Standard Bank sends out Covid-19 warning on earnings impact

Standard Bank warned shareholders on Monday (1 June) that it expects earnings to decline substantially as a result of the impact caused by the Covid-19 pandemic.

The bank advised that headline earnings per share (HEPS) and earnings per share (EPS) for the six-month period ending June 2020 are expected to be more than 20% lower than HEPS of 837.4 cents, and EPS of 827.0 cents before.

It said that the outlook for the twelve month period ending 31 December 2020 (FY20) continues to deteriorate. In sub-Saharan Africa, the human impact of the Covid-19 pandemic is growing.

Standard Bank noted that in Africa regions, the group’s African operations outside South Africa, lockdown period has averaged 37 days. South Africa has been under a relatively restrictive lockdown for 63 days.

“While the economic data is likely to take some time to catch up, the toll of the lockdowns is starting to emerge,” it said.

By 28 May, the Personal and Business Banking division (PBB) had provided R92 billion in relief to individuals, SMMEs and commercial clients in SA across 285,000 accounts and R11 billion to predominantly commercial PBB clients in Africa Regions across 14,000 accounts.

The Corporate & Investment Banking division (CIB) had concluded restructures for eligible clients with risk exposures amounting to approximately R30 billion. To date, the CIB requests have largely originated in South Africa, it said.

From a Standard Bank perspective, the lockdowns negatively impacted sales, disbursements and transaction activity levels, the lender said.

Deeds offices and dealerships were closed in April, which halted mortgage disbursements and resulted in a more than 70% decline in VAF disbursements compared to March.

In addition, ATM and branch volumes were down 38% and 61% respectively, Standard Bank said.

It said that while there has been an improvement in activity levels during the course of May, they remain below those seen prior to the lockdown.

“There remains a high degree of uncertainty regarding the impact that the Covid-19 pandemic and the associated governmental responses will have on the economies in the markets in which the group operates, and in turn, on the group,” it warned.

It said that loan growth in the first 4 months of 2020 (4M20) was robust. The combination of higher digital disbursements, corporate facility drawdowns and a weaker rand led to strong double-digit growth period on period. CIB grew faster than PBB. In PBB, unsecured lending grew faster than secured lending.

Standard Bank said that loan growth is expected to slow from current levels. “Low business and consumer confidence levels are expected to continue to be a constraint on secured portfolio growth. While instalment relief is likely to temporarily support portfolio levels, this is likely to be offset by lower new business disbursements.”

It said that unsecured lending growth will be subject to individual affordability and business and sector viability over the medium term. Deposit growth was also strong period on period, in particular demand deposits, as corporates drew down on facilities to access liquidity and placed it back on deposit.

Deposit growth is also expected to slow, it said.

Looking ahead, Standard Bank said that containing operating expense growth remains a focus. “Where possible, cost levers will be pulled, but not at the expense of the resilience of our systems or our ongoing digital customer journeys.”

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Standard Bank sends out Covid-19 warning on earnings impact