Standard Bank sees earnings jump

Standard Bank has seen a jump in earnings, but credit impairments still remain at the upper end of the scale.

In a trading update for the ten months to 31 October 2024 (10M24), the Standard Bank Group said that its underlying operational and financial trends were robust and reflective of the continued momentum in the underlying franchise.

Group headline earnings grew by low-to-mid single digits in rand terms and by mid-teens on a constant currency basis from the same period in 2023.

“Currency devaluations in various countries in which the group operates on the African continent, together with, more recently, the stronger ZAR, continued to dilute the group’s performance in ZAR,” said the group.

“Previously, this impact was expected to moderate in the second half of the year, however, this was not the case in the four months to 31 October 2024.”

“Importantly, while the impact thereof is a headwind to reported revenue growth trends, it also favourably impacts reported operating expenses and credit impairment charges.”

Banking headline earnings also grew by low-to-mid single digits in ZAR and by mid-teens on
a constant currency basis period on period.

That said, balance sheet growth has been slower than expected due to larger-than-expected currency movements in African regions, and net interest income growth slowed to low-to-mid single digits period on period.

Non-interest revenue declined by low-to-mid single digits period on period as continued growth in fees and commissions was more than offset by a decline in trading revenue off a high base in 10M23.

Cost growth was also controlled, reflected by cost management discipline, which was dampened by the impacts of currency translation.

Notably, the group said that credit impairments were also lower period on period due to a slowdown in early arrears and lower inflows into non-performing loans in Personal and Private banking, as reported previously.

That said, the group’s credit loss ratio for 10M24 remained in the top half of the group’s
through-the-cycle range of 70 to 100 basis points.

Several companies in South Africa have been severely impacted by interest rates reaching a 15-year high in 2023, with many cusomters unable to repay their loans.

This has led to South Africans being weary of extending credit to already cash-strapped consumers.

Looking ahead

In line with its previous guidance for the twelve months to 31 December 2024 (FY24), the group
said that it remains committed to delivering the following:

• Banking revenue growth of low single digits in ZAR and low double digits in constant
  currency;
• Banking revenue growth at or above operating expenses growth, resulting in a flat to
  lower cost-to-income ratio year on year; and
• Group ROE is well anchored in the group’s target range of 17% to 20%.

“The group has proved resilient and continued to deliver strong organic growth. This is reflective of the value in the diversity of the franchise across the four businesses and three regions and is a testament to the strength of the client franchise and resilience of our people.”

“The group will provide guidance for 2025 when it reports its financial results for FY24 in March 2025.”

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