Standard Bank Group Limited (SBK) Earnings Call Transcript

Good morning. On behalf of the Board and management of the Standard Bank Group, thank you for joining us for the presentation of our financial results for the first half of 2026. I will begin with a brief discussion of the good and steady progress that we've made during the first half towards our financial and strategic targets. Starting with overall -- the overall investment case. As the graph on the left of the slide shows, Sub-Saharan Africa is now consistently the fastest growing major region in the world. Africa's growth rate is expected to dip far less than that of other emerging markets in response to the war in the Middle East. It is also expected to recover far more quickly and strongly than other regions. The map in the middle of the slide illustrates our geographic footprint across Africa. We have, on the ground, businesses in all the major African economies. 80% of sub-Saharan Africa's GDP is generated in the countries where we operate. We remain consistently the largest and most capable financial services business in the region. We have 20 million active customers. Based on assets, we are the largest financial services group in Africa. We also have businesses in all the major global financial centers, linking Africa's economies to the wider world. On the right of the slide are 4 structural themes which create our opportunities. As we highlighted at our Capital Markets Day this past March, as we said then, we set our medium-term opportunities as shaped by Africa's rapid and steady growth and highly favorable demographics. Africa's large infrastructure needs, the continent's growing and diversified trade and capital flows and developments in financial services markets, largely driven by rapid technological change. In the first half, our well-diversified African portfolio continued to provide steady growth in an otherwise unsteady world. Starting on the left of the slide, we show that the first half -- for the first half, 51% of our headline earnings were generated in South Africa, 40% were generated in Africa beyond South Africa and 9% in our offshore businesses as well as ICBCS. As illustrated in the middle panel, this well-diversified portfolio has enabled us to grow our earnings consistently over the last 6 periods despite volatile macroeconomic conditions. At 19.8%, our group return on equity is now in a structurally higher range than 5 years ago. Since the beginning of 2021, Standard Bank Group has delivered total shareholder returns of 17% per year, better than our peers by 2 percentage points. Over this half, we added another ZAR 8.4 billion in shareholder value. The growth in our SVA reflected in the previous slide is the outcome of the systematic execution of our strategy. Starting on the left, we focused on serving our clients as one Standard Bank Group, providing a comprehensive range of financial services with minimum friction. This client-led approach to growth was reflected in a larger and more active client base and good growth in capital-light revenues, including very pleasing growth in revenues from value-added services, such as Instant Money and online vouchers, which grew by 50%. We originated loans in support of our corporate clients and provided foreign exchange, fixed income risk management and financing solutions to assist clients in managing the increased market volatility observed over the half. We remain committed to supporting our clients in achieving their sustainability goals. In the first half of 2026, the group mobilized ZAR 51 billion in sustainable finance. We have cumulatively mobilized over ZAR 328 billion in sustainable finance against our target of ZAR 450 billion by 2028. Our cost control remained highly effective over the half, and we have now achieved 10 consecutive half -- 10 consecutive halves of positive jaws. We continue to invest both in people and in digital technology. One of the main themes in the global conversation over the half was, of course, artificial intelligence. Our approach is to invest where AI can improve client experience or internal efficiency. I'll say a little bit more about this on the next slide. Risks were well managed with our credit loss ratio improving to the bottom of our through-the-cycle range. Lastly, on the right, our capital allocation approach over the half. First and most importantly, we allocated more capital to support our clients, and we declared ZAR 15 billion worth in dividends while maintaining our very strong balance sheet and delivering our highest ROE of the post-Basel III era. We continue to increase our holdings in Africa Regions wherever that is appropriate, and we remain on the lookout for attractive and well-priced opportunities. It is worth saying, however, that as the largest African financial services network, we can afford to be patient, careful and highly selective. You may recall from our Capital Markets Day that technology, AI and payments are key pillars of our growth. First, our technology platform. This is the foundation which enables us to scale artificial intelligence and payments. For every rand that we spend on technology, we now generate 7.3x that in revenue. 78% of our migratable compute is now on cloud. Turning to artificial intelligence itself. During the first half, we continued to scale the deployment of AI. In addition to the productivity tools that are available to our employees, we have also built our group-wide AI platform on Amazon Bedrock to scale our client-facing use cases. This provides a shared, secure foundation to scale AI right across the group. Using this platform, we are accelerating delivery of AI use cases in 4 areas: relationship management, servicing payments and lending. More than 39,000 of our employees are active users of generative AI tools. And our AI maturity was recently recognized by the inaugural Evident AI Index for Banks, which ranked us first in Africa. AI is transforming our world and our industry. However, we are aware that we need to avoid overpromising or investing in unnecessary expensive technology. We believe that our decision to scale AI is the right one, but we are doing so in a thoughtful and disciplined manner. And finally, payments, where we have a scale advantage. The payments franchise continued to deliver capital-light revenue growth while supporting a growing deposit base. In the first half, the group processed ZAR 88 trillion in payments, reinforcing Standard Bank's position as the largest transactional franchise on the continent by payment value. We continue to invest in payment rails that we know clients want. We made good progress against the 3 priorities that we set in March. First, domestic payments. Electronic payment values grew 11% on the same period last year. Second, cross-border payments. Our market share across our footprint has grown to 19% from 17% in 2025. Third, digital assets. We continue to make good progress across stablecoins, tokenized deposits and custody. These 3 pillars underpinned the good performance in the first half. In summary, we have made very good strategic progress in the first 6 months of the year. Our focus on developing and delivering client-led growth, supported by robust risk management and disciplined capital allocation combined with continued investment in people, systems and capabilities, gives us a great deal of confidence for the rest of 2026. I will now hand you over to Arno to take you through the results in detail. Arno?

