Good morning, ladies and gentlemen. On behalf of Ms. Nonkululeko Nyembezi, our Chairman, the board of Standard Bank Group and the leadership team, welcome to our results for 2025. Thank you for joining us. It's wonderful to see all of you. The overarching message of today's presentation is that we do what we say we're gonna do. We keep our promises, and we meet our targets as we have for the period from 2020 to 2025. We will do so again in 2026, and we will do so over the next medium-term period, which is from this year to 2028. As you may recall, in 2021, in the depths of the pandemic, socially distanced, wearing masks, battling with the mute button, we nevertheless chose to take the long view, and we were optimistic. We made three deliberate strategic choices. First, transform client experience.
Second, execute with excellence. Third, to drive sustainable growth and value. The order of these choices is not random. We made a clear decision to put our clients front and center in everything that we do. A commitment that, as you will see, firmly continues today. These choices had consequences for our structure and for how we allocated our capital and our energy. In line with our commitment to transform client experience, we re-emphasize that our group is built from and led by the business units. Following from our commitment to execute with excellence, we adopted the mantra of save to invest. This means focusing more sharply on leveraging existing investment, on operational efficiency, and on judicious further investment in modernizing our platforms. In order to fulfill our commitment to drive sustainable growth and value, we developed a rigorous capital allocation model.
We have followed through on these choices and commitments to achieve the pleasing results we will be discussing with you this morning. As we will shortly show you, we have met or exceeded the financial targets that we announced for the 2020 to 2025 period. This slide shows the VIX Index, the measure of volatility from 2020 to date, including the latest spike in uncertainty arising from the current distressing events in the Middle East. As we can see, we announced our targets in 2025 in the aftermath of the most disruptive and uncertain period in living memory. Things have hardly been quiet since then. The world has faced levels of geopolitical tension not seen since the 1980s. Energy price shocks, high inflation, high interest rates, political surprises, bank failures, and more recently, radical changes to U.S. economic policy.
Africa has certainly not been immune to volatility over the past five years, including periods of very high inflation, elevated interest rates, and severe sovereign stress. As can be seen in the left hand and the middle graphs, seven of our biggest markets experienced rapid rising inflation, followed by decisive interest rate responses by the authorities. Note two things here. One, that inflation experience differed widely in terms of timing and extent. Two, that Africa's central banks responded with speed and firmness, testament to their growing credibility and effectiveness. The rightmost graph shows changes in Moody's credit ratings of the same seven major African sovereigns from 2020 to 2025. Again, I would draw your attention to two features. First, frequent changes in sovereign ratings. Second, increased steadiness and upward movements since 2023, with the exception of Uganda and Mozambique.
In sum, a complex and rapidly changing picture, but a broadly improving one. Very importantly, however, and despite all these complexities, Africa's growth engine just keeps running fast and steady. The graph on the left of this slide shows aggregate GDP growth for sub-Saharan Africa from 2020 to 2025. There's a lot of evidence that Africa's growth has become endogenous and self-sustaining. This is thanks to our favorable mineral and agricultural endowments, rising human capital, rapid urbanization, infrastructure development, expanding trade, and generally improving business environments. How does one invest in Africa's aggregate growth? That's what Standard Bank can offer.
We translate and amplify Africa's aggregate GDP growth into tangible headline earnings growth, as can be seen on the right of the graph. To do this, it is necessary to have the scale, the diversity, and the skills to manage the volatility and risk in each market and in each country together combine into aggregate performance. As illustrated on this slide, we manage volatility by having a large and diversified portfolio. It is diversified in two senses, by business unit and by geography. We now have four business units whose headline earnings contribution are illustrated on the left. It's worth remembering that in 2021 we had only just separated Personal and Business Banking into two distinct business units, and we had only just announced that we were acquiring complete control of Liberty. Separating Personal and Private Banking was a large but very worthwhile undertaking.
PPB and BCB are both now more sharply focused. Liberty has become a part of the insurance and asset management business unit, a much bigger and more profitable business. Each of our four business units serves different client segments with different needs. We respond in different ways and in different speeds to the macroeconomic and market developments. Our business units therefore combine into a portfolio that is robust to the economic cycle. Turning to a geographic view shown on the right of the slide, our well-diversified portfolio of businesses across Africa and offshore creates robustness to local shocks and to global geopolitical developments. A further source of robustness is that our Africa region's businesses are split into west, east, and south and central regions, each of which has its own distinct economic characteristics. I turn now to outcomes for each of our strategic choices, starting with transform client experience.
Our business units have made excellent progress in deepening relationships with our clients and enabling them to interact digitally with us. For example, our improved merchant offerings resulted in a 13% compound annual increase in acquiring turnover. We've invested ZAR 1 billion to enhance our new online banking interface for BCB clients and have onboarded 25% of our clients to date. In 2025, we used hyper-personalization at scale. We generated over 40 million personalized client engagements. We delivered innovative solutions for clients mobilizing ZAR 277 billion of sustainable finance, and we paid over ZAR 28 billion in claims. The outcome can be seen on the right-hand side of the slide, where we show an annualized 11% growth in revenue since 2020.
In our priority to execute with excellence, we highlight that 88% reduction in legacy servers and a 27% reduction in data center footprint as a result of moving 71% of our migratable processing into the cloud. These kinds of savings have freed up resources which we have invested in modern platforms to improve client experience. These platforms are now enabling us to continue rapid innovation in payments and in artificial intelligence. On the right-hand side of the slide, we show that all these efforts combined to increase our efficiency and deliver operating leverage. Since 2020, our cost-to-income ratio has improved by almost 900 basis points to 50.2%. As a purpose-led organization, the Standard Bank Group is committed to generating positive impact for all our stakeholders.
In 2025, for instance, we lent ZAR 32 billion to SMEs across Africa, and we disbursed nearly ZAR 5 billion to homeowners to enable them to reduce their environmental impact. We have financed a cumulative 11 GW of renewable energy in South Africa to the value of ZAR 108 billion. As I mentioned earlier, we have so far mobilized ZAR 277 billion in sustainable finance. We are well on our way to meeting our target of ZAR 450 billion in sustainable finance clearly by 2028. Turning now to shareholder return, our five years of steady and disciplined effort have culminated in headline earnings growth to ZAR 49.2 billion. Return on equity more than doubling to 19.3%. Except when following regulatory guidance during the pandemic, maintaining our dividend payout ratio within our target range.
