Standard Bank finds digital traction in soft local economy

For the year ended December 2018, Standard Bank Group said it delivered sustainable earnings growth and improved returns.

Group revenue grew 3%, however, the Standard Bank of South Africa’s revenue was flat amid a weaker-than-expected local economy.

The lender’s headline earnings per share (HEPS) increased 7% to 1,748 cents, compared with 1,620 cents in 2017.

Group headline earnings grew 6% to R27.9 billion, and ROE improved to 18.0% from 17.1% for the year ended 31 December 2017, it said.

“The group’s capital position remained robust, with a common equity tier 1 (CET1) ratio of 13.5%. Accordingly, a final dividend of 540 cents per share has been declared, resulting in a total dividend of 970 cents per share, an increase of 7% on the prior year,” Standard Bank said.

Banking activities headline earnings grew 7% to R25.8 billion and ROE improved to 18.8% from 18.0% in 2017.

A dividend per share was up 7% to 970 cents (2017: 910 cents), with return on equity up 18.0% (2017: 17.1%).

“In line with our customers’ increasing preference for convenient digital channels over traditional channels, electronic banking fee revenue increased 11% whilst revenue from account transaction fees increased at a slower rate of 2%.

“In SA, the business saw strong digital volume growth across Instant Money, the SBG mobile app and value-added  services as well as card-based transactions,” the bank said.

“Our customers continued to migrate to our digital platforms apace, in particular, the SBG mobile app. Digital transaction volumes increased 26%, whilst face-to-face volumes declined 13%. SBG mobile app users increased 30% to 1.3 million, mobile transaction values increased, 44% to 262 billion and transaction volumes increased, 50% to  958 million (over 2.5 million a day).”

Instant Money, the group’s money transfer platform, also continued to gain traction; unique users increased 10% to 1.7 million.

“In order to deliver the always-on, always-secure offering they expect, we have to leverage the strategic IT assets we have, accelerate our product development and rollout and digitise our execution processes. This will require a reallocation  of resources from our physical to our digital channels and a concomitant reconfiguration of our branch infrastructure,” the bank said.

Looking ahead, Standard Bank said that with elections set for May 2019, South Africa is expected to be a tale of two halves. Subdued growth is anticipated in 1H19 as political and policy uncertainty continues to undermine confidence and delay investment and growth, it said.

“An acceleration in 2H19 and into 2020, driven by corporate investment, whilst expected, will be dependent on the rate of policy progress, structural reform, broader economic stimulus and job creation. A return of stable electricity supply is critical,” it said.

Assuming some progress and no further downgrades by rating agencies, Standard Bank said it expects inflation to remain within the target range and interest rates to remain at current levels in 2019. This should support an uptick in growth to 1.3% for the year.

“There is no doubt that in the years ahead the financial services industry, the competitive and regulatory environment and our customers’ and employees’ expectations will continue to change. Across the group, we are making the changes necessary to best position the franchise to deliver to all our stakeholders.

“We are focused on transforming our customer  and employee experience and improving our productivity to deliver a “future-ready” group. In 2019, we will build on the franchise momentum from 2018, continue to simplify, rationalise and digitise and seek ways to accelerate our delivery,” it said.

“We remain committed to our medium-term targets of delivering sustainable earnings growth and an ROE in our 18%-20% target range,” the bank said.

Read: Standard Bank builds payments blockchain

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Standard Bank finds digital traction in soft local economy