Standard Bank flags earnings leap of up to 28%
Standard Bank expects its earnings to jump as much as 28% in the year to end-December from the same period a year earlier, driven by the high interest rate environment.
Africa’s largest bank by assets said in a trading update on Wednesday that its headline earnings per share (HEPS) would rise to between R25.22 and R26.25 from R20.50.
Standard Bank, like its peers, has benefited from high interest rates, which boosted its lending margins. The group said during the finalisation of the results it amended the methodology for recognising interest on stage 3 loans. This change resulted in an increase in net interest income and an equal and opposite increase in credit impairment charges.
There was no impact on HEPS, earnings per share, gross loans and advances, balance sheet provisions or coverage. The change had been applied retrospectively to the 2022 financial year, and the related ratios had been restated. The amendment would result in a change in the related figures and ratios in 2023, and the full-year net interest margin and credit loss ratio would be higher than previously guided, it said.
The jump in its full-year earnings would also have been boosted by its Africa regions, which in the first half compensated for a sluggish economic environment in SA.
Mergence Investment Managers senior investment analyst Radebe Sipamla said Standard Bank had a first-mover advantage relative to its peers on the continent and had paid its “school fees” in understanding the regulatory, competitive and cultural environments in Africa.
“Standard Bank in the rest of Africa operates in niche segments and has different offerings tailored to specific markets with largely a CIB [corporate and investment] focus providing banking services to multinationals operating on the continent,” Sipamla said.
“It has taken several decades for Standard Bank’s rest-ofAfrica franchise to reach the scale, profitability and returns that it currently generates.”
The Africa regions contributed 44% to group headline earnings in the six months ended June 2023 versus just 12% in 2012.