Most importantly, we delivered total shareholder return of 26% over the period, outperforming the average of our major South African competitors by 3 percentage points each year. This slide summarizes our performance over the past five years for the period and for the year 2025. As we have shown, we have met or exceeded the financial targets we announced in 2021. We don't merely survive in volatile times. We thrive thanks to our unmatched scale, our unique reach across the continent, and our deep capabilities along the whole spectrum of financial services. I will now hand you over to Arno Daehnke to take us through the 2025 financial results in detail.
Good morning, everyone, and thank you, Sim. I'm now going to cover section two of the presentation, which analyzes the group's 2025 results in detail and outlines our expectations for 2026. As you can see, Standard Bank Group delivered another excellent set of results in 2025. Headline earnings grew by 11% to ZAR 49.2 billion. Headline earnings per share and dividends per share grew by 12%, and a strong Common Equity Tier 1 ratio of 13.8% was recorded. The group's return on equity extended to 19.3%. The cost-to-income ratio declined to 50.2%, and given overall improving macros, the credit loss ratio declined to 73 basis points. Despite lower interest rates and muted retail loan growth, our diversified portfolio continued to deliver strong results.
Despite trade and geopolitical disruptions, developments in global macros were overall constructive. In the second half of the year, Mozambique's sovereign rating was ungraded due to an increase in financing pressures. In contrast, South Africa and Nigeria's sovereign credit ratings were upgraded, and both countries were removed from the Financial Action Task Force gray list. South Africa's inflation fell to a 21-year low, enabling a new 3% inflation target. Across the group's portfolio of countries, shown in the graphs on this slide, on a weighted average basis, real GDP growth rose to 2.1%, inflation declined to 5.3%, and interest rates declined to 8.4%. On average and as expected, changes in currency exchange rates relative to the rand were muted. A summarized group income statement is shown on slide 17, illustrating the drivers of the 11% growth in headline earnings.
Net interest income growth of 4% and an excellent non-interest revenue print delivered total income 6% higher than last year. Operating expense growth was also 6% and resulted in marginally positive jaws. Credit impairment charges reduced for a second year due to favorable macros and optimized collection strategies. These movements resulted in headline earnings of ZAR 44 billion for our banking activities, 8% higher than the prior period. Good performance from insurance and asset management activities as well as from our investment in ICBCS lifted earnings growth for the group to 11%. Earnings grew at the same rate in rands and in constant currency, given the relatively stable average exchange rate of our subsidiaries relative to the rand. The slides that follow cover our banking business unit results. On slide 19, we show lending balances over the last five years.
In the most recent reporting period, growth on gross loans and advances to customers was 6%. Corporate lending grew by 12%, driven by strong investment banking origination across a variety of sectors. Retail and business lending growth was muted as growth in disbursements was offset by higher repayments due to increased disposable income linked to lower interest rates. A regional analysis of loan growth shows South Africa increasing by 7% and Africa regions growing by a robust 15% in constant currency. This slide shows customer demand through origination and disbursement trends over the last two years. Investment banking disbursements across our network amounted to just under ZAR 170 billion in the second half of the year.
Building on the momentum from the second half of 2024 across a variety of sectors, but especially in energy and infrastructure sectors, business lending originations increased meaningfully and demand for working capital increased. However, increased customer repayments meant that origination did not meaningfully translate into book growth in the period. Home loan payouts in South Africa increased by a pleasing 11% year-on-year, showing an acceleration in the second half of the year. Easing inflation and interest rate cuts improved buyer affordability as well as confidence, leading to increased demand for mortgages.
The acceleration in Personal and Private Banking VAF disbursements was driven by a recovery in new car sales in South Africa and our strategic focus on serving our own clients. Total deposits increased by 11% year-on-year to ZAR 2.4 trillion, supported by a 10% growth in current and savings accounts and 18% growth in cash management deposits. Deposit growth was strong across most markets, supported by competitive products, better client engagement, and a larger active client base. As mentioned earlier, net interest income grew by 4%, driven by the larger average balance sheet I spoke about just now. The waterfall graph shows our margin dropping by 7 basis points to 483 basis points.
Margin compression was driven by the negative endowment impact of lower average interest rates, which impacted the margin by 29 basis points or ZAR 6.4 billion. This was mitigated by our endowment hedging program and asset management strategies, which contributed ZAR 2.5 billion in downside protection in the period. Margins continued to be impacted by the positive mix benefit of the Africa regions portfolio growing faster than the South African portfolio. Loan pricing, however, remains under pressure in home services, commercial asset finance, as well as in investment banking lending. As we saw on the group income statement, non-interest revenue grew by 10% in the period. Our focus on growing a diversified stream of capital-light revenues is indeed bearing fruit. Our largest component of NIR, namely fees and commission revenue, will be covered on the slides that follow.
Insurance revenues, which we have attributed to banking services, increased by a pleasing 11% to ZAR 2.7 billion. Collaboration between our banking and insurance and asset management businesses leveraged our combined capabilities to deliver competitive end-to-end insurance and investment solutions to clients and resulted in accelerated insurance revenue growth. Net fee and commission revenue increased by a pleasing 11% to ZAR 35.7 billion, supported by strong deal origination and associated fees, particularly in CIB, increased transaction volumes in BCB, and an expanding and more engaged client base in PPB. Personal and private banking net fee and commission revenue growth was 10%, and this was boosted by a 33% increase in revenue from value-added services adjacent to our banking products. Value-added services have grown from both higher transaction volumes and deeper cross-sell of these banking adjacent products.
Trading revenue grew by 10% year-on-year on the back of heightened market volatility, which led to increased client activity and also, of course, market making opportunities for us. Revenue was driven by client demand for credit-linked notes, structured and financing solutions in South Africa, as well as foreign exchange transactions in African regions. While opportunities for market making revenues were higher than normal this year, client franchise-related revenues remained at 80% of total global markets revenues. Turning now to credit impairments and starting, as we usually do, with the balance sheet provisions. While gross loans and advances grew by 4% year-on-year, total balance sheet impairments ended the year just over ZAR 65 billion, and this is broadly flat on the prior year.