Thank you, Sim. The group's first half results for 2026 demonstrate the resilience of our diversified portfolio and show good progress against the 2028 commitments we set out at our Capital Markets Day in March. Standard Bank Group delivered another record performance in the first half of 2026. Group headline earnings increased by 10% to ZAR 26.1 billion. Headline earnings per share and dividends per share also increased by 10%. In this set of results, the rand was stronger than we had anticipated, and this had a dilutive impact on earnings translated into rands. In constant currency terms, group earnings growth was 3% stronger than our recorded 10% rand growth. Return on equity improved to a pleasing 19.8% from 19.1% in the prior period. The group's common equity Tier 1 ratio strengthened to 13.6%, providing resilience and flexibility to support growth and distributions. Within banking, the cost-to-income ratio improved to 49.3%, supported by positive jaws of 44 basis points. The credit loss ratio improved to 73 basis points, and that is from 93 basis points from last year. Overall, we have delivered good top line growth, improved credit performance, higher earnings and higher returns, and maintained a strong capital position, all while continuing to invest for sustainable growth. Running through the group's income statement on Slide 10. We see net interest income increased by 4% and noninterest revenue increased by 7%. This resulted in a 5% increase at a total income level. Operating expenses increased at a similar 5%, resulting in preprovision profit growth of 5% for banking activities. Credit impairment charges decreased by 12%, reflecting improved credit performance across all banking portfolios. Banking headline earnings increased by 9% to ZAR 23 billion. Insurance and Asset Management headline earnings increased by a strong 15%, supported by favorable persistency and risk experience and revenue growth in Asset Management. The contribution from our investment in ICBCS increased to ZAR 1 billion, driven by strong client activity in precious metals. Taken together, group headline earnings increased by 10% to ZAR 26.1 billion. I will now turn to analysis of the banking businesses, starting with the balance sheet. Gross loans and advances to customers at period end increased by 5% to ZAR 1.6 trillion. Corporate lending increased by 8%, supported by good origination across energy, diversified industries, telecommunications and media sectors. Retail and business lending have shown good origination momentum in South Africa in the last 6 months, but loan growth has been slower than we had anticipated. Home Services sustained 1% growth, where strong registrations have translated into modest net book growth due to repayments on this large portfolio. We are encouraged by the 13% loan growth in Africa Regions in constant currency. This slide provides further evidence of positive origination momentum in targeted portfolios. Corporate and investment banking origination across the continent increased by 21% to ZAR 146 billion. In South Africa, business lending origination increased by 27% to ZAR 21 billion. Home Services new registrations increased by 17% to almost ZAR 27 billion, reflecting our continued market-leading position, where we financed 1 in 3 homes in South Africa. Personal unsecured loan disbursements declined by 8%, indicating our continued disciplined approach to risk and affordability. Vehicle and Asset Finance in BCB increased payouts by 8% and PPB Vehicle and Asset Finance in South Africa increased by 20%, reflecting targeted growth aligned to our primary client strategy. Overall, our targeted growth strategies are delivering within our risk and return criteria. Deposits increased by 11% to ZAR 2.5 trillion and 14% in constant currency. Growth was broad-based. Core deposits increased by 13%, current and savings accounts by 12%, term deposits by 7% and cash management deposits by 5%. CIB deposits grew strongly in support of lending activity. Regionally, SBSA deposits increased by 13%, while Africa Regions increased by 22% in constant currency. Strong growth in low-cost transactional balances reflects the depth of our client relationships and supports both funding and resilience and sustainable revenue growth. Although not reflected in deposit balances, it is worth noting that the group issued first loss after capital instruments to the value of ZAR 16.5 billion. This new class of unsecured subordinated debt is an important step forward in systemically important banks protecting public funds during a crisis. Net interest income increased by 4% to ZAR 53.2 billion. Average interest earning assets increased by 7%, which contributed an incremental ZAR 3.7 billion to net interest income. Net interest margin declined by 17 basis points to 472 basis points. The benefit of stronger growth in higher-margin Africa Regions was offset by tighter corporate lending spreads and ongoing competition for wholesale deposits. The gross negative endowment impact across our markets was ZAR 2.9 billion for the 6 months or 26 basis points. This was partially offset by a 13 basis point hedge benefit from hedging strategies. The net endowments impact of ZAR 1.4 billion is largely skewed towards Africa Regions in this period, with an impact of over ZAR 1 billion for this region, and Ghana alone comprising over half of this impact. This is evident in the large Africa region's margin squeeze of 64 basis points to 7.2% now. Noninterest revenue increased by 7% to ZAR 33.4 billion and has delivered a 5-year compound annual growth rate of 10%. Within this, net fee and commission revenue increased by 7%, trading revenue by 8%, insurance attribution by 1% and other revenue by 4%. Before unpacking fees and trading in more detail, it is worth noting that the 1% growth in attributed revenue from insurance was dampened by higher claims. Gross written premiums from funeral and simple life sales grew by a strong 13%. Good noninterest revenue growth demonstrates that the group continues to generate capital-light revenue from higher client activity, payments, market trading activities and other financial services. As shown on the previous slide, net fee and commission revenue increased by 7% to ZAR 18.4 billion. The largest component of transactional fees increased by 1%. Continued higher activity and client engagement in South Africa was offset in this period by fee pricing adjustments in Africa Regions. Card fees increased by 7%, supported by higher interchange volumes from retail and corporate clients. Arrangements, guarantee and knowledge-based fees increased by 8%, reflecting increased structured product activity in Global Markets and stronger deal origination in energy, infrastructure and real estate sectors. Pleasingly, net fee income growth in PBB South Africa was a strong 11%, supported in part by a 50% growth in value-added services revenues. Trading revenue increased by 8% to ZAR 12.8 billion or a strong 12% in constant currency. And as you can see here, has