Better than expected

The Standard Bank group financial year end to 31 December 2005

Normalised IFRS

Return on equity (%) 25,227,8

Headline earnings growth (%) 20 12

Headline earnings per share (cents) 666,0 702,3

Headline earnings per share growth (%)19 23

According to Jacko Maree CE of Standard Bank key factors impacting the results included increased consumer activity in South Africa, while the conversion to IFRS took place in this financial year. The distortion of results is due mainly due to shareholder ownership Tutuwa and Liberty Life policyholders shares.

R77m of investment income was lost due to this, while shareholders are credited for holding the shares, although they cant reflect the shareholding as an asset.

Last year saw continued strong growth in the residential property market and record new vehicle sales, and a further 50 basis points reduction in the prime interest rate together with a strengthening economy was conducive to sustained growth in lending and transaction volumes.

Customer deposits continue to grow at a slower pace than consumer lending, resulting in an increased reliance on more expensive wholesale funding. In addition, the proportion of term deposits has been increased to lengthen the structure of the funding book in line with internal prudential guidelines.

Consequently, average long-term funding as a percentage of total funding has increased from 15% to 18%. During the year, the group successfully concluded its first asset-backed securitisation transactions: R4.5bn of mortgage loans and R3bn of vehicle and asset finance receivables.

Increased regulations are becoming a feature in most of the jurisdictions in which the group operates. Staff costs in South Africa were significantly impacted by additional staff requirements to comply with FICA and other regulations. FICA requirements were also the main driver behind increased communication costs.

Across the group, additional compliance related costs amounted to approximately R200m in 2005.