Within the ZAR 65 billion, we saw an increase in Stage 3 provisions, which was offset by a decrease in Stage 1 and Stage 2 provisions. Stage 3 coverage was increased to 50% for provision for long-standing non-performing home loans, as well as increased Stage 3 balances in personal unsecured card, as well as corporate lending. Total coverage ratios, as you can see here, remained robust at 3.7%. This slide looks at loan performance trends specifically for PPB South Africa. Lower interest rates, rising wages, and easing inflation improved consumer financial health. On the left-hand side, we note a continuing trend of declining early delinquencies. This consistent decrease shows our intentional effort to create healthier credit behaviors earlier in the credit life cycle to reduce the likelihood of moving to a non-performing loan status. Activities include proactive restructuring, redesigned customer assistance programs, and improved collections processes.
On the right-hand side, we show NPLs continuing to grow, but at a much slower rate. Balances are now lower than they were at June, and as a percentage of the book, as you can see here, NPLs have dipped to 11.1%, and this is compared to 11.3% in the prior year. Sticky NPLs, either in the legal process or as part of an insolvent or a ceased estate, are taking longer to resolve than we would like. We are, however, encouraged by the progress we have made to date on this. Credit impairment charges decreased by 5% overall year-on-year. Within those charges on loans reduced by 9% and charges on financial investments and other increased to ZAR 1.5 billion. This was primarily driven by default on local currency debt in Mozambique.
We are comfortable that we are well provisioned against Mozambican exposures. Within the charge on loans, the retail and business portfolios benefited from an improved macroeconomic environment, optimized collection strategies, remediation efforts, and improved early intervention strategies. Credit impairment charges in the corporate portfolio increased off a low base but remain well below the CIB through-the-cycle target range. The overall credit loss ratio improved year-on-year from 83 basis points a year ago to 73 basis points, trending towards the bottom of the group's through-the-cycle target range of 70 to 100 basis points. Operating expenses grew by 6% to ZAR 85 billion. Staff costs grew by 5%, driven by annual salary adjustments, higher performance-related incentives, and of course, a continued investment in specialist skills we need. Other operating expenses increased by 6%.
Software and cloud costs rose by 9% due to higher servicing fees, subscription and continued investment in technology. Marketing and advertising spend also increased linked to investment in digital marketing platforms and specific client marketing campaigns. Total income growth exceeded cost growth for the fifth consecutive year, resulting in positive jaws of 64 basis points and a continued improvement in the cost-to-income ratio to be now at 50.2%. As you can see here, we have a proven track record of managing costs relative to revenue growth. Of course, while continuing with prioritized investments into technology, into critical skills and into specific client related initiatives. That completes our banking analysis, and I'm now turning to insurance and asset management.
Insurance and Asset Management delivered headline earnings growth of 26% to ZAR 4.1 billion and a very pleasing return on equity of 22.1%. Earnings from insurance operations grew by an impressive 27% due to improved persistency and risk experience in South African life savings and investment businesses and a much improved result from the short term business in South Africa. New business value across insurance was up 12% due to steady growth in embedded risk book, and this includes Credit Life, Funeral and Flexi Life products, as well as the better short term insurance result. Asset management earnings increased by 16%, benefiting from performance fees and growth in the asset base in both South Africa as well as in Nigeria. Total assets under administration and management increased to ZAR 1.8 trillion.
Earnings derived from the shareholder portfolio became less volatile following the implementation we did last year of a capital stability portfolio. Regulated entities within IAM continue to hold strong capital buffers and are well covered. This slide shows the meaningful changes to the earnings and return profile of IAM since the buyout of Liberty Minorities, which Sim spoke about early on. IAM's gross contribution to the group, and this is illustrated on the left-hand side, is before a revenue pay away to our banking business units and over a three-year period, earnings have increased by 13% a year. Increased collaboration between IAM and PPB, which are referred to early on, has driven insurance earnings up by 17% per annum over the period shown.
The significant improvement in the ROE over the three-year period from 18.5% to 33.7% was driven by strong earnings growth and of course, capital optimization actions in prior periods. I remind you that following the acquisition of Liberty Minorities in 2022, close to ZAR 16 billion of distributions have been extracted from Liberty Group. The graph on the right-hand side reflects the IAM business unit's net earnings and return on equity post revenue attributions to banking. Turning now to the group's robust capital position. As commented earlier, Standard Bank Group's Common Equity Tier 1 ratio was 13.8%. This ratio remains well above the regulatory minimum of 9.5% and above our internal target of 12.5%. You can also see here the group's liquidity ratios both remain well above the 100% regulatory requirements.
The graph on slide 36 illustrates the build up of our Common Equity Tier 1 capital over time. The dark blue bars represent minimum regulatory capital and should grow in line with risk-weighted asset growth. In the current period, we also saw a step up to support the new regulatory requirement to hold capital for countercyclical buffers. This capital base shown in the dark blue bar supports our ongoing franchise growth. The light blue bars represent internal capital buffers held for macro uncertainties and to bolster our resilience and fortress balance sheet. This capital is available to absorb macro and business stresses that may arise. These buffers take our Common Equity Tier 1 ratio to 12.5%. The bright blue bar on top represents the capital available for expansion, organic or inorganic dividends, as well as share buybacks.
Although the current operating environment remains highly unpredictable, our substantial and resilient capital base, combined with an established record of effective capital management, positions and protects us well. We are confident in our capacity to mitigate potential downturns and to capitalize on emerging growth opportunities. I would like to spend some time on the group's cost of equity as this is an important variable in our assessment of shareholder value add. We currently calculate the group's cost of equity to be 13.8% using the standard capital asset pricing model, which is well known to you all. This has been reducing over the last number of reporting periods, mainly due to a reduction in the risk-free benchmark interest rate used in the calculation. In 2025, the risk-free rate in South Africa declined by 200 basis points to end the year at 8.3%.
