Picture: ISTOCK
Picture: ISTOCK

Standard Bank shareholders have shrugged off a "sell" recommendation on the stock by the group’s stockbroking subsidiary, which has lowered earnings forecasts for the bank over the next three years.

Vincent Anthonyrajah, a research analyst at Standard Bank Group Securities, said in a note on March 9 that Standard Bank was a "sell" at R160 — roughly the level at which the share is trading.

The stock is up about 4% since the note was sent, mostly to portfolio managers, in line with the gain in the banks index. This could be because Anthonyrajah has rated the stock a "sell" since August 2016 and is generally bearish on banking shares: he has "sell" recommendations on Nedbank and Capitec and "hold" recommendations on Barclays and FirstRand.

Still, his outlook for Standard Bank – particularly its domestic personal and business banking (PBB) franchise — is gloomy.

He flagged an 11% increase in the unit’s costs over 6% growth in noninterest revenue, pointing to the loss of credit card and current accounts. Over the period, credit card accounts fell 6% to about 1.5-million, while active current accounts dropped 3% to 2.4-million, Standard Bank’s results show.

"Were it not for the mortgage book, personal banking’s earnings [in SA] would not have grown. PBB’s revenue growth has been flattered by endowment and keeping client deposit interest rates low," he said.

Despite a recovery in commodity prices, rand strength would hurt the corporate and investment bank, which derived a large chunk of revenue from the rest of Africa, he said.

Weak advances growth in 2016 and the effect of rand strength on fee income would mute revenue growth this year. "At a 1.9x [price-to-book], the valuation is not compelling in our view. Our… earnings forecasts [for 2018 and 2019] have also been slightly lowered."

Avior Capital Markets said its one-year target price for the share was R176.67.

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