delivered a 5-year compound annual growth rate of 13%. Fixed Income and Currencies revenue increased. A stronger client activity, market fluctuations and positive investor sentiment created trading opportunities and increased demand for foreign exchange solutions. In line with prior periods, approximately 80% of Global Markets revenue is client franchise related. It is worth noting that in the second quarter of 2026, no loss days were noted in Global Markets. This clearly reinforces the quality and client-led nature of this revenue base. Let us turn to credit provisions, starting with the balance sheet. Gross loans and advances increased by 7%, while provisions decreased by 6%. This resulted in a lower but robust total coverage ratio of 3.6%. Stage 3 loans, or NPLs, decreased in both rand value and as a percentage of the book to 5.6%, and coverage ratios were maintained at 50% on the nonperforming loan book. The income statement charge for credit impairments decreased by 12% to ZAR 7.1 billion. And the group credit loss ratio improved to 73 basis points from 93 basis points this time last year. BCB charges decreased by 30%, driven by a significant decline in Africa Regions and offshore, linked to strengthen nonperforming loan management and enhanced collections. PPB charges decreased by 2%, supported by improved collections and early intervention strategies. CIB charges decreased by 52% due to lower NPLs as well as post write-off recoveries. The improvement across all major loan portfolios reflects effective risk management, improved collections and a generally supportive macroeconomic environment. Credit loss ratios, accordingly, improved across the board. On Slide 21, we provide an analysis of credit trends in SBSA across 4 products, so that's our South African business. Our South African retail clients are, of course, negatively impacted by recent higher inflation and interest rates. But so far, the income and employment have been resilient. Debt-to-income ratios have decreased relative to historical levels and repayment behaviors have strengthened. In our assessment, Consumer Health overall is trending towards gradual improvement and resilience, supported by an easing rate cycle and a housing recovery. Across the portfolio, as shown on this slide, the credit loss ratio has improved. Effective nonperforming loan management strategies are bearing fruit, with flows into nonperforming loans slowing. A change in NPL management in card has reduced debt sales. This has been effective from a recovery perspective, but has resulted in NPLs remaining on our books for longer, and hence, a higher NPL ratio, as you can see on the slide. Operating expenses increased by 5% to ZAR 42.7 billion or 6% in constant currency. Within this, staff costs increased by 6% following annual salary adjustments, continued investment in specialist capabilities and the expansion of client-facing teams. Software, cloud, and technology-related costs increased by 6%, reflecting the continued modernization of our banking platforms and the expansion of artificial intelligence capabilities to improve client experience, cybersecurity and operating efficiency. Other expenses increased by 3%, driven by brand investment, targeted client campaigns, strategic sponsorships as well as higher professional fees. A total view of IT spend, and this includes IT staff costs, totals ZAR 11.8 billion and shows a 2% increase in the period and a 5% annual increase over 5 years. Increased expenditure on IT staff and software, cloud and technology, were largely offset by the lower amortization charge. Over the 5-year period, amortization expenses decreased by 8% per annum, as previously capitalized projects roll off and systems and platforms move to the cloud. This slide illustrates the 10 consecutive reporting periods of positive jaws referred to by Sim earlier. In the first 6 months of 2026, revenue growth again exceeded cost growth, resulting in positive jaws of 44 basis points. The banking cost-to-income ratio improved to 49.3%. This sustained improvement in the cost-to-income ratio demonstrates the benefits of scale, digital adoption and productivity initiatives. Over this period, we have continued to strategically invest in the franchise while preserving positive operating leverage. That concludes the banking review, and I will now turn to Insurance and Asset Management. Our Insurance and Asset Management business continues to build momentum. In South Africa, short-term insurance sales increased by 17%, and underwriting margins were maintained well above our 10% target levels. Open market index premiums related to products sold outside of banking channels increased by 15%, and funeral and Flexilife gross written premiums increased by 13%. Assets under management and administration increased to ZAR 1.8 trillion. South Africa increased by 13%, while Africa Regions and offshore increased by a strong 23%. On the back of these strong business outcomes, Insurance and Asset Management headline earnings increased by 15% to ZAR 2.1 billion, and the ROE improved to a very pleasing 21.1%. Insurance operations increased earnings by 10%, with South Africa up 7%, primarily driven by favorable persistency and risk experience in retail and corporate life businesses. Asset Management operations earnings increased by 35% to ZAR 660 million. South Africa increased by 18%, benefiting from a higher asset base linked to favorable markets. Africa Regions and offshore increased by 47%, driven by a strong performance in our Nigerian pension fund business. Total operating earnings increased by 18% to ZAR 3.4 billion. The shareholder portfolio recorded a loss of ZAR 104 million, and this compares with a profit of ZAR 120 million in the prior period. Overall, IAM delivered strong earnings growth and improved returns, reinforcing the strategic value of the group's integrated financial services model. I will now turn to the group's capital position, capital allocation as well as shareholder returns. At the end of June, the group's common equity Tier 1 capital increased to ZAR 264 billion, and the common equity Tier 1 ratio increased to 13.6%. We continue to think about capital in 3 broad components. First, ZAR 185 billion represents capital backing risk-weighted asset growth and supports organic client growth. This represents a CET1 ratio of 9.5%. Second, a further ZAR 58 billion of Tier 1 capital provides a buffer for macroeconomic uncertainty and protects the group against downside risks, and this takes the ratio to 12.5%. Thirdly, we currently have ZAR 21 billion available for investments in acquisitions and partnerships, dividends as well as share buybacks, providing optionality and supporting distributions to shareholders. We do see continued significant opportunities to expand and deepen our position across Africa, and will selectively invest where we have clear competitive advantages and strong prospects for value creation. We invested $80 million of additional capital in Tanzania in July 2026. And we