Johannesburg - Standard Bank has warned that the current slump in the country’s economic growth and looming downgrades by international rating agencies could harm its growth prospects in South Africa.
Africa’s largest lender by assets said it was concerned about the possible downgrade to junk status by US rating agencies Standard & Poor’s and Moody’s as this move would further harm an already struggling economy.
Read: Standard Bank's profit up 34%
The bank’s joint chief executive Sim Tshabalala said yesterday that if the rating agencies downgraded the country to junk, the government, businesses and citizens would all face substantially higher interest rates on their debt.
He said this would reduce the government’s ability to invest in infrastructure and social services.
“We would also see further rapid rand depreciation and higher inflation,” Tshabalala said. “The combined effect of all these pressures would make it very likely that the economy would fall into a recession and that unemployment and poverty would worsen.”
Tshabalala said the group had produced solid results for 2015 in an environment that was affected by moderate global economic growth, and weakening business and consumer confidence.
He said the bank had exited the loss-making UK operations by selling a 60 percent stake to Industrial and Commercial Bank of China (ICBC) last year, thus helping to boost the profits. He added that Standard Bank was now focused on tapping growth across Africa and had operations in 20 countries on the continent.
“We will continue to look for opportunities to grow in Africa and to link Africa to the rest of the world, and particularly to China, often in partnership with ICBC.
“Despite the current downturn, we firmly believe that the commercial logic of operating in – and linking – the world’s two most dynamic regions remains compelling.”
Standard Bank yesterday reported a rise in headline earnings by 27 percent to R22 million, up from R17.32m for the year to the end of December. The bank also posted a 27 percent increase in headline earnings a share to 1 359c. It declared a total dividend per share of 674c, up 13 percent from the previous reporting period.
Brad Preston, a chief investment officer at Mergence Investment Management, said Standard Bank’s results were influenced by a number of factors and the large rise in headline earnings a share was driven by the reduction in their stake in their London Standard Bank business.
“The more reflective number of actual operations was the 13 percent increase in pro forma continuing operations,” Preston said.
Nico Smuts, an analyst at 36One Asset Management, said the growth outlook for 2016 was muted due to elevated economic and political risks in South Africa and several other countries in which Standard Bank operated.
Shares rose 6.3 percent to close at R122.24 on the JSE.
BUSINESS REPORT