We also sense check this important metric using a weighted average calculation of each of our legal entities. Within Africa regions, inflation and country-specific risk factors drive a calculated weighted average cost of equity across all our subsidiaries in Africa regions of 22%. To reflect the diversification benefit and relative stability that this portfolio has delivered to the group, we correlate country earnings to South Africa's earnings over the last four years, and then to arrive at an adjusted cost of equity for the Africa region of 16.5%. Using a 10.1% cost of equity for our offshore operations, dollar denominated, the 16.5% we just calculated for Africa regions and the 13.8% for South African operations, the group's weighted average cost of equity is calculated as 14%.
This closely approximates the 13.8% we have disclosed. Looking forward, interest rates, which are reducing, and inflation differentials, which are also reducing, together with improved credit ratings, Sim has referred to, will result in incrementally declining group cost of equity on a weighted average as well as on a CAPM or capital asset pricing method basis. On this slide, the graph on the left shows the group's improving ROE relative to the declining cost of equity we have just discussed. The graph in the middle represents economic shareholder value added, referred to by Sim early on. As you can see in the current period, shareholder value grew by a very impressive and exceptional 62% to ZAR 14.1 billion. The graphs on the right show distributions to shareholders.
Our ordinary dividend declared today is ZAR 8.78 per share, and the total dividend for the year is ZAR 16.95 per share. This is a dividend payout ratio of 56%. If we add the share buybacks we did earlier in the year, the distribution payout ratio rises to 64%. To illustrate the diversity and depth of our franchise, we present the group headline earnings by business unit on the left, by product in the middle, and by legal entity on the right. Corporate and Investment Banking, as you can see, remains our largest business unit, generating around half of the group's earnings. On a product basis in the center and in the current year, transactional banking products were impacted by the negative endowment impacts on our large deposit and transactional franchises.
In the legal entity chart, African regions contributed 40% of the group's earnings. On slide 41, we showed the build-up of group earnings by business unit. CIB earnings rose by an impressive 18% with the return on equity over 22%, and this was driven by strong income growth. Business and Commercial Banking earnings fell by 4% but maintained a robust 38.1% return on equity. BCB's overall income stayed flat due to margins which were compressed from the lower interest rate environment. Personal and Private Banking earnings were up 3% and achieved a return on equity of 23.3%. Within this result, Personal and Private Banking in South Africa grew earnings by an impressive 10%. I've already discussed the Insurance and Asset Management performance drivers. Here also, you can see ICBCS contributing ZAR 1.5 billion.
This was up a strong 46% due to increased client activity and also the higher precious metals prices which they could capitalize on. This slide represents the financial performance of our sizable local subsidiary, SBSA, on the left-hand side, highlighting earnings and returns across multiple years. Despite sluggish growth in the economy of South Africa, SBSA saw earnings increase by 7% in the period. On the right-hand side, we analyze earnings from Africa regions, and we here have broken it down into sub-regions. Even in a complex and challenging environment, our Africa regions franchises recorded robust growth. Total earnings grew by 9% in rands or 10% in constant currency and delivered an overall return on equity of just under 26%. Over the depicted timeframe, the Africa regions portfolio has achieved an annual average earnings growth rate of 16% in rands.
West Africa continues to generate excellent growth in returns. South and Central was impacted in the current year by the sovereign downgrades in Mozambique. We are excited about the outstanding prospects that all of these Africa regions franchises offer, and we remain fully committed to harnessing their momentum for exceptional growth in earnings and impressive returns for our shareholders. I'm now gonna cover the outlook for 2026. We expect continued macroeconomic support in 2026. We expect accelerating economic growth, declining inflation, as well as declining interest rates to reinforce earnings momentum, support balance sheet resilience, and position the group well to capture increased economic activity. Exchange rates are expected to remain relatively stable on average across our portfolio in 2026. Of course, geopolitical developments in the Middle East, particularly the conflict involving Iran, continue to introduce uncertainty. The above forecasts include our latest best estimates.
Of course, an escalation in the conflict could impact these forecasts. We continue to be guided by our purpose. Africa is our home, we drive her growth. The opportunities that Africa present are large, and they are growing. We recognize the challenges of intensifying competition, evolving regulatory dynamics, volatile macros, and also the accelerating role of artificial intelligence and other advanced technologies. We are confident in our ability to drive growth, not only in the short term, but in the medium to the sustainable long term. For the 12 months to 31st of December 2026, and using the macro forecasts on the previous slide, we expect the following. Banking revenue to grow by mid- to high-single-digit s, supported by ongoing business momentum. The group ROE to be higher than in 2025, with both banking and insurance ROEs improving.
The banking cost-to-income ratio is expected to decline slightly on the back of positive jaws. The credit charge impairments is expected to increase, but the credit loss ratio will remain in the bottom half of the through-the-cycle credit target range of 70-100 basis points. The Common Equity Tier 1 ratio will remain robust, and we expect a dividend payout ratio to be at the top end of our range. This guidance is set out in the context of the 2028 targets laid out last year. We are confident we will deliver in 2026 and remain on track to deliver on the 2028 targets. I will now hand back to Sim to conclude. Thank you very much.
I will conclude by looking ahead to the rest of 2026 and to our next medium-term period, which runs from this year to the end of 2028. First, as Arno has just said, we are of course concerned by the conflict in the Middle East. It is too soon to comment with any confidence on the long-term economic effects of that conflict. The most important variable over the next several weeks will be the price of oil. Unless the war ends very soon, elevated oil prices will start to negatively affect global inflation, then interest rates, and ultimately growth. A prolonged war could also place additional stress on many African economies through both oil prices and interest rate channels and could push up fertilizer prices and reduce food security. These negative effects could be counterbalanced by higher export prices for energy and metals.
Standard Bank has taken the necessary actions to manage our risks and will continue to monitor the situation very closely. We have developed scenarios to guide our actions over the rest of the year and beyond. We understand the possible impacts on our business and stand ready using our fortress balance sheet and unparalleled risk management capabilities to support clients in, for, and across Africa. As today's presentation has shown, the Standard Bank Group is particularly expert and experienced in managing volatility and in creating superior shareholder returns in turbulent times. Therefore, as things stand, we see no reason to modify our commitments and our targets. The outcomes we expect for 2025 will keep us well on track to meet our 2028 targets.