remain on track to increase our shareholding in Angola during the second half of 2026, further strengthening the group's presence in 2 of Africa's most attractive growth markets. This framework links capital strength directly to growth, resilience and shareholder returns. On Slide 30, we show shareholder returns. For the period under review, we calculate a decline in cost of equity for the group of 13.4%. The group's return on equity improved to 19.8%. The spread between ROE and cost of equity widened further, which generated increased shareholder value add of ZAR 8.4 billion, and this is 55% higher than this time last year. The interim dividend increased by 10% to ZAR 9.02 per share, and this represents a payout ratio of earnings of 56%. The combination of stronger returns, a robust capital position and disciplined allocation supports sustained growth in shareholder value and distributions to shareholders. I will now provide a brief overview of performance across the group's businesses, products and regions. Slide 32 provides a portfolio view, illustrating our diversified franchise by business unit, product and region. By business unit, you can see CIB remains the largest contributor to the group's earnings. CIB and Insurance and Asset Management both delivered excellent growth. By product, the drag of endowments on our large transactional product base is evident, despite good clients and balanced growth. Lending products, at an aggregate level, benefited from lower credit losses. Global Markets continues to grow strongly off a large base. By legal entity, SBSA increased by 14%, Africa Regions by 11% in constant currency and Liberty by 6%, while offshore declined by 18%. Not every portfolio moved in the same direction, but the breadth of the group across businesses, products and regions supported resilient earnings growth at a group level. This slide builds the group's headline earnings by business unit. CIB, as I have mentioned, had a standout performance, and delivered earnings of ZAR 13.8 billion, up 15%, with a return on equity of 24.8%. BCB overall delivered earnings of ZAR 4.4 billion, while down 2% on the prior period, a strong return on equity of 36.3% was sustained. Within this result, the South Africa business achieved a robust result with earnings up 5%. PPB, overall earnings declined by 1% to ZAR 4.6 billion. Again, within this result, the South Africa performance was excellent, achieving 12% growth. Return on equity was 18.6%. The endowment impact of declining interest rates in Africa Regions and offshore materially impacted both BCB and PPB results in these regions. Slide 34 shows the performance of our large and growing banking franchise in South Africa. Headline earnings for this legal entity increased by 14% to ZAR 11 billion. The result was achieved through good balance sheet growth, a more entrenched client base, higher client activity and improved credit performance. Despite a volatile and competitive operating environment, SBSA continues to deliver consistent revenues and returns for the group. Africa Regions collectively delivered headline earnings of ZAR 10.4 billion, up 7% in rand and 11% in constant currency and contributed 40% of group headline earnings. East Africa earnings were broadly flat in rand and increased by 11% in constant currency. South and Central Africa increased by 6% in rand and 9% in constant currency. West Africa grew earnings by a robust 13% in rand and 12% in constant currency. Africa Regions return on equity remained strong at 24.8%, well above the 16.1% cost of equity we calculate for our diverse portfolio of Africa Regions countries. As our Africa Regions businesses achieved scale, they are increasing funding -- increasingly funding their own growth and paying dividends. For 2025, Africa Regions achieved a payout ratio of approximately 50%, with most dividends settled to date. Slide 36 uses headline earnings to 2025 to illustrate the strength of our Africa Regions portfolio. On the left, our 8 largest earnings contributors outside of South Africa. You can see here, individually volatile. In the middle, countries are grouped by subregion, clearly evidencing regional diversity. And on the right, the aggregated portfolio is collectively resilient. This diversification underpins a resilient and steady growing sub-Saharan franchise. Africa Regions earnings, have on average, grown by 14% per annum since 2015. I will now conclude with the macroeconomic outlook and our guidance for the full year. Our weighted macroeconomic expectations for 2026 have moderated slightly since March, but they still reflect an improvement on 2025. Weighted real GDP growth for 2026 is now expected at 2.3%, inflation at 5.3% and interest rates at 7.9%. Higher for longer inflation and interest rates have and will continue to impact loan growth but protect margins. The stronger-than-anticipated rand has moved the expected currency translation impact from negative 1% to negative 2%. This implies that rand earnings growth is now anticipated to be around 2% slower than constant currency earnings growth. While near-term expectations have shifted, the broader portfolio fundamentals remain supportive of growth and returns. Our full year 2026 guidance is unchanged. The group's diversified and well-positioned franchise is expected to benefit from resilient macroeconomic conditions and increased economic activity across our markets. We continue to expect banking revenue growth for 2026 to be in the mid to high single digits, supported by a continued business momentum across our franchise. Within this expectation, we do acknowledge that a stronger rand will impact growth rates. NII is expected to grow by mid-single digits. NIR is now expected to grow by high single digits. The cost-to-income ratio is expected to decline slightly as we apply our safe-to-invest approach to fund strategic investments. Our cost growth will be positively assisted by currency impacts. The credit loss ratio for the year is anticipated to remain within the bottom half of the through-the-cycle target range of 70 to 100 basis points. Our return on equity for 2026 is expected to be higher than in 2025. Our guidance, of course, remains subject to uncertainty and global sentiment, trade flows, inflation as well as economic growth. To conclude, our first half results demonstrate strong progress against our 2028 commitments with record earnings, higher returns, positive operating leverage, improved credit performance and a stronger capital position. We grew our client base and deepened client activity, while continuing to invest in talent, technology, digital capabilities and artificial intelligence. The external environment clearly remains uncertain. But within our portfolio of diverse businesses, products and regions, we have maintained our guidance for the full year. We remain confident in the strength of the franchise, the discipline embedded in our execution and our ability to deliver against our targets. With that, I will hand back to Sim. Thank you.

