Standard Bank Group’s share price increased sharply by 5% yesterday after it reported a 4% rise in half-year headline earnings to R22 billion driven by growth in the number of clients, increased digital adoption, strategic capital allocation and growth in lending to the South Africa corporate market.
CEO Sim Tshabalala said yesterday their earnings growth would have been a more robust 17% if the impact of other African foreign currency devaluations was excluded – the group operates in 20 Africa markets – while earnings in Standard Bank South Africa had grown by 12%.
“We take the long view, we’ve seen these cycles before,” he said in relation to the foreign currency fluctuations.
He said in an online interview the rise in the share price – which was at R230 on the JSE yesterday afternoon compared with R193.30 a year ago was an indication that their earnings growth had been favourably received by investors, who may also have been “surprised about the upside”.
The group’s return on equity was at 18.5%, slightly lower than 18.9% in the first half of 2023, and 18.8% at the end of 2023. Tshabalala said they had warned at the end of the 2023 year their earnings might be impacted by currency devaluations.
The interim dividend was raised 8% to 744 cents. The credit loss ratio reduced to 92 basis points from 109 basis points. Tshabalala said if their economic forecasts were correct, with the possibility of two 25 basis point interest rate cuts later this year, lower inflation and improving consumer confidence, then the current trend of lower growth in non-performing loans was likely to continue.
The first-half performance had been underpinned by continued franchise growth in the banking businesses and good earnings growth in the insurance and asset management business.
He said they were well-positioned to navigate uncertainty, mitigate risks, and continue delivering strong earnings and attractive returns.
The bank, which has 19.5 million clients and employs over 50 000 people, has the Industrial and Commercial Bank of China (ICBC), the world’s largest bank, as its largest shareholder, with a 19.4% shareholding.
In addition, the group and ICBC have a partnership that facilitates trade and deal flow between Africa, China and other emerging markets. This remains an important part of their business, he said.
The number of active clients increased 5% to 19.5 million. Digitally active retail clients in South Africa grew by 7%. Africa Regions contributed 41% to group headline earnings, with top contributors including Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda, and Zambia.
Tshabalala said adjustments to the Nigeria economy should over the longer term be beneficial to that economy.
The bank’s directors in the results said customers continued to demonstrate resilience through the first half with many proactively trying to find means to protect their assets and credit records. In South Africa, inflows into early arrears had slowed, supported by customer assist programmes and collection process enhancements.
The bank mobilised over R21bn in sustainable finance in the first half of 2024. In the 2.5 years that it had recorded this data, some R127bn had been cumulatively mobilised, and a target of more than R250bn by the end of 2026 was well on its way to being met.
The bank said South Africa saw improvements in energy and logistics, supported by private sector initiatives in the first half. The May, 2024 election, deemed free and fair, boosted market confidence and was expected to accelerate policy reforms, and if sustained, may boost economic growth higher than expected.
The IMF forecasts global GDP growth of 3.2% for 2024 and 3.3% for 2025. Standard Bank expected South African GDP growth of 1.1% in 2024, improving to 1.8% in 2025. Across it’s portfolio of sub-Saharan African countries, outside of South Africa, GDP growth was anticipated to be above 4% in the short term and closer to 5% in the medium term.
“A strong capital position, together with our well-diversified and resilient earnings streams, provide us with both the scope and flexibility to pay dividends and to fund the growth opportunities,” said Tshabalala.
These included increased investments in subsidiaries in Angola and Nigeria, funding to support growth opportunities in South Africa and the East Africa Region, and to capture a leading share of the client opportunities surrounding Africa’s just energy transition.
BUSINESS REPORT