Standard Africa strategy pays off

• Earnings outshine other operations

Standard Bank’s three-decade bet on Africa is yielding rich returns for the group as evidenced by a 27% surge in headline earnings to R43bn for the year to end-December, with earnings from its African operations jumping 49%.

Standard’s strong results come after Absa, which also has sizeable operations in the rest of Africa, reported earnings growth of just 1%. Nedbank grew earnings by 11% and FirstRand by 6%.

In constant currency terms, the earnings growth from Standard’s Africa regions was more than 70%. With currencies devaluing in several African countries, the group cautioned that rand earnings growth would slow in 2024.

Still, Standard remains optimistic about expanding its operations throughout the continent. Sub-Saharan African economies are expected to grow at 4% this year, presenting opportunities for the lender to scale up in several of the 19 other African countries in which it has a presence.

It also expects an improvement from its SA operations, which grew headline earnings by 3% to R17bn, with provisions for bad debt hiked by more than a third as consumers bear the pain of high interest rates and as loan growth slowed. Provisions for bad debt were increased by 15% for the group and the credit loss ratio rose to 93 basis points from 83 a year earlier, though this is still within the target range and below that of competitors.

High interest rates and a weak SA economy have hurt consumers and businesses, driving up credit losses for all the banks in the past year. But they have also benefited from the higher rates they earn on their capital and deposits. This “endowment effect” translated into a R10.8bn benefit for Standard, with interest rates across the group’s portfolio of countries 300 basis points higher than in the previous year, group financial director Arno Daehnke said.

Group CEO Sim Tshabalala remains optimistic about SA, which is still by far the largest single country for the group.

“We don’t expect miracles in SA but we think there is a strong case for reasonable optimism that this country will start to grow significantly faster over the medium term,” he told investors on Thursday.

But while the group’s SA operations grew by a compound annual average of 4% in the decade to 2023, its Africa regions rose by 18% over the period and in the latest year posted a return on equity of 28%. That compared with a robust 18.8% for the group overall, which Daehnke said was higher than expected and reflected efficient use of capital.

Standard’s Africa footprint goes back to 1991 when it bought the African operations of ANZ Grindlays in an effort to regain a presence across the continent after UK-based Standard Chartered divested its stake in Standard Bank of SA during the late 1980s’ sanctions against the apartheid regime of the time. Standard — which often trades as Stanbic in the rest of Africa — has since expanded further by acquisitions and organic growth to become the top or number two in several of the countries in which it operates.

The group said that all three regions grew strongly, with West Africa more than doubling

earnings, South and Central Africa was up 52% and East Africa up 37%. Standard’s corporate and investment banking operations across the continent were mature and delivered pleasing growth, but its retail business in Africa regions also performed extremely well, Daehnke said. The biggest opportunity is in business and commercial banking where it has market shares of just 5%10% in many countries.

“While uncertainty is expected to remain elevated, our business is diversified, growing and resilient. We ... remain on track to deliver on our 2025 targets,” Tshabalala said.

COO Margaret Nienaber said the group’s technology ecosystem was much improved from two years ago when the bank experienced a tough time in terms of stability.

The group has also delivered on its commitment to sustainable financing, mobilising R35bn of sustainable finance in SA en route to a target of R50bn by 2026. It has issued 22-million loans for rooftop solar energy under the government’s bounce-back scheme.