Standard Bank said in a trading update for the twelve-month period ending December 2020, that it has identified ‘pockets of pressure’ in its personal & business banking South Africa, particularly within personal unsecured lending.
In summary, the lender said that balance sheet growth has slowed; margin pressure continues, as the impact of previous interest rate cuts filter through; and while credit losses remain elevated, the group is capital generative.
Africa Regions continues to outperform South Africa, it said.
Standard Bank said that the current surge in infections and ensuing lockdowns in the Northern Hemisphere are a concern.
“While the broader impact thereof on the global economy, disruptions to trade and the potential knock-on impact on Africa is unclear, it is expected to be milder than that seen in 2Q20.
“Across most of the countries in which the group operates in sub-Saharan Africa, infection rates and lockdowns have moderated, and economic activity has recovered. We do note, however, an unfortunate increase in infections in Kenya, South Africa and Uganda.”
The bank said that the management of the client relief portfolios continues to receive attention. As at 31 October 2020, the PBB client relief portfolio in SA had declined further to R47 billion or 8% of the PBB SA portfolio (30 June 2020: R107 billion, 30 September 2020: R61 billion).
Approximately 80% of the remaining client relief portfolio is secured, i.e. mortgages and vehicle and asset finance loans. “The lapsed client relief portfolio continues to reflect strong payment behaviour and has performed in line with our previous expectations,” it said.
“More broadly, we have identified pockets of pressure in the PBB SA portfolio, particularly within personal unsecured lending. In addition, a continued increase in retrenchments has triggered additional stage 3 provisions. In contrast, collection rate trends continue to improve, leading to positive transfers from stage 2 to stage 1.”
The bank said that forward-looking provisions related to the macro-economic variables continue to be monitored closely.
Taking these trends into account, total coverage for the PBB SA portfolio increased from 5.3% as at 30 June 2020 to 5.5% as at 30 October 2020. In PBB Africa Regions, the client relief portfolio declined to R4 billion (30 June 2020: R11 billion, 30 September 2020: R6 billion).
“While we have seen a decline in the total balance outstanding, we have seen an uptick in balances in Stage 2 and 3 (relative to 30 June 2020) and associated provisions. Total coverage on the remaining client relief portfolio has increased from 2.6% as at 30 June 2020 to 3.9% as at 30 October 2020,” the bank said.
Standard Bank said that headline earnings per share (HEPS) and earnings per share (EPS) for the twelve-month period ending December2020 are expected to be more than 20% lower than HEPS of R17.66, and EPS of R15.93 reported previously.