Flat earnings after $248m joint venture losses for Standard Bank
JOHANNESBURG - Standard Bank yesterday reported flat earnings for the year to end December, dragged down by losses of $248 million (R3.8 billion) at its struggling London-based joint venture with Industrial and Commercial Bank of China (ICBC) and a sluggish economy in the country.
Standard Bank said ICBC Standard (ICBCS) reported a $248m loss during the period, with a single client costing its $198m while restructuring costs rising $30m and operations $20m.
The group’s 40 percent share of the losses equated to R1.4bn. In September, Standard Bank recorded a $163m impairment of its stake in ICBCS, reducing the carrying value from $383m to $220m.
The group said this equated to a R2.4bn impairment reported outside of headline earnings.
As a result, the group reported a 1percent increase in headline earnings to R28.21bn while headline earnings per share rose 1percent to 1767cents a share.
The group declared a 2percent increase in dividend a share to 994c.
Chief executive Sim Tshabalala said the bank's performance during the period under review was nonetheless underpinned by the growth and resilience of its core operations.
“The constrained macroeconomic environment, particularly in South Africa, and ICBCS losses impacted the group’s results,” Tshabalala said, adding that growth in the sub-Saharan Africa had been revised downwards.
“Growth in South and Central Africa continued to be negatively impacted by the poor South African environment. In South Africa, load-shedding undermined growth prospects, the pace of policy progress and reform was slow and Eskom’s fiscal concerns remained unresolved. Business and consumer confidence levels remained low, constraining spending and demand for credit. The economy shrank 1.4percent in the fourth quarter of 2019 which resulted in a second recession in less than two years. Real GDP growth for the year was 0.2percent.”
Standard Bank said credit impairment charges increased 23percent to R7.96bn off a low base and pushed South Africa’s second largest bank by market capitalisation credit loss ratio to 68 basis points from 56points last year.
The group said the ratio was expected to remain “at the lower end” of Standard Bank’s 70 to 100 basis points range.
Return on equity declined to 16.8percent from 18percent a year earlier, and the bank said it would move closer to the lower end of its 18 to 20percent goal in 2020.
Personal and Business Banking increased its headline earnings by 6percent to R16.5bn while Corporate and Investment Banking grew headline earnings by 5percent to R11.8bn.
Last year the bank reduced its headcount by 5.5percent as it battled cost growth below inflation and revenue growth.
Chief executive of Customer Experience Specialists Nathalie Schooling said the bank would focus on increasing competitiveness and client experience in 2020.
“Any financial institution that wants to stay in business in this tough economy needs to invest in the right technology and make efficient use of resources, all with the customer in mind,” Schooling said.
Standard Bank rose 0.12percent on the JSE yesterday to close at R152.64.