Standard Bank interim earnings to be impacted by other African currency volatility

Sim Tshabalala, Standard Bank Group CEO. SUPPLIED.

Sim Tshabalala, Standard Bank Group CEO. SUPPLIED.

Published Jun 21, 2024


Standard Bank Group has become the latest South African company whose profits are being whittled away by other devaluing African currencies.

The biggest lender in Africa by assets said yesterday that its headline earnings grew by only low-to-mid single digits in the five months to May 31 after being negatively impacted by currency movements, most notably in Angola, Malawi, Nigeria, and Zambia.

Other listed companies in South Africa with large business interests elsewhere on the continent that have been similarly affected include Telkom and cellphone companies such as MTN.

Standard Bank said in a trading update for the five months to May 31 that on a constant currency basis, headline earnings grew by mid-teens period-on-period.

Credit impairment charges were marginally higher, based on restated figures for last year’s five-month period. Higher charges in Business & Commercial Banking and Personal & Private Banking (PPB) were partially offset by lower charges in Corporate & Investment Banking (CIB).

Sovereign debt provisions in Africa Regions, specifically Ghana and Malawi, were the key driver of higher CIB credit charges in the prior period. The elevated credit charges resulted in the five-month 2024 credit loss ratio for banking being above the top of the group’s through-the-cycle credit loss ratio target range of 100 basis points.

Banking activities headline earnings grew by mid-single digits. The group restated its results for the six months to June 30, 2023, due to it amending the methodology for recognising interest on Stage 3 loans, but headline earnings per share and earnings per share were not impacted. Some impacts included increased impairment charges, not interest margin and credit loss ratio.

Relative to the restated five months to 2023 results, the group’s banking activities’ trends were broadly in line with those noted in the three-month update on April 26, 2024, the group said.

Income growth was supported by higher average interest rates and higher client transactional volumes, but dampened by lower trading revenues.

Balance sheet growth slowed. Operating expenses growth was contained, supported by cost containment initiatives and lower performance-linked incentives.

Growth in both income and operating expenses were dampened by currency movements. Total income growth exceeded operating expenses growth.

Earnings from the Insurance & Asset Management (IAM) business increased period-on-period. The improvement relative to the first-quarter 2024 performance was driven by an improved performance of the shareholder assets and exposures portfolio.

The group remained well capitalised and liquid. The return on equity, while lower than in the first five months of the 2023 financial year, remained within the target range of 17% to 20%. The group’s guidance remained in line with previous guidance.