Renee Bonorchis
STANDARD Bank gained the most in six years after it reported profit boosted by expansion in Africa, lower bad debts and curbs on costs.
Its shares rose as much as 6.61 percent, the biggest intraday advance since April 2009, before closing 5.41 percent higher at R156.96. The banks index rose 2.73 percent
Full-year net income climbed to R17.9 billion from R16.2bn a year earlier, the bank said yesterday.
Customer deposits in Africa, where the 151-year-old bank operates in 19 countries outside its home market, had jumped by 22 percent in 2014, the lender said. Bad debts declined, with the credit-loss ratio improving to 1 percent from 1.12 percent.
The performance “was driven higher by healthy revenue growth of 15 percent and a lower credit-loss ratio”, Liam Hechter, an analyst at Anchor Capital in Johannesburg, said.
The bank also benefited from good results in fixed income, currency and commodities trading “and currency tailwinds in corporate and investment banking”, he added.
After saying on February 25 that earnings might fall as much as 2 percent, the bank yesterday reported per-share earnings excluding one-time items that increased 1 percent.
During 2014, Standard Bank sold a controlling stake in its London-based global markets business to its biggest shareholder, the Industrial & Commercial Bank of China. The bank booked a loss from this unit of R3.75bn.
Balance sheet growth outside of the country was “good”, while there was a “good” fixed income and currency trading performance and a reduction in impairments in the rest of the continent, Standard Bank said.
Personal and business banking in the rest of Africa generated earnings of R105 million, compared with a R366m loss in 2013. The total dividend gained 12 percent to R5.98 per share.
While Standard Bank’s overall return on equity fell to 12.9 percent from 14.1 percent, the cost-to-income ratio improved to 54.5 percent from 56.8 percent. The return on equity from continuing operations, excluding the global markets business, increased to 14.6 percent, according to Adrian Cloete, a money manager at PSG Wealth.
The loss from the global markets business stems from the write-down of metal stockpiles in China. Standard Bank started legal proceedings in July after $167m (R2bn) of aluminium it claimed ownership of was placed under lockdown by Chinese authorities probing irregularities at warehouses in Shandong Province.
The aluminium stockpiles held in bonded facilities, mostly at the Qingdao port, were allegedly pledged to banks as collateral for loans multiple times. The bank is not accused of wrongdoing
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In the past year, Standard Bank was fined by regulators in the UK and South Africa for failures in anti-money laundering controls. It may be facing a US inquiry for precious metal price manipulation along with some of the world’s biggest banks, according to people with knowledge of the matter.
US suit
It has also been named in a US class action suit that claims the lender, and others, manipulated platinum and palladium prices.
“We agreed a year ago that the platinum and palladium fix should move to the London Metals Exchange, but just before it moved a US institution decided it’s moving because of wrongdoing and launched a class action,” Ben Kruger, a co-chief executive of Standard Bank, said. The judge in the case had yet to approve the class action, he added.
The bank is involved through its investment arm in the oil and gas industry, as well as mining, across the continent. The slump in the oil price has prompted the bank to examine the potential impact on its business. Kruger said: “We’ve had some small exposures, but we’ve looked at them and they’re really not significant.” – Bloomberg