We create value by effectively managing risk, and creating sustainable returns

A strong relationship with our shareholders is essential for a shared understanding and vision of our future role.

Key matters raised by stakeholders …
  • Turnaround of Retail and Business Banking in South Africa
  • Barclays PLC’s sell-down, the resulting Separation including rebranding, system changes and management capacity
  • Resilience and revenue growth in an uncertain and volatile economic environment and sustainable cost containment
  • Strong and emerging competition, particularly fintech in the retail space
  • Operational risks including IT, cybercrime and physical security
… inform our material focus areas …
  1. Sustainably growing revenue
  2. Effectively managing risks
  3. Disciplined cost management while enabling strategic investments
  4. Delivering appropriate shareholder returns while executing the Separation
… to achieve the following value …

For our investors

  • Growing, sustainable return on their investment through dividends and share price
  • Return on debt-based investments delivered in agreed timelines

For the Group

  • Adequate levels of capital and liquidity to fund growth
  • Effective risk management
  • Investment and support from shareholders

We present a snapshot of our normalised performance against our material focus areas. Our Financial Director’s review and risk management review provide further detail.

1. Sustainably growing revenue

Revenue growth slowed to 1%, partly reflecting the difficult macro backdrop. However, underlying revenue growth increased 5% after factoring in the impact of a stronger rand and regulatory changes, plus some one-off items in the 2016 base. Although our overall revenue growth was limited, we improved momentum in several targeted areas in the second half of the year.

Our revenue share from Rest of Africa decreased slightly to 22.0% (2016: 22.5%), due to the stronger rand negatively impacting currency translation and regulatory caps. We remain top three by revenue in four of our largest businesses – Botswana, Ghana, South Africa and Zambia.

2. Effectively managing risks

The credit loss ratio improved to 0.87% as credit impairments decreased to R7.0bn due to lower defaults in the South Africa Wholesale and Rest of Africa portfolios and proactive risk mitigation strategies in South Africa Retail banking (2016: 1.08%; R8.8bn). Our non-performing loans as a percentage of gross loans and advances improved to 3.7% (2016: 3.9%).

While our portfolio provisions to performing loans decreased to 70bps due to a 26% decrease in model-driven impairments, with a slight increase in macroeconomic overlays (2016: 79bps).

Our liquidity position remains healthy, within risk appetite and minimum regulatory requirements. We consistently maintained a liquidity coverage ratio in excess of the minimum regulatory requirement of 80%.

Operational resilience continues to improve due to investments in infrastructure, process engineering, people and technology.

See risk management review for more on our performance against our principal risks.

3. Disciplined cost management while enabling strategic investments

Operating expenses grew 4% resulting in a cost-to-income ratio of 56.8% (2016: 55.2%) where the largest component of the growth is represented by employee costs. Headcount increased by 1% largely due to technology hires in South Africa.

Our structural cost programme continues to produce efficiency gains that allow us to invest in strategic initiatives. Outside of Separation activities, our total information technology-related spend (R7.4bn) was stable at 8% of Group costs.

4. Delivering appropriate shareholder returns

Our return on equity declined slightly to 16.4% from 16.6% – a resilient performance considering the tough operating environment. South Africa Banking’s return on regulatory capital was stable at 20.8%, while Rest of Africa Banking’s return on equity improved to 16.6% and WIMI’s return on equity declined to 20.1%.

Dividend per ordinary share increased by 4% to 1 070 cents and contributed to a shareholder return of 14.1% (2016: 24.6%).

1 Share price appreciation/depreciation and dividends received for the period.