Standard Bank’s double-digit earnings growth puts it streaks ahead
Standard Bank is the only one of the big four banks to report a double-digit increase in headline earnings so far this earnings season, raising this number 12% to R12.1bn in the first half of 2017, beating consensus estimates.
Headline earnings per share for the six months to June were R7.555, 11% stronger than the previous period and more than the R7.427 forecast by analysts.
Competitors Barclays Africa and Nedbank earlier reported tepid growth in earnings, with figures of 5% from Barclays Africa and 6.7% from Nedbank’s own managed operations.
Including losses from pan-African associate Ecobank Transnational, Nedbank’s earnings contracted for the first time since the global financial crisis.
Standard Bank CEO Sim Tshabalala said the bank’s growth in earnings showed its strategy (focusing on clients, digitisation and its vision of being the leading financial services organisation across Africa) was working.
"We have had a very good performance in our South African operations," he said, referring to the Standard Bank SA’s headline earnings growth of 18% to R7.4bn — the lion’s share of group profit.
The South African operation’s credit impairment charges dropped marginally, even as the recession bit in the first quarter. Credit losses fell to 0.96% of gross loans and advances, from 1.05% before.
"The decline in [the credit loss] ratio was underpinned by lower charges in mortgages and vehicle and asset finance, and lower arrears and nonperforming loans in the personal and business bank," said Jaap Meijer, the MD of research at Arqaam Capital.
Meijer said the personal and business bank had benefited from declines in early arrears and improved collections, intervening early in accounts that were about to sour.
The infamous cabinet reshuffle in March, which led to downgrades of the country’s debt along with some of the banking sector’s obligations to third parties, did not drastically increase pressure on the bank’s customers, Tshabalala said.
"There was no sudden deterioration as SA’s economy had been getting steadily weaker.
"We had already impaired some accounts by the time the reshuffle took place," he said.
"Home loans had slowed by that time.... Consumer loans had already slowed by the time the reshuffle happened."
While SA’s economy had been growing at about 1% at the beginning of the year, growth for 2017 was forecast at 0.3%-0.5%, he said. The effect of the downgrade would be felt in the long term in the form of lower consumer and business confidence.
"We are well capitalised to withstand that. One of the big differences with Standard Bank is our business outside SA, which is expected to grow."
The Africa Regions business, spanning 18 countries in East Africa, Southern and Central Africa, and West Africa, posted 16% growth in headline earnings to R3.2bn. In constant currency, earnings were up 46%.
Asked which regions offered scope for growth, Tshabalala said: "We have a strong and balanced portfolio. This half, the fastest-growing region is West Africa, followed by South[ern] and Central Africa, and then East Africa. [In 2016] the order was East Africa, then South[ern] and Central Africa, with losses in West Africa due to commodities and naira devaluation."