These are to grow headline earnings per share by 8%-12% and achieve a return on equity within our new higher range of 18%-22%. We will be providing considerably more detail on how we intend to reach these targets at our Capital Markets Day. As I mentioned at the start, the overarching message of today's presentation is that we do what we said we were gonna do. As you can see, we have kept our promises. We will do so again over the next 3 years. Thank you. That concludes our presentation. We will now take questions, and I will request Arno and the business unit heads to please join me on stage. Thank you very much, folks. We will start with the room here in Rosebank. There are roving mics.
Because the room is quite large and I've got middle-age challenges with my eyes, I will ask you to identify yourself please when asking a question. Calling for questions in the auditorium.
Morning, Sim. It's Clem.
Morning, sir.
May I please start by complimenting the bank and the pension fund? I know it has a long history of volatile performance, and I know it was resurrected during the seventies by the late Henri de Villiers. The way the pension fund continues to not only pay bonuses at year-end, but annual increases in excess of inflation is very, very much appreciated.
Thank you, Clem, and we do stand on the shoulders of giants, the great Henri de Villiers that you're referring to, and of course yourself. Thank you.
I'm not in that company. Thank you. Looking at slide 10, the amortization of high investments in core banking developments that Bill, Ben Kruger will be very sore about. How much longer is this amortization going to continue?
Arno.
Thank you, Clem. Amortization has come down quite materially. Currently, the charge was just over ZAR 2 billion. We expect that to continue to come down. Clem, we do continue to invest in technology and in very select circumstances. Following the accounting rules, we do capitalize some of those technology investments, so they will have to be amortized in the future. It's never gonna come down to zero, but it's certainly gonna continue to come down from the current ZAR 2 billion level.
Fine. Thank you. On slide 11, your infrastructure, if I may call it that, original target of 445. Given where you are now, are you going to reset that, or are you gonna talk about that on 26th March?
Let me ask young Luvuyo to answer that.
Thank you, Sim. Thanks, Clem, and good morning. We have recently updated that target. You'd recall we previously had a target of ZAR 250 billion. We think the ZAR 450 billion is still appropriate, to maintain in the medium term. Even on the 26th, we'll reconfirm the ZAR 450 billion.
Right. On slide 17, may I compliment Yuresh and the asset management team on the ROE at 26%. Thank you.
Yuresh, do you want to comment?
I'll take the congratulations.
You'll take the compliment.
Thanks, Clem.
Thank you, Clem. I'm calling for more questions in the auditorium. If there aren't, can we move to the conference call? Operator, do we have any questions?
At this stage, there are no questions on the conference.
Right. Sarah, do we have any on the webcast?
Thanks, Sim. Yes, we do have some on the webcast. The first one's from Ashburton Investments. It relates to IT investments. The question is: Where are you within your IT investment cycle relative to peers, particularly with regards to amortization? I think we've answered that. The second part of the question is: Is the current run rate in IT/tech spend sustainable over the next three to five years?
Arno?
Yeah. We obviously have to continue to invest in technology. You can see software, cloud, and technology-related costs going up 9%. We continue to migrate and have great progress in migrating into the cloud. That is so critical for us to utilize the advantages of artificial intelligence, for example, which is a very focused area of growth for us. We continue to invest, but there also are opportunities to save as we shut down our own data centers and as we increase in compute in the cloud and also as amortization costs come down. I think I've already answered the amortization question.
Sarah, do we have more?
Yes. The next question is from Baron Nkomo from JP Morgan. Relates to IAM. What is your 2026 earnings outlook after a solid 26% growth in 2025 and the strong 22% ROE achieved in the year? How much of this is repeatable from operating drivers versus markets?
Thanks, Baron. I think as you reflected, there was positivity in investment markets for 2025. It gives us the opportunity to start particularly with opening or higher asset values as we start 2026. If we look into where we are, not just for 2026, but actually for the medium term, we expect on a normalized run rate to increase our earnings at high sort of early, say, double digits. Be it in the 9%-10%. I think the ROE as well at 22.1% is off the back of a focused capital optimization program that we ran for several years. That's complete, and we expect our ROE to remain at that level and improving from here onwards. Thank you.
Thanks. I've got three questions from Chris Stewart from Ninety One. I'll read the first one, and then I'll come back to the second and third. The first one is: Current events notwithstanding, it looks like the weighted average currency translation impact will be a bigger drag in 2026 relative to 2025. Is this a potential concern regarding the guidance for 2026? And similarly, if energy markets normalize, will the negative endowment impacts be considerably higher?
Doc?
Yeah, Chris, as I'd shown on the podium, we don't expect the currency impact to be that material. It'll be slightly negative, but not that material. That's based on our weighted average calculation across all of our portfolios. Sarah, just repeat that, please.
The second part of the question is in relation to endowment.
Oh, right. Endowment.
If the markets normalize, will the endowment be worse than guided?
No, I don't think so. We now expect two rate cuts in South Africa based on our base case outlook, and of course, we have many scenarios around that. One in May and a second rate cut in the second half of the year. Our guidance is based on those rate cuts. We then also expect a third rate cut in early 2027.
Thanks. The next two questions from Chris. Is the current extreme volatility we're seeing good or bad for the global markets business?
Thanks, Chris. As we're seeing in the short term, it is beneficial to the global markets business on the back of increased client activity as they try to mitigate the risks. We're seeing increased hedging activities which is driven by from a client perspective. Of course, the longer the conflict drags on and with uncertainty of the end of it, I think the transmission you know effects of higher oil prices into inflation, slower growth and impact of some of the FX liquidity in the market could become a challenge. In the short term, we're seeing it in our business for the first two months, we think it's we believe it's a net positive.
The second question also from or third question from Chris, sorry. What would be the impact for the group if dollar liquidity conditions were to materially tighten across the continent?
I'll ans-
Luvuyo.
Look, I'll give you a perspective from the business, and then maybe Arno can talk broader from a group perspective. Look, what we saw, and you'd recall what we saw during COVID and the aftermath of COVID, we saw quite a drain in FX liquidity. What that drove from a business perspective were a couple of things. Firstly, we saw quite a big swing into local currency increase in that business, especially for African markets, which provided opportunities for wider margin business. Secondly, we saw a drag in volumes of FX traded, but the margins were much wider. We actually saw that it was net neutral overall.
