Standard Bank Group’s shareholders will no doubt be satisfied that guidance for its financial year to December 31 is expected to remain intact.
The biggest bank in Africa by assets said in a trading update for the 10 months to October 31, 2023 yesterday that banking revenue growth was expected to be “robust”, underpinned by strong momentum across the franchise.
The share price inched up 0.47% to R198.50 yesterday afternoon, a price 0.3% higher than on the same day a year previously and 63% higher than three years ago.
Banking cost growth was expected to remain elevated, but strong positive jaws (income growth versus cost growth) was expected, the bank said.
Credit impairment charge growth was expected to moderate in the six months to December 31, and the credit loss ratio for the full year was expected to remain within the targeted range, albeit above the midpoint.
Return on equity was expected to remain in the 2025 target range of 17% to 20%, in line with previous forecasts.
For the 10 months to October 31, banking revenue growth slowed but was above 20% period-on-period, driven by strong net interest income and non-interest revenue growth.
Higher average interest rates supported the net interest margin, but the net interest margin expansion had slowed recently as interest rate increases in the second half of 2022 were now embedded in the base.
“Lower demand, reduced affordability, and competitive pricing (particularly in mortgages in South Africa), resulted in lower disbursements to retail and business clients and a slowdown in growth in the related loan portfolios,” the group said.
Corporate origination remained strong, driven by energy-related opportunities.
Non-interest revenue growth was in the low-to-mid teens, supported by client acquisition, higher transaction volumes, annual price increases, and volatility that supported trading revenues.
Credit impairment charges growth slowed, but remained elevated due to balance sheet growth, client strain linked to the interest rate increases, sovereign risk migrations in Africa Regions, and provisions linked to specific corporates in South Africa.
Africa Regions performed “very well and delivered strong earnings growth” in reported and constant currency. Its contribution to group headline earnings for the 10 months was 44%.
At the half year stage, Standard had forecast that banking revenue growth was expected to be stronger than previously guided, but moderate relative to the strong first-half growth when compared with the first half of last year.
It forecast that banking cost growth was likely to remain elevated due to inflationary pressures, higher performance-related incentives, continued investment in its franchise and to ensure client propositions remained competitive. Banking revenue, however, was expected to remain ahead of cost growth.