Standard Bank reports 8% increase in first-quarter earnings

Standard Bank Group says earnings attributable to shareholders were 8% higher in the three months to end-March compared to a year before thanks in part to “strong growth” in the rest of Africa.

The performance of the SA banking business in the first quarter was hamstrung by "the difficult domestic operating environment”, the group said. “In contrast, the Africa regions’ businesses, outside of SA, recorded strong growth. Net interest income growth was supported by year-on-year loan growth.”

Non-interest revenue growth was aided by an increase in trading revenue, according to the group, Africa’s largest lender by assets.

However, operating costs rose because of branch closures, while credit impairment charges were higher. In March, Standard Bank said it would cut 1,200 jobs and close 91 branches as part of a plan to digitise its retail and business bank.

Meyrick Barker, investment analyst at Kagiso Asset Management, said the bank generates a larger portion of its earnings outside of SA relative to its peers. “This has helped deliver reasonable earnings growth in the first quarter, despite the weak SA economy,” Barker said.

Because a portion of the bank’s restructuring costs relating to branch closures have already been expensed, this “points to a slightly better operational performance than the reported 8% growth implies”.

Standard Bank makes quarterly earnings disclosures for the benefit of its associate, Industrial and Commercial Bank of China (ICBC).

The bank said in March its headline earnings in the year ended December 2018 rose 6% to R27.9bn, thanks to growth in the retail banking unit. 

At the time, Standard Bank said it would probably need to inject about $80m (R1.1bn) into ICBC Standard Bank in the next 12-18 months. In the year ended December 2018, ICBC Standard Bank made a loss of $14.9m as declining emerging-market risk appetite and flows hampered the trading business.

Standard Bank owns 40% of the joint venture with China’s ICBC.  Standard Bank’s share of those losses equated to R74m.

“ICBC Standard Bank’s ability to deliver sustainable profits is dependent on its ability to continue to integrate into, and leverage, ICBC’s extensive client base,” Standard Bank said.

Standard Bank’s shares were 1% down at R197.56 on Wednesday afternoon.

hedleyn@businesslive.co.za