Thank you, Arno. As you've heard, Arno has confirmed our guidance for this financial year. I'll conclude our presentation this morning with some thoughts on the medium term. I remind you that we expect Africa to continue to be the fastest-growing region in the world. Despite the war in the Middle East, the macroeconomic fundamentals in Africa remain highly supportive and have been only moderately and modestly impacted in the short term since the war broke out in February. Our purpose has not changed, and our strategy remains quite simple, to compete and win in our chosen markets and segments. We are led by our 4 business units, enabled by our strong brand, excellent people, modern and secure technology and wide range of partnerships, all underpinned by digital -- by diligent capital allocation and effective risk management. We remain entirely confident that executing this strategy will maximize the value of our portfolio and deliver our growth and returns, on which I will be speaking shortly. This slide shows a summary of the BU strategic focus areas and financial targets to 2028. Again, these plans and targets were discussed in detail at our Capital Markets Day. In each business unit, growth will be achieved by focusing intensely on meeting our clients' needs, supporting our growth and providing excellent client experience. Each business unit is investing in the appropriate technology to improve efficiency. And each business unit is being encouraged and incentivized to find more opportunities for cross BU collaboration. Returning to our medium-term financial targets. This slide makes 2 main points. First, it illustrates our history of steady progress since 2020. We did what we said we were going to do over that period. We will do the same in this new period to the end of 2028. Despite global turbulence and as our record shows, we will navigate through volatility and uncertainty to achieve the targets for 2028. Just to restate them for the record. We will increase our banking revenue by 7% to 10% each year on average to 2028. We will continue to focus on generating operational leverage to ensure that our cost-to-income ratio trends down from 50%. We will increase our headline earnings per share by 8% to 12% on average from 2025 to 2028. We'll achieve an ROE well within our target range of 18% to 22%. I'll conclude with 5 key points that we would like you to take away from our presentation today. Africa's macroeconomic prospects are bright. Our strategy is clear and consistent. Our business units are executing our strategy systematically and successfully, as our results show. We are highly confident that we will reach our 2028 targets. Standard Bank Group continues to do what we say we will do. Finally, we believe that Standard Bank is very well positioned to help investors capture the opportunities arising from Africa's strong and steady growth. Thank you for your attention. That concludes the presentation. As always, our sincere gratitude to our policymakers and regulators for the world-class regulatory environments they create for us and for our sector. Thank you to our shareholders for your continued support. We would like to say thank you to our 20 million clients for their continued trust in us. And last but not least, we thank our 50,000 employees for their professionalism and hard work.