The challenge, of course, with it is, more from a sustainability point of view, is that you see much less growth, in those economies, which has a more longer-term negative impact, to the business.
The next question is from Charles Russell from SBG Securities. There are three questions. I'll read all three of them, and then we can. I'll come back to them if need be. Can you comment on the resilience of your Africa regions portfolio in the context of higher oil prices? The second question is, with a solid 13.8% CET1, how are you thinking about inorganic opportunities in the context of Nedbank bidding for NCBA and FirstRand taking a stake in Optasia? What capabilities are you looking to add to the group's arsenal? The third question is, can you comment on any capital optimization in your FY 2026 guidance for ROE?
Arno, do you wanna take?
Sure.
Yeah, resilience in AR remains on the back of this diversified portfolio, strong, and we've pointed it out on the podium. In terms of the oil price impact, which I think, Charles, you specifically asked, clearly, there are oil exporters on the western side, and they will continue to do very well. Angola, for example, I know the sovereign has budgeted their oil price to be at $61 a barrel. That's what they've set out their fiscal discipline on, and clearly at the moment, that leaves a lot of upside in our very valuable franchise in Angola. Similarly, in Nigeria and other oil-exporting countries, we do expect this to be giving a boost there. On the other hand, obviously, in South Africa and possibly East Africa, oil importers, there will be an impact on possible higher oil prices.
Our group economists indicates roughly 20 basis points growth reduction in South Africa on the back of a sustainably higher $10 oil price. If the oil price goes sustainably higher for the whole year by $10 up, we can expect around a 20 basis point growth impact. Just gives you an impact on the sensitivity. Importantly, because you're asking about resilience, the way we approach this is through scenario analysis, stress testing, as opposed to just having a singular view of the market and of our business.
We are, as we normally do in these environments, very actively involved in looking at all of the possible scenarios for each of our different markets, and that allows us then to plan to support our clients in these volatile times and to grab opportunities where we can, but also to ensure we have the right capital, liquidity, and funding structures, which Luvuyo spoke about earlier on, to actually win in these environments. On CET1-
Let me a-
Sorry.
Let me answer the strategic question, and you can come back to CET1.
Okay.
On the strategic question, we are quite comfortable with organic growth, and our targets and our strategy are driven off the opportunities that we see organically. When opportunities arise for inorganic growth, the strict capital allocation processes in the group demand that we charge and we do transactions that are appropriately priced given the capital that is to be allocated. Of course, we worry about how to think about the golden growth model, and we are very focused on growth as well. We've got the capability to do programmatic acquisitions, and that is part of what we do on a daily basis. What competitors do is of interest. We watch it with interest, but we stick to our own strategic plans. The targets to 2028 will be met by existing strategies.
And then CET1 .
On the capital adequacy at 13.8%, as I indicated, we are well-capitalized. We have continual optimization activities around our capital. This relates to the capital management, collateral recognition, risk-weighted asset optimization. In the CIB business, for example, there's also opportunity to think more about capital-efficient distribution models. We're working on all of this, to continue to derive a optimized capital stack. This also includes issuing Additional Tier 1, Tier 2, and importantly also FLAC instruments, these new debt instruments which we are the first to issue in the South African market.
Thanks. The next question is from James Starke, from RMB Morgan Stanley. Again, there are a few questions, so I'll run through them. What is the outlook for NIM for 2026? On loan growth outlook, please can you comment on which product areas you see as attractive and for growth into 2026, where you've seen the strongest loan production in the first two months of the year? Third question, ICBCS delivered a strong 2025. Can it sustain this level of performance into 2026 and possibly even grow off this base? Then the fourth question, trading income in global markets continues to impress. Can you sustain this growth tempo into 2026? If I repeat, one question on NIM, second one on loan growth outlook, third question on ICBCS, and fourth question on trading income. Thank you.
Can I suggest that Arno takes the NIM and ICBCS question, and the business units take the loan growth question.
Great. Thank you, Sim.
Mm-hmm.
We do expect some NIM compression. As indicated in 2025, we had 7 basis points. In 2026, somewhere between 10 and 15 basis points of NIM compression. On ICBCS, they indeed had an exceptional year. They exceeded their plans by quite some margin. At this stage, we don't expect a performance as high as in 2025, though. There could be some reduction on the earnings contribution.
Thank you. On asset growth in PPB, the outlook is faster growth in unsecured lending compared to secured, both in South Africa and Africa regions. Overall, due to the size of mortgages, we still expect assets to grow low to mid-single digits. Thank you.
Yeah. I'll start with the loan growth and then answer your question on global-
Trading.
Trading. The first is on the loan growth, what we are seeing consistently across many of our markets, is client activity off the back of structural reforms, whether it's been in South Africa around energy and infrastructure. We see that as a theme across many of our markets. Off the back of some of the constrained balance sheets of sovereigns. We're seeing in many of our markets that the private sector is playing a much bigger role in those investments, which we believe we're well-placed to take advantage of. We have seen that continue very strong finish into last year, and we're seeing that continuing into this year.
On the trading, James, we've always talked about it. It is really important to be mindful and to know that, you know, that our trading business is of our client franchise first and foremost. The fact that we have this presence across 21 markets and we are at scale in many of those markets means that we can originate and help clients manage their risk in a way that is differentiated to the market. We also organize our teams and our trading teams in a way that really helps us firstly internalize the risk distributed internally, which means we're able to maximize some of the benefit and the margins before externalizing some of that risk.
Arno showed a slide that when you consider our trading revenue, 80% of it is traditionally from our client business, and we have no reason to believe that will not continue to grow. In these numbers, that grew by 10%, and we believe that momentum for that part of the business is there. The fact that we have these opportunities from clients means that we often do have the ability to take advantage of what we refer to as market making. Off the back of client situations that we can take a view on some of what we're seeing in the market. That is one that's generally variable. As you've seen over a period of 10 years, we've been able to maintain the growth in this business.
If your question is whether we'll grow by 15% again next year, I don't know the answer to that. We're not planning for that high, but we expect for us to grow off the base that we have. Just to confirm that we believe the base is sustainable.
