Standard Bank declares dividend despite drop in earnings

Standard Bank on Thursday (11 March), reported headline earnings down 43% for the year ended December 2020, reflecting the very difficult operating environment.

“Covid-19 placed considerable strain on our retail, business and corporate clients, particularly in South Africa. The group’s strong capital position enabled us to respond quickly and significantly,” it said.

Group headline earnings were R15.9 billion, a decline of 43% on the prior year, and ROE was 8.9%. Banking operations headline earnings were R15.7 billion, down 42% on FY19, and ROE was 9.6%.

“In the first six months of the year (1H20), the group’s results were negatively impacted by lower activity levels and higher credit charges. In the second six months of the year (2H20), activity recovered, however, credit charges remained elevated and the negative impact of the interest rate cuts in 1H20 became more pronounced,” the bank said.

Overall banking revenues declined marginally, down 2%.

Diluted headline earnings per share fell 43% to 999.6 cents per share, from 1756.9 cents per share previously.

The bank declared a final dividend of 240 cents per share, representing a payout ratio of 24% on FY20 headline earnings.

“The group’s ongoing resilience is underpinned by our diverse client base and varied revenue streams. Our strong capital position enabled us to provide substantial support to our clients, employees and our communities,” said group chief executive, Sim Tshabalala,

Personal & business banking (PBB) revenues declined 4% to R70.1 billion. Across PBB Group, active customer numbers grew and digital transaction activity continued to grow year on year, while physical transactions have not fully recovered to pre-Covid-19 levels, it said.

Customers gained confidence and comfort in using the digital alternatives and new features provided. Digital transaction volumes increased 29% in South Africa, and comprised 99% of total transactions.

Across PBB Group, active customer numbers grew to 14.8 million. While this growth was largely sourced within the Africa Regions (active clients grew 7% to 5.4 million), the South African active client base grew 1.1% from June 2020 to December 2020.

Branch transactions in South Africa and Africa Regions declined 44% and 29% respectively, year on year.

Mortgage disbursements reached record levels, fuelled by low interest rates. Personal unsecured and business lending showed moderate growth, the lender said.

Corporate & investment banking (CIB) delivered a sound performance, Standard Bank said. Headline earnings were R10.6 billion, down 6% year on year. Client, sector and regional diversification helped
cushion the impact of the pandemic.

Looking ahead, Standard Bank said that the global recovery is likely to be bumpy and very uneven across different regions. “South Africa’s recovery is expected to be multi-year and, like elsewhere, will be closely linked to the effectiveness of its vaccine rollout programme.”

“The recovery will bring opportunities to extend the group’s balance sheet, facilitate business and consumer activity, and continue to build the franchise,” the bank said.

However, it warned that prolonged downturns will place additional pressure on weaker countries, sectors and clients, particularly leveraged corporates and certain South African state-owned entities.

While future dividends remain subject to earnings and capital levels, the group said its dividend payout ratio is expected to increase over the medium term towards the lower end of historic levels (45% – 55%).

Read: Capitec warns of earnings drop, with caveats

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Standard Bank declares dividend despite drop in earnings