQLA to cover ZAR net cash outflows from 1 Jan'24
- Minimal impact to SBSA due to small holdings of FCY HQLA but will limit diversification away from ZAR government and credit bonds
- The group maintained LCR compliance throughout 2023 well in excess of the 100% regulatory requirement
Basel III Liquidity Coverage Ratio (daily avg.1)
150.0% | 138.4% | 134.8% | 144.3% | 146.8% | 136.4% | ||||||||||
124.4% | 129.1% | 133.0% | |||||||||||||
112.6% | 110.8% | ||||||||||||||
100.0% | |||||||||||||||
50.0% | |||||||||||||||
0.0%
Dec-19 | Dec-20 | Dec-21 | Dec-22 | Sep-23 | ||
SBG | SBSA Regulatory min | |||||
Basel III Net Stable Funding Ratio (month end)
Net Stable Funding Ratio (NSFR)
- SARB directive requiring the phase out of the 35% Available Stable Funding (ASF) factor applied to ZAR NBFI deposits with a residual maturity of less than 6 months
− From 1 Jan'24 the ASF factor reduced from 30% to 20% - The phase out impacts approximately R70bn of short-term wholesale funding on
SBSA's balance sheet over the full phase out period, which will impact pricing of these funding sources - The group successfully maintained the NSFR ratio in excess of the 100% regulatory requirement
150.0%
119.5% | 124.8% | 122.0% | 124.1% | 122.6% |
108.8% | 111.9% | 107.6% | 110.6% | 108.3% |
100.0%
50.0%
0.0%
Dec-19 | Dec-20 | Dec-21 | Dec-22 | Sep-23 |
SBG SBSA Regulatory min
1 Simple average of 92 days of daily observations over the respective quarters for SBSA, SBSA Isle of Man branch, Stanbic Bank Ghana, Stanbic Bank Uganda, Stanbic IBTC Bank Nigeria, Standard Bank Namibia, Standard Bank Isle of Man Limited and Standard Bank Jersey Limited and the simple average of three month-end data points for the respective quarters for the other Africa Regions banking entities
P9
Liquidity management
Diversified sources of liquidity, prudent redemption profile
SBG and SBSA's funding sources3
2% 1%
SBG | 3% | ||
9% | 4% | ||
20% | 30% | ||
11% | 2% | ||
1% | |||
5% | |||
11% | SBSA | ||
21% | |||
23% | |||
30% | |||
27% | |||
Corporate funding | Retail deposits | ||
Institutional funding | Interbank funding | ||
Government and parastatals | Senior debt | ||
Term loan funding | Subordinated debt issued | ||
Other liabilities to the public |
SBG debt redemption profile (ZARbn)1
Thousands | 70 | |||||||||||
60 | ||||||||||||
60 | ||||||||||||
50 | 41 | |||||||||||
40 | 39 | 35 | ||||||||||
30 | 21 | |||||||||||
20 | ||||||||||||
10 | ||||||||||||
0 | ||||||||||||
2024 | 2025 | 2026 | 2027 | 2028 | ||||||||
Structured Notes | Senior debt | Subordinated debt | ||||||||||
Syndicated/Bi-lateral loans | DFI loans | Offshore T2 | ||||||||||
NCD (> 1 year original tenor)
- Primary markets are open and receptive to bond and note issuances
-
USD400m offshore Tier 2 bond is approaching its optional redemption date in
May'24 - Funding diversification maintained across products, sectors, geographic regions and counterparties
- Diversified use of platforms across various jurisdictions:
- Local listed bonds
- Foreign currency loans, bonds: Eurobond, MTN, niche markets
- Local and offshore structured notes2
- Debt strategy designed to manage maturity profile and reduce refinancing risk
- Redemption profile represents the contractual maturity or the first call date in the case of a callable instrument. SBSA is the main issuer of debt instruments other than subordinated debt which is issued by SBG Limited
- Luxembourg listed programme launched 2017
3 As at June'23 | P10 |
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Disclaimer
Standard Bank Group Ltd. published this content on 29 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 May 2024 07:09:07 UTC.