Johannesburg - Standard Bank, Africa’s largest lender, reported first-half profit yesterday that missed analyst estimates as bad debts climbed.
Net income for the half-year to June rose to R8.07 billion from R7.1bn a year earlier, the bank said in a statement. Headline earnings a share rose 10 percent to R5.06, missing the R5.22 median estimate of four analysts in a survey.
Bad debt charges rose 28 percent to R5.06bn.
Standard Bank appointed Sim Tshabalala and Ben Kruger as joint chief executives in March when Jacko Maree retired after 13 years at the helm. The bank is seeking to attract more low-income earners in South Africa while trying to boost returns at its operations in 17 other African nations.
“South African households continue to struggle with high overall debt burdens, coupled with sluggish income growth and rising inflation,” the bank said in the statement.
Standard Bank is the second-worst performing stock on the six-member FTSE/JSE Africa banks index this year, having fallen 3.6 percent while the index has lost 3.8 percent. Only Barclays Africa Group, formerly known as Absa, has done worse. The stock fell further yesterday, closing 1.64 percent lower at R113.85.
Standard Bank increased the interim dividend by 10 percent to R2.33.
South Africa’s gross domestic product expanded 0.9 percent quarter on quarter in the first three months of the year, the slowest pace since the 2009 recession, while unemployment climbed to 25.6 percent in the second quarter, up from 25.2 percent in the previous three months. The price of petrol has gained about 22 percent since July last year.
“Cost pressures will continue in the second half of the year given the weaker rand,” Standard Bank said, referring to a 15 percent decline in the currency against the dollar this year. “We remain confident in our ability to grow revenues.”
While the lender’s bad debt charges advanced more than a quarter in the first half, Nedbank Group’s impairments rose 23 percent. In contrast, Absa’s losses from loans and advances fell 14 percent to R3.55bn over the same period.
“We’re clear that the question is whether or not clients have the capacity to take on loans,” Tshabalala said. “We’re not applying a blanket rule on unsecured lending, but we’re reducing our exposure.”
South Africa’s biggest banks, including FirstRand retail arm FNB and Barclays subsidiary Absa, started offering more loans not backed by assets to low-income earners about four years ago as they sought to boost profit. The growth in unsecured lending outstripped that in mortgages before falling back in the first quarter of this year as consumers struggled to repay debt amid rising unemployment, increasing inflation and a slowing economy.
“What happened over the last few years, with all the banks and all the mono-line lenders growing loan books over 30 percent per year, was crazy, and to a large extent ignored by regulators till it was too late,” said Neville Chester, a fund manager at Coronation Fund Managers in Cape Town.
“Fortunately, the unsecured loan sector is not that big in the overall size of the South African economy, and it will not destabilise the banking system.” – Bloomberg