Stan­dard sees re­turn on eq­uity hurt by slow S Africa

The Pak Banker - - COM­PA­NIES/BOSS -

Stan­dard Bank Group Ltd, Africa's largest lender by as­sets, said re­turn on eq­uity will be hurt by South Africa's slug­gish econ­omy and it's col­lab­o­rat­ing with the gov­ern­ment on ways to im­prove the coun­try's out­look.

Re­turns, which will also be de­pressed by slower growth in other African na­tions, will be knocked if South Africa's sov­er­eign credit rat­ing is down­graded to junk sta­tus, the Jo­han­nes­burg­based lender said in a state­ment on Thurs­day. The bank said that it's main­tain­ing its medi­umterm re­turn on eq­uity tar­get of 15 per­cent to 18 per­cent, af­ter the key met­ric rose to 15.3 per­cent in 2015 from 12.9 per­cent a year ear­lier.

South Africa's growth slowed last year and the coun­try is "flirt­ing with stag­na­tion, if not re­ces­sion" in 2016, ac­cord­ing to the World Bank, which cut the na­tion's growth fore­cast for this year to 0.8 per­cent. Other African coun­tries in which Stan­dard Bank op­er­ates, such as Nige­ria, have also strug­gled be­cause of the rout in com­mod­ity prices.

Sim Tsha­bal­ala, joint chief ex­ec­u­tive of­fi­cer of Stan­dard Bank, is one of the co-con­ven­ers of a task group made up of South African busi­ness lead­ers who have met with Fi­nance Min­is­ter Pravin Gord­han and Pres­i­dent Ja­cob Zuma to come up with mea­sures to boost the econ­omy. Moody's In­vestors Ser­vice cut the out­look on South Africa's Baa2 credit rat­ing, the sec­ond­low­est in­vest­ment grade, to neg­a­tive in De­cem­ber. Stan­dard & Poor's, which puts the na­tion's debt one level be­low Moody's, also changed its out­look to neg­a­tive.

Stan­dard Bank's nor­mal­ized net in­come climbed 34 per­cent in 2015 to 21.37 bil­lion rand ($1.37 bil­lion) from 15.93 bil­lion rand a year ear­lier, ac­cord­ing to a state­ment Thurs­day. Earn­ings per share ex­clud­ing one-time items in­creased 27 per­cent to 13.59 rand, beat­ing the 13.19 rand me­dian es­ti­mate of 13 an­a­lysts sur­veyed by Bloomberg. The div­i­dend rose 13 per­cent to 6.74 rand.

Even as it faces a tough year ahead, the bank re­mains well cap­i­tal­ized and its 15 per­cent as­set growth "was very pleas­ing," said Adrian Cloete, a banks an­a­lyst at PSG Wealth, a Cape Town­based firm that man­ages more than 300 bil­lion rand. Another pos­i­tive was the de­cline in the bank's credit-loss ra­tio to 0.87 per­cent from 1 per­cent, he said, adding that earn­ings beat his ex­pec­ta­tions. The bank com­pleted the sale of a 60 per­cent stake in its U.K. op­er­a­tions to In­dus­trial and Com­mer­cial Bank of China Ltd. last year, help­ing boost profit as it par­tially ex­ited its Lon­don busi­ness, which was mak­ing losses.

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