Could I just add, it of course goes without saying, but it is worth adding that we've built a risk management capability throughout the network over decades, and it's not something that has happened overnight, and that capability exists in our board as well. If I could ask Bill just to cover the loan growth.
Perfect.
Part of it.
Thank you. James, as we've covered previously in our discussions, we've very much focused in BCB on the client experience and improving that over time. In that context, we've been improving our credit processes, substantially increasing the throughput of digital lending, particularly in the enterprise segment. In addition, we've built a team for structured lending within BCB that's growing really very nicely now. Improving things like the throughput of working capital by improving impairment processes or new business approval processes, et cetera. Interestingly, what we see now is actually we turn roughly 60% of our balance sheet within the year, and we think that's quite sustainable, if not to improve over time. The pace of growth on the balance sheet, well, this year, as Arno pointed out, actually has been quite muted.
When you look at it collectively, a lot of that is the remediation of the residual Africa book and International book. Actually net-net, the individual businesses and, portions of the business in lending are growing nicely. Thank you.
Thanks. The next question is from Ross Krige from Investec. Sorry, we've covered that. That was with regards to NII and NIM. The next question is from Harry Botha from Bank of America Securities. Well done on the results. Can you expand on CIB's loan growth potential in 2026? And how is local currency African lending supporting your growth expectations?
Yeah, thanks, Ross. As I've mentioned in the previous answer, previous question, we believe that the momentum in the lending and the opportunity that is driving that momentum remains off the back of structural reforms, off the improved, you know, business environment across many of our markets, lower interest rates off the back of lower inflation. We think we'll continue to see clients wanting to expand and invest. Lastly, the point around the critical minerals in towards the East and Middle of Africa, we think will continue to provide great opportunities for growth. On the local corporates, in our investment banking business, our Africa business grew faster than South Africa in terms of loan growth.
That is a better margin business as well, and it's been one of the big drivers for the very strong performance of the investment banking business. We think that will provide opportunity for continued growth.
Next question. The next question is from Jarred Houston, All Weather. Please explain why we're not seeing higher return on risk-weighted assets commensurate with the higher ROE?
Doc?
Yeah, we are growing our CIB business faster at this point in time in this cycle, and the returns on the CIB business are not as rich as they would be in BCB or in the other business units, for example.
It is important to remember that the CIB business, the lending business, forms an important part of all the ancillary activity that we do. One can't simply measure the-
Yeah
risk-weighted assets of the lending business on its own.
Yep, that's a good point.
There's a second question from Jarred Houston. Please explain the changes made to the Liberty shareholder portfolio and why the group didn't participate further in the strong 2025 market returns.
Sure. Thanks. I think as mentioned by Arno, we do hold a long bond position in terms of managing our capital stability. In that context, we put in a hedging program relating to that long bond interest rate position. That has come through in the year, and effectively what we should see out of that is through the cycle, less earnings volatility over the period. That's one which we feel in the long run is actually a more stable outcome for us over the long period.
The next question is from Kabelo Moshesha from Mazi Asset Management. It's for BCB. Please do unpack the pressures you're seeing in the BCB business and what are the key initiatives that will see growth turning positive?
Perfect. Thank you. So when you break down the BCB business, I think it's important to break it down geographically and then product-wise. Geographically, we were very pleased with the outcome in South Africa, particularly relative to the competition as you see them reporting to find ourselves in the position that we did, largely flat year-on-year, given that the business is so geared towards endowment. Now that would be true across the other businesses. In the other businesses, Africa regions and international, we've been doing quite a lot of remediation that we've covered with the market in previous years. For example, in international, there's actually a reduction in assets and liabilities as we've adjusted our risk appetite.
The consequence of that, though, is if you look back over a number of years, is we've actually halved the credit loss ratio on the business as a whole. We think that we enter into a period where we can sustain that credit loss ratio and build off that foundation moving forward. South Africa, obviously, we've got a big business in South Africa with relatively high market shares. In commercial, we would say we're definitely number one in the market. As you move into business and enterprise, probably more into the number two space. That is where we would want to seek growth in South Africa, particularly in the enterprise segment.
In Africa regions, of course, we've got relatively low market shares across a very, very big market. There's a lot of potential for us to continue to grow, much as we did in the investment banking business and the CIB business, in years gone by. We see a lot of upside in the business over the long run.
The next question is from Warren Riley from Bateleur Capital. I see limited discussion on the use of AI in your results. Can you talk to some of the opportunities you see in terms of improved productivity and potentially save on costs over the medium term?
Artificial intelligence does indeed form a central part of our group strategy. It is led by our Chief Operating Officer, Margaret Nienaber. We have got use cases right across the organization, ranging from risk management to personalization in PPB, personalization in CIB. The range of activity ranges from productivity right across to client experience. We've got targets that are internal, we've got strategies that are internal, and they are giving rise to outcomes consistent with the targets to 2028. That is also related to our strategy in payments, and it's also related to what we said about our cloud capability, setting us up to be able to do both.
The next question is from Foord Asset Management. As the high disbursements shown in your presentation annualize into this year, do you expect retail advances to start delivering material growth, or are high repayments still a headwind?
Thank you for the question. What we expect to see is continued growth of new business, as we start to see clients, particularly in South Africa, start to show signs of resilience. Particularly as we start to think about interest rates, reductions at least, in our base case. However, the rate of repayment, or what we call the prepayment rate, does offset part of that growth. Where we expect to see net growth is in personal lending, both in South Africa and Africa regions. These are what clients use for predominantly, three uses. Firstly would be education-related, secondly would be home improvements, particularly as people are staying in their homes for longer, and thirdly would be travel-related expenses. That's what we are expecting to see in 2026. Thank you.
Next question is from Simon Nellis from Citibank. Please, can you comment on the muted earnings growth relative to the other divisions, particularly in the muted earnings growth in PPB and BCB and the outlook for these divisions. Please can you also explain the higher effective tax rates this year, and whether we should assume the same tax rate going forward.
Funeka, you go first.
We are quite pleased with the performance print in PPBSA, if you compare it with local competitors. Just a reminder, 10% growth. Not only 10% growth in headline earnings, but 10% growth in the key line of net fee and commission, and therefore NIR as well. I think that talks to the strength of the franchise that we've built, particularly over the last four years, and we expect that to continue to entrench. Africa region's growth of 15%, I think that is also good outcome, particularly given the impact of endowment, where the offset, the big amount of the offset is sitting in our offshore business. Remember, that's the business that enables our clients to diversify their investments from local currency risk.
