Standard Bank interest rate warning for South Africa

Standard Bank has warned that, while the Reserve Bank (SARB) is likely to cut interest rates next week, South Africans should not expect any more relief in 2025.

In its financial results for the 2024 financial year, the group said that inflation in South Africa is expected to remain well-anchored in the target band of 3% to 6% this year.

Thus, interest rates are expected to be cut from the current level of 7.5% to 7.25%.

The Reserve Bank’s Monetary Policy Committee (MPC) is anticipated to make this 25 basis point cut at its 20 March meeting.

This would be the fourth straight cut for interest rates, totalling 100bps, with inflation dropping dramatically over 2024 to an average of 4.4%. The January 2025 CPI figure stood at 3.2%

However, South Africa’s largest bank by assets under management believes that next week’s cut will be the last one for 2025.

“This, together with ongoing policy reform and improved business and consumer confidence, will support economic growth. South African real GDP growth is expected to improve to 1.7% in 2025,” the bank said.

Standard Bank’s estimates are relatively conservative and out of step with other market views.

Investec Chief Economist Annabel Bishop, Old Mutual Chief Economist Johann Els and FNB senior economist Koketso Mano believe South Africa will see another 50 basis points worth of cuts in 2025.

Bishop also believes that the Reserve Bank’s MPC will likely skip an interest rate cut at its meeting next week due to uncertainty over the US and the increased probability of a VAT hike.

Nevertheless, Investec still expects the SARB to cut interest rates by 25 basis points in 2025, with one cut in July and another in November.

Standard Bank Financials

Standard Bank’s interest rate outlook comes against the backdrop of a solid performance for the group in the full year ending December 2024.

The bank recorded headline earnings up to R44.5 billion for the year, with return on equity at 18.5%.

The group’s active clients grew by 4% to 20 million, while digitally active retail clients in South Africa grew by 6% as more clients transitioned to the group’s digital channels.

The South African franchise saw double-digit earnings growth, supported by increased client activity and improved credit trends.

“The group remains on track to deliver on its 2025 strategy and targets,” said Sim Tshabalala, Standard Bank Group CEO, in the results.

Although the group’s Africa Regions saw earnings growth of 22% in local currency, the earnings of R18 billion were marginally down from the prior period in rand terms.

In FY24, Africa Regions contributed 41% to group headline earnings. Key contributors to Africa Regions were Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda and Zambia.

The group’s performance comes amidst an improved global inflation outlook, as interest rates declined, and real GDP remained relatively strong at 3.2% in 2024.

Following the general elections in South Africa and the formation of the GNU, consumer and business confidence also improved.

Electricity supply stabilised, with Eskom seeing close to a full year of no load shedding. Progress in reducing logistical constraints was also viewed positively.

Overall, the group’s total net income for the year saw growth of 2% to R181.7 billion. Notably, the group’s credit impairments moderated from R16.2 billion to R15.1 billion.

While headline earnings per share increased by 4% to 2,691 cents per share, the group’s basic earnings per share dropped by 1% to 2,644.1 cents per share for the period.

The group board approved a final dividend of 763 cents per share, which equates to a final dividend payout ratio of 56%.

The total dividend for the year, including the interim and final dividends, increased by 6% year-on-year.

Outlook

Standard Bank said that while it is on track to meet its targets, notable uncertainties persist, especially in the geopolitical landscape related to the United States.

The IMF expects global real GDP growth of 3.3% for 2025 and 2026. However, this was based on the normalisation of monetary policy and continued open trade.

However, US policy changes related to tariffs could lead to trade disruptions and inflation pressures. Nevertheless, Standard Bank said these US-related pressures are expected to be temporary.

Threats from the Donald Trump-led country are not expected to disrupt the significant medium- and long-term opportunities across Africa.