SA banking business reflects tough operating environment
Companies / 19 October 2018, 06:00am / Banele Ginindza
JOHANNESBURG – Standard Bank delivered “unexciting” headline earnings per share (Heps) for the nine months to September of 4 percent on a subdued South African business performance, alleviated by strong growth by the rest of its Africa operations.
In an update to the Industrial and Commercial Bank of China Limited for the period, the bank said yesterday that the South African banking business performance reflected the difficult domestic operating environment, while in contrast the Africa Regions businesses recorded strong growth.
Analysts said yesterday that the numbers were par for the course, given the subdued South African economy, which is in a technical recession and policy uncertainty that led to lower banking capacity among clientele and investor corporates paying debt instead of investing.
“The 4 percent in Heps is not terribly exciting. It is nothing that would change market sentiment.
“These numbers are largely what the market expected, it is part of the picture of a tough local environment in which businesses are struggling for growth,” said Rowan Williams, a portfolio manager at Nitrogen Fund Managers.
Standard Bank once again found itself with a negative jaws ratio, the difference between cost growth and revenue growth in the period.
“Net interest income, although supported by slightly stronger asset growth in the three months to September 30, grew slower than non-interest revenue. Operating expense growth remained above income growth, resulting in negative jaws,” the bank said in its update.
The jaws ratio was at a negative 1.8 percent in August, though it has not been revealed in the period under review.
In the period to August, the bank was once again saved by the rest of Africa operations, with Angola, Ghana, Mozambique, Nigeria and Uganda coming in as the five most profitable countries, boosting earnings up to 32 percent or about a third of the bottom line.
“The bank has done well in the rest of Africa, though there was a bit of uncertainty with Nigeria, which is unpredictable. What the bank needs is a portfolio of businesses across the continent,” said 36One Investment analyst Wessel Badenhorst.
The bank earnings attributable to ordinary shareholders were 4 percent higher than recorded in the nine months to September 30, 2017.
Credit impairment charges continued to be well managed, with a strong performance in Africa Regions partially offset by additional charges in South Africa, it said.
Badenhorst said it was not all gloom and doom because “there are some green shoots, positive changes in loan growth and quarter-on-quarter loan trends. The bank is starting to gain some traction,” he said.
Williams said growth in most businesses was a wait-and-see scenario. The deciding factor being the upcoming Medium-term Budget Policy Statement (MTBPS) to be delivered by the new minister for finance Tito Mboweni next week.
“In the short-term the MTBPS will be the focus. We will have to wait and see on that, what with Moody's delaying its update,” he said.
Standard Bank shares fell 0.42 percent to close at R163.11 on the JSE on Thursday.