Standard Bank warns of tough trading conditions ahead
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DURBAN - STANDARD Bank said on Friday that the operating environment in South Africa remained difficult in the first quarter to end March, partly due to Covid-19, electricity supply disruptions and low consumer and business confidence.
It said the GDP growth in 2021, and beyond, remained highly uncertain and that the recovery was likely to be uneven across geography and sector.
“However, as base effects begin to unwind, GDP growth will probably recover in the second quarter of 2021. Inflation is expected to remain relatively benign across the group’s countries of operation,” the group said.
In an operational update to the Industrial and Commercial Bank of China, which holds more than a 20 percent stake of its stock, Standard Bank said its performance in the first quarter relative to the three months to March 2020 needed to be considered in the context of Covid-19.
“In the first quarter of 2021, the operating environment in South Africa remained difficult,” it said. “Electricity supply disruptions continued, consumer confidence remained low and business confidence fell relative to the fourth quarter of 2020.”
Standard Bank said that its first quarter performance was positively impacted by market volatility in terms of trading revenue but this was offset by the negative impact of the decline in market valuations, particularly
Liberty Holdings’ shareholder investment portfolio, and the IFRS 9 driven increase in credit charges based on the portfolio performance and the forward-looking assumptions used at the time.
The group said the first quarter was affected by lockdown restrictions in late December and had a negative impact on activity and customer spend. However, the bank said by March restrictions were eased and activity levels improved but remained below the levels seen in the first quarter of 2020 before the pandemic.
In the Africa regions, higher oil prices were positive for West Africa and Covid-19 related restrictions had largely been lifted and trade activity improved from pandemic lows.
“In late March, Kenya re-introduced restrictions as infection rates increased, a risk to the East Africa region, and Mozambique battled an insurgency in the north. In the first quarter of 2021, private sector credit growth remained subdued in South Africa, but was stronger in Africa regions and considerable global stimulus supported markets,” the group said.
However, the group’s mortgage disbursements continued to be strong in the first quarter of 2021 and well ahead of the first quarter of 2020, and vehicle and asset finance and personal unsecured disbursements were more in line with last year.
“Revenue pressures experienced in the second half of 2020 continued into the first quarter, while net interest income declined as higher average interest-earning asset balances period-on-period were more than offset by lower margins relative to last year,” the group said.
The group’s non-interest revenue declined due to lower activity-related fees and lower trading revenue relative to last year, particularly in March 2020 and its operating expenses were well-managed and declined marginally period-on-period.
The group said this was insufficient to offset the decline in revenues.
It added that the active payment holiday portfolios continued to reduce over the period both in South Africa and Africa Regions, reducing from R21 billion at the end of December 2020 to R10bn by the end of March.