Covid-19 storm is battering SA’s banking sector
Standard, Nedbank take earnings knock
BANKS are in the eye of the Covid19 storm as Standard Bank yesterday slammed brakes on dividend payments while Nedbank warned its earnings could plummet up to 72 percent.
Standard Bank, Africa’s largest bank by asset, said its profits fell during the six months to end June, with headline earnings per share falling 43 percent to 473.8 cents a share.
The bank said that its banking operations reported headline earnings of R7.7 billion, down 40 percent on those recorded during the corresponding period last year and a return on equity of 9.5 percent.
Chief executive Sim Tshabalala said that the bank’s balance sheet growth was constrained. He said the first half of 2020 has been dominated by the Covid-19 pandemic globally and the distressing human and economic cost thereof.
“During this time, we have remained steadfast in support of our clients, our employees and the communities in the countries we operate in.
“The group’s strong capital and liquidity positions going into this crisis have allowed us to provide significant temporary relief to clients without constraining our ability to lend to existing and new clients or support new projects,” Tshabalala said. He said the bank would not declare a dividend.
The bank said its headline earnings declined 44 percent to R7.54bn with South Africa operations reporting a 72 percent decline as the pandemic exacerbated an already difficult environment.
The performance was, however, offset