We will now take questions. If I could ask my colleagues to join me on stage. So if we could start on the conference call. Operator, are there any questions?

Yes, we do. First question comes from Harry Botha of Bank of America Securities.

Can you please elaborate on the higher banking revenue growth that you expect in the second half? Is it mostly low endowments headwinds in the second half? And then can you give us more detail on the noninterest revenue growth headwinds in BCB, particularly Africa Regions? Has that changed your 2026 noninterest revenue expectations for BCB or should the second half be better? And finally, can you comment on the outlook for ICBCS given that's the potential exposure to Radiant World?

So Arno, will you share that Bill?

Sure. On the higher banking revenue growth -- Harry, good to hear from you again. We do see slightly accelerating loans and advances growth, so we'll see an expanding loan portfolio. And we're also seeing interest rates starting to -- the impact of interest rates starting to be in the base more. So margins should improve slightly to what we've printed now, and obviously, that will improve NII. On the NIR side, we see continued high growth, obviously, in the fees and commission line item in businesses like PPB SA, and that should overall accelerate our revenue line item. Of course, I have also mentioned, Harry, we are seeing the currency impact slightly bigger than we had anticipated, but that is also supporting our bottom -- our cost line. That's important for you to note. So on the bottom line basis, we continue to maintain our earnings guidance on that basis, as I've indicated.

