Standard Bank shares drop despite rise in earnings
STANDARD Bank shares traded 3 percent lower on the JSE yesterday after the group reported a 6 percent increase in headline earnings to R27.9 billion for the year to end December, with a return on equity (ROE) of 18 percent, up from 17.1 percent compared to last year.
Standard Bank’s headline earnings were below that of its competitor, Nedbank, which reported 14.5 percent increase in its headline earnings on Tuesday. The share price declined to R183.27 a share, down from Wednesday’s closing price of R188.20, but later closed at R182.43.
The group pointed to the low growth in the South African economy, which was weaker than expected at 0.7 percent. “The poor macro environment, slow policy progress and higher taxes weighed on consumer and business confidence and, in turn, demand for credit,” the group said.
However, the group’s banking activities headline earnings increased by 7 percent to R25.8bn and ROE improved to 18.8 percent, up from 18 percent compared to last year.
Chief executive Sim Tshabalala said: “Standard Bank delivered sustainable earnings growth and improved returns, underpinned by the strength and breadth of our client franchise.”
Income from banking activities increased to R105.3bn and net income before taxation increased to R44.3bn while headline earnings per share increased by 7 percent to 1 748.4 cents a share.
The group declared a dividend of 970c, which was up by 7 percent.
Africa Regions’ contribution to banking headline earnings grew to 31 percent, up from 28 percent and the top five contributors were Angola, Ghana, Mozambique, Nigeria and Uganda.
Personal and business banking increased headline earnings by 10 percent to R15.5bn, supported by customer and balance sheet growth, higher transaction volumes and lower credit impairment charges.
However, corporate and investment banking headline earnings declined by 2 percent to R11.2bn while Liberty’s operating earnings were up 42 percent compared to last year.
Ron Klipin, a senior analyst at Cratos Capital, said the results were impacted by a lacklustre economy, which reflected 0.7 percent growth in 2018.
“This resulted in a decline in the demand for credit as well as a tightening of risk lending criteria by the lending institutions. Therefore, revenue growth has been difficult to achieve with a rise in operating costs, that in many cases exceeded that of top line growth, thereby impacting on profitability,” Klipin said.