Banking group Standard Bank says that its fuel costs to combat load shedding ballooned from R18 million in FY21 to R72 million in FY22.<\/p>\n
This was one of the main drivers behind its operating costs and bank branches rising 9% in the latest financial year – along with other hikes in municipal charges.<\/p>\n
The bank published its financial results for the year ending December 2022 on Thursday, reporting strong growth in its operations for the year despite the challenging conditions in the country.<\/p>\n
Total income was up 18% to R156.92 billion, from R132.72 billion in 2021, while headline earnings per share were up 33% to 2,087.1 cents (2021: 1,573).<\/p>\n
Return on equity (ROE) improved to 16.4% (FY21: 13.5%). Net asset value grew by 10% and the group ended the current period with a common equity tier 1 ratio of 13.5% (31 December 2021: 13.8%).<\/p>\n
The board approved a final dividend of 691 cents per share which equates to a final dividend payout ratio of 60%, it said.<\/p>\n
Operating expenses increased by 12%, below the group\u2019s weighted average inflation rate of 15%. The group said cost growth was impacted by higher inflation across the group’s operating markets and relative rand weakness.<\/p>\n
Staff costs increased by 12% due to annual salary increases, an increase in skilled staff, and higher incentive accruals aligned to performance. Information technology costs increased by 13%, largely due to higher spend on cloud migration and software licences.<\/p>\n
Premises costs increased by 9% as a result of the aforementioned increased municipal charges and higher fuel-related cost for diesel.<\/p>\n
The bank said that its strong growth came against a backdrop of wider economic turmoil in 2022.<\/p>\n
The year saw increased geopolitical tensions, the Russia\/Ukraine conflict, and China\u2019s Covid-19 related restrictions fuelled inflation, uncertainty, elevated market volatility and an asset price shock.<\/p>\n
“Inflation concerns drove monetary policy tightening and higher funding costs weighed on economic activity,” it said. “The aftermath of the KwaZulu-Natal floods, increased electricity disruptions, and stalled structural reforms weighed on sentiment and demand.”<\/p>\n
Consumers were particularly hard-hit by the prevailing conditions. The repo rate increases\u00a0 – which were up 325 basis points over the year – were both faster and larger than expected, and by year-end, signs of stress had started to emerge, the bank said.<\/p>\n
Looking at the year ahead, the bank said that the challenges are not expected to abate, but prospects are mixed.<\/p>\n
Monetary tightening is expected to slow – but another 25 basis point hike in rates is still expected before the middle of the year<\/p>\n
Inflation is expected to moderate to 5.9% in the year ahead – but the economy is expected to show weak performance, and South Africa will also have to contend with being greylisted by the Financial Action Task Force (FATF).<\/p>\n
Echoing wider market sentiments, Standard Bank said that load shedding and the power crisis are fundamental to South Africa’s outlook – and if any positive movement is to be seen, it will have to come from a resolution to the ongoing energy contraints.<\/p>\n
“The level of electricity disruptions experienced year to date are unprecedented. We are concerned about the additional strain it is likely to place on our clients,” the bank said.<\/p>\n
“In South Africa, meaningful structural reform and an improvement in the electricity supply could lift confidence and accelerate economic growth, job creation and social upliftment.”<\/p>\n