Double-digit win for Standard Bank

Standard Bank has reported double-digit growth in headline earnings since the start of the year, despite its net interest margin dropping amidst decreasing interest rates.

In a trading update for the first five months of 2025, Standard Bank said that its operational and financial trends were strong.

Although there was considerable uncertainty and market volatility, the group said it was resilient.

Group headline earnings grew by 10% in rands in 1Q25 relative to 1Q24, with group headline earnings growing by a similar rate in the first five months of the year.

On a constant currency basis, headline earnings grew by mid-teens period on period.

The currency impact should moderate in the second half of 2025 as the devaluations experienced in 2024 feed into the base.

The group’s ROE for the five months remained anchored within the group’s 2025 target range of 17% to 20%.

The group noted that its net interest margin declined on the basis of lower average interest rates and competitive pricing, especially in the mortgage market in South Africa.

However, it expected this, with the drop partially offset by the positive mix impact as the Africa Regions portfolio grew faster than the South African portfolio.

The South African Reserve Bank has cut interest rates by a cumulative 100 basis points since September 2024 on the back of improved inflation expectations, with many other central banks also cutting rates.

Despite the drop in the margin, net interest income was flat period on period. The group also saw strong net fee and commission revenue growth from its growing client base.

The group’s non-interest revenue grew by mid-teens period on period.

Credit impairment charges were also lower period on period due to slower book growth, a slowdown in early arrears and lower inflows into non-performing loans in Personal and Private Banking.

As expected, the group’s credit loss ratio for the period was just outside the top end of the group’s through-the-cycle range of 70 to 100 basis points, but lower than the first five months of 2024.

Tough times

Standard Bank said the operating environment for the first five months was uncertain due to US trade policies and geopolitics.

These matters impacted macroeconomic dynamics and monetary policy. This has resulted in weaker global demand, a slowdown or pause on monetary policy easing and weaker growth.

Across the markets it operates, on a blended basis, inflation has remained moderate from elevated levels, and interest rates have declined, even if this was slower than expected.

Uncertainty has weighed on confidence, and GDP growth outlooks have been moderated down. That said, sub-Saharan Africa is still expected to grow at 3.8% in 2024.

Although global uncertainty and local budget-related wrangles weighed on confidence and demand, the group said higher commodity prices and market volatility have presented opportunities.

The group’s balance sheet growth was slower than expected as elevated uncertainty and a delay in interest rate cuts negatively impacted demand for credit, especially in South Africa.

The group said that disciplined cost management remains a priority. Staff cost growth was driven by annual increases, higher performance incentives, and a headcount change that included specialist skills.

Other operating expense growth was contained as higher growth in activity-related costs was moderated by slower growth in different areas, such as amortisation and premises-related costs.

Cost growth slightly ahead of revenue growth period on period, which is still in line with expectations at this point on the year.

Its Insurance and Asset Management operating earnings period-on-period was supported by improved risk experience and lower short term claims.

When it comes to the rest of the year, it aims to deliver the following results:

• Banking revenue growth of mid-to-high single digits in ZAR;
• Banking cost-to-income ratio is flat to down year on year; and
• Group ROE is well anchored in the 2025 SBG target range of 17% to 20%.

For the six months to 30 June 2025, the group expects headline earnings growth to be slower than the growth recorded in the first five months of the year due to a robust June 2024.

“Uncertainty around the macroeconomic dynamics, monetary policy, trade policies and geopolitical developments remains elevated,” it said.

“The group continues to model and plan for a variety of scenarios and outcomes. The group’s large and diversified set of clients, businesses and regions underpins its resilience.”

The group will report its financial results for the six months ended 30 June 2025 on 14 August 2025.