There, because of rate cuts, that's the one that has given us a 25% reduction. However, what we see is that the flow of local clients into offshore, we continue to capture a reasonable amount of that, and that we see as the strength of the underlying businesses. Thank you.
William?
Brilliant. Thank you. Just to tackle that question. Obviously in BCB we have less than 50% loan to deposit ratio, which is what creates the value in the business, the high return on capital. At the same time, when endowment is coming down or interest rates are coming down, you're gonna feel that acutely on the business. Just to put numbers to it, of the roughly just under ZAR 10 billion of headline earnings, we had to digest ZAR 1 billion of endowment downdraft in the year. That's a lot to sort of pick up in the year. You can see if you just look at all the graphs, we're now through the worst of the speed of reduction of interest rates.
With the asset growth starting to grow, together with the client growth starting to grow, we're comfortable we'll start to come out of where we are now.
Arno, on tax.
Thanks very much. The direct effective taxation rate, as you would have picked up in our accounts, is just under 28% for 2025. This compares to just under 26% for the period beforehand. We do expect the direct effective taxation rate to remain around 28% for this year. We have lower structured products in CIB, so that has structurally shifted that direct taxation rate a bit higher, and also higher withholding tax when we extract dividends from some of the Africa regions entities, which also has had an impact. For now, we expect around a 28% ETR.
Okay. The next question is from Tinashe from [Kruger]. There are a few questions. Some are related, so I'll read the ones that are related together, and then I'll come back to the rest.
The first one is around capital and growth discipline. How are you prioritizing capital between organic lending growth, IAM expansion, and further buybacks over the next two to three years? And what hard return or payback hurdles are you using to make the trade-offs? The second part of the question related to capital is on rest of Africa risk-adjusted returns. In African regions, can you quantify how risk-adjusted returns differ by sub-region? And what concrete actions are you taking in markets like Mozambique and Malawi to lift ROE without increasing sovereign and Forex risk?
Arno, I think those are yours.
Some great questions there. Thank you very much. Talking about trade-offs, of course, that's our job every single day to consider trade-offs between our investments and the returns for shareholders. We focus on, as you know, return on equity, but also on growth. We know when we have high ROE and high growth, that maximizes shareholder value. When we think about investments, organic, inorganic, or across different business units or product lines, we're looking for the maximum ROE and the maximum growth, earnings growth coming out of that. At the moment, we're seeing a lot of opportunity across the business units to support growth, risk-weighted assets growth, organic growth, and we stand behind these business units. We have ample capital resources to support them.
If there is an inorganic opportunity, which some referred to early on, we do the same analysis, growth prospects versus the return on capital or return on investment into that, and then would make a decision on the back of that. Always bearing in mind that we wanna uplift the valuation of the company overall. In Africa regions, we do have different ROEs. In West Africa, for example, our ROE is 37%, East it's 23%, South and Central, 22%. The portfolio overall, 26%. We expect that to be a bit higher this year. Each of those countries has got their own cost of equity and their own hurdle rates to achieve above their cost of equity. Countries like Mozambique currently would have a relatively high cost of equity. Countries like Mauritius would have a much lower cost of equity.
There's a granular analysis, and then the mandate is given to the management teams in those countries to beat those hurdle rates and of course, also have a growth lens and to set the certain growth targets we have. Mozambique, at the moment, we wanna support our clients and our sovereign, of course, there to get through the current difficult position. At the moment, they are not as ROE accretive as we'd like them to be, but we need to have a through the cycle view here, which is very important to help them get through the difficult fiscal constraints and then to continue to be one of the most profitable entities we've had in our business franchise for many years. We see tremendous opportunity in Mozambique.
I don't need to tell you about the opportunities in the gas field specifically, and the investment that's going into that. In the long term, Mozambique will be highly accretive to the group, while in the short term, we're managing some fiscal constraints together with the sovereign.
Luvuyo, do you wanna add maybe on the dynamic between sovereign and supporting clients or are you comfortable with Arno's-
I think Arno answered it well. Thanks, sir.
Thank you.
Okay.
The next question is from NewsDay. There are a few questions around Zimbabwe, which I'll just summarize. Were you able to repatriate dividends from Zimbabwe? Did the foreign exchange revaluation gains in Zimbabwe reflect a structural exposure on the Standard Bank Zimbabwe balance sheet? Has the bank since adjusted its currency or risk management strategy? Thirdly, given Zimbabwe's evolving currency framework and exchange rate volatility, how is Standard Bank assessing the sustainability of revenue and profitability in these operations? I'll pause there.
Thank you. Yes, we continue to extract dividends from Zimbabwe. We have done so without constraints for many, many years. The FX reval in 2024 did flatter the trading revenue at that time and was a non-repeat in 2025, so earnings are more subdued in 2025 for Zimbabwe. I remind you, at the beginning of the year, we converted that currency, functional currency of that entity to USD because more than 80% of our balance sheet in Zimbabwe is actually dollar-denominated deposits and assets. We continue to see a valuable franchise in Zimbabwe now denominated in USD and are managing our risk exposures and currency exposures in that entity successfully. It remains profitable and has a reasonably good year if we take out the base effect of the currency reval a year ago.
The last question I have on the webcast is again from Warren Riley from Bateleur Capital. What is the current view on share buybacks? Will you remain opportunistic as you have been in the past?
Arno?
Yeah. We bought back ZAR 4 billion of shares in 2024, ZAR 3 billion in 2025, and the short answer is yes, we will remain opportunistic as and when we have surplus cash and we don't put it for immediate growth into the business units or inorganic opportunities. We will contemplate share buybacks at the right price, though. We think long term, the combination of an ordinary dividend with a payout ratio somewhere between 50% and 60%, supplemented with share buybacks, is a good strategy and a good return for shareholders.
Thank you very much indeed, colleagues. Thank you very much to, the folks on the webcast. Thank you for everybody who has been present here today. That brings an end to our results presentation. Thank you for joining us, and hopefully, we will see you at, the interims. Thank you.