ICBCS?

ICBCS, yes, they're doing well. And they have had a diversified franchise. There are many clients which are now transacting with that business. We see a relatively stable and consistent revenue flowing through that business. I mentioned the precious metals business, but there also are other business structured and FICC businesses in that entity. And for now, we anticipate continued good performance in ICBCS. The sale of ICBCS, if I can just preempt that, previously, we had spoken about selling that business. For now, I think it's best for people on the call and stakeholders to assume that ICBCS is going to remain a part of our business, and we continue to work with them to maximize their revenue as well as our revenue, of course.

Great. Bill, do you want to add anything on BCB?

Yes. Perfect. Harry, thank you. Thanks for the question. So with respect to NIR, so the growth obviously depressed in this first half. There are a couple of things that we had to digest from last year. So we had a number of property sales, et cetera, incorporated in NIR from last year that obviously aren't repeated this year. Probably the biggest shift has been with respect to global market flows and the compression of margins on global market flows. And you'll know from our results previously that, that forms a big portion of our NIR base. And then we've also had to digest quite significant increase in deposit insurance. The long-term focus for us, Harry, is, of course, diversification, both of clients, and the sources of NIR for this business over time. So I hope that gives you a sense of that.

Any more questions, operator?

At this stage, we have no further questions from the telephone lines.

Many thanks. Sarah, on Teams ?

Thanks, Sim. We do have a number of questions, so bear with me. The first question -- or a couple of questions are from Baron Nkomo at JPMorgan. The first question is, can you guide to FY '26 CLR -- sorry, you guide to FY '26 CLR in the lower half of your through-the-cycle range of 70 to 100 basis points. Please, can you expand on what leading indicators in your macro and portfolio data are giving you confidence in that outcome today? And then the second question is for IAM. Net income from insurance and asset management activities was down 3% year-on-year, but overall headline earnings increased materially, up 15%. Please, can you help reconcile the numbers?

I'll start with the first one then. Baron, good to hear from you. Yes, I made a few points in my presentation just now on the outlook, where we are constructive on the macroeconomic outlook. And we're seeing, as I mentioned, sub-Saharan economic growth to remain resilient, around 4.3% in 2026 and improved to 4.6% in 2027. We've also seen really great macroeconomic stabilization reforms in many of our markets. Think about Angola, Ghana, Nigeria and Zambia. And we've seen strengthening of policy frameworks and favorable terms of trades, which that has unlocked Nigeria being a great example. So overall, the macros are supportive, and that has resulted in a fairly benign outlook for credit charges. As you have noted, our guide we remain at the bottom end of our through-the-cycle range. But from a credit loss ratio point of view, slightly higher than the 73 basis points we noted in 2025. Baron, what we also do, as you know, in our analyst booklet, which I'm sure you have on hand, on Page 123, we do disclose in a fair amount of detail, the macroeconomic variables on which we model our portfolios, and we do this for a base bear and bull scenario and the key macro parameters are outlined for that as well as the implications for forward-looking impairment adjustments. I'm very happy to go through the detail with you when we meet later on. But that does give you a good indication on how we're seeing the various downside and upside scenarios playing out in the next 18 to 24 months and on which we've based our forecast.

Cool. And then the IAM question, Yuresh?

Thanks. Baron, thanks for the question. It actually relates to one of the technical accounting consequences of adopting IFRS 17. And the reason for that is we effectively capture in that line, taxes that we collect and we have to pay over on a fiduciary basis for our policyholder base. So it does distort the line, and you would expect that to be in your tax paid line. So that does distort the number. We're happy to unpack that with you. We normally do a detailed buildup in disclosures in our year-end results. Sort of normalizing for that fiduciary tax collection, I would say that number is more in the region of 4% up as opposed to 3% down. Thanks.

Great, Sarah?

The next question is from Warren Riley from Bateleur Capital. The performance has primarily been driven by the CIB division, while negative endowment in Africa has negatively impacted BCB and PPB. Do you expect the shape of this performance to persist in the second half of 2026? And when do you expect the endowment headwind to turn in Africa Regions?

Yes. Thank you. We are expecting a slightly better performance in BCB and PPB in the second half of the year. You would know that seasonally, the retail business does better in the second half, and we do expect that trend again to manifest in this period. So a stronger contribution from BCB and PPB, particularly in Africa Regions. You would have noted that endowment headwinds, and I'll come to your second part of the question now, were very material in Africa Regions in the first half. We are seeing that coming increasingly into the base now, and endowment headwinds will start to lessen from now onwards, but I guess only washing through fully in 2027.

Then we've got a few questions from Chris Steward. So the first 2 for Arno. Please, can you comment on the growth in trading income in Q1 versus Q2? And how does this impact your outlook for the second half of 2026? Apologies for Luvuyo. And then 2 questions -- 2 further questions. Please, can you unpack the nature of the increased claims experience that dampened insurance income? And then thirdly, when do you expect the relationship between loan origination volumes and book growth to normalize? The presentation shows great originations. When will this translate into more robust book growth?

So we're going to defy Chris. We'll ask Luvuyo to answer the trading question, and then Arno, between you and Yuresh on the IAM question.

Thank you very much, Chris. You're absolutely right. It was a tale of 2 quarters in terms of the performance of our trading global markets. The first one, obviously, benefiting from the high volatility and client activity that we were able to take advantage of, which really benefited the business. And so I would say that Q1 performed well ahead of plan, while Q2 was slower but only slightly below plan. And to give you a sense, if we maintain the performance of Q2 for the rest of the year, we'll still get very close to our full year plan of trading revenues of around mid- to high single digits. Maybe I should answer partly, CIB was a big contributor to the dislocation between origination versus asset growth. We'll start to see more and more that the business, especially through the joint venture between our IB and Global Markets business that we will originate large transactions and structure them, but with the purpose upfront of distributing that, especially for our investors, both locally but also offshore and -- and so that is a trend, I think you'll start to see continuing. This first half was especially strong. And when I look at the pipeline, there's more opportunities for that where we will see a strong origination but with purposeful distribution for a lot of that risk.

Thank you. On the claims experience, Yuresh, over to you, please.

Yes. Thanks. Chris, I would start by saying this -- the book of business that we're referring to is actually quite large, mature and established. It's in excess of 3 million policies now. And so what we do experience from time to time is cyclical changes. Just to remind you, we've had multiple periods of good claims experience. And this was one which was not as good as what we've experienced over multiple periods. This is one that we continue to monitor on a quarterly basis and have the ability to reprice if we see that as experience business.

Thank you, Yuresh. And Funeka, you may want to comment on the origination activity. And then Bill, if you can also comment on the products in BCB.

Chris, PPB, first half of the year, ZAR 61 billion origination, yet the book growth is low single digits. Why? In South Africa, it's really a story of the mortgage book. The amount of -- as you originate the older books prepay. And as you will remember, in the COVID period, we originated quite a proportionately higher book in both of those years. So that book is running off faster than the book that we are putting in the market now. And second, in the Africa Regions, the dislocation between disbursement amount and the balance sheet is likely to be more pronounced, simply because we are doing a lot more, as you know, unsecured lending books. We are also doing short-term lending books as well. So think about 90 to 180 books, which mean -- 80 months, sorry. That means -- sorry, 60 -- 90 to 180 days sort of loans. If you do that, then it means that what you will have for the same balance, it will turn a couple of times for reporting period, which is great from an income and an ROE perspective, particularly given the current experience that we're seeing from a collection perspective. So I think that, that is probably more of a structural change between those 2 numbers.

Yes. And then just commenting on this point that Funeka just raised. So in BCB, total origination and disbursements was ZAR 62 billion for the half. What we're doing is we're shifting and starting to build, as I've commented previously, the structured debt capability and more longer-term lending. And so moving away from the dependence on the very, very short-term nature of some of the historic origination. And so you start to see that coming through in both South Africa and Africa Regions. Africa region starting to grow in double digits in constant currency. Obviously, a downdraft once you measure that in rands, and then South Africa growing at 9%. So that hopefully will start to give you a sense of conversion of origination into balance sheet growth.

The next series of questions are from Charles Russell from SBG Securities. Can you quantify the impact of the investment in Tanzania and Angola on your common equity Tier 1 and ROE? The second question, how sustainable is the 2% growth in IT function costs? Could you also elaborate on the 11% lower other costs as shown in the booklet? And then thirdly, to what do you attribute the lower-than-guided NIR growth, 7% versus March guidance of low double digits?

Arno?