Standard Bank boosts earnings – but flags consumer trouble

 ·20 Jun 2024

Standard Bank’s credit losses remain elevated, even if the group has seen an increase in headline earnings.

For the five months ended 31 May 2024 (5M24), the group’s headline earnings grew by low-to-mid
single digits from 5M23.

The group said that ZAR growth was hurt by movements in average currencies relative to the ZAR period on period, especially in Angola, Malawi, Nigeria, and Zambia. On a constant currency basis, the group’s headline earnings increased by the mid-teens period on period.

Headline earnings for banking activities grew by mid-single digits period on period.

With the group changing its methodology for recognising interest on Stage 3 loans, net interest income has increased, as have credit impairment charges. The group’s net interest margin and credit loss ratio have also increased.

Higher average interest rates and increased client transactional volumes supported income growth over the period, but lower trading revenues lessened it.

Although balance sheet growth has slowed, operating expense growth was contained amid cost-containment initiatives and lower performance-linked incentives.

Growth in income and operating expenses were also lessened due to currency movements over the period, and total income growth exceeded operating expenses growth, resulting in positive jaws.

However, as the group expected, credit impairment charges were marginally higher period on period.

“Higher charges in Business & Commercial Banking and Personal & Private Banking (PPB) were partially offset by lower charges in Corporate & Investment Banking (CIB).

“In the current period, growth in PPB early arrears and nonperforming loan (NPL) has slowed.

“Sovereign debt provisions in Africa Regions, specifically Ghana and Malawi, were the key driver of higher CIB credit charges in the prior period.”

“The elevated credit charges resulted in the 5M24 credit loss ratio for banking being above the top of the group’s through-the-cycle credit loss ratio target range of 100 basis points.”

The group’s earnings from its Insurance & Asset Management (IAM) business increased period-on-period due to improved performance in its Shareholder Assets and Exposures portfolio.

IAM operating earnings grew because of improved insurance results in South Africa, primarily from improved risk claims experience in corporate and short-term businesses.

This was offset by a reduction in the Africa Regions’ Asset Management earnings following the devaluation of the Nigerian Naira.

2024 outlook

The group said that the first half of the year’s performance is compared to a high base period.

It remains committed to a full-year return on equity within the group’s target range of 17% to 20%.

The group will release its interim results for the six months to 30 June 2024 on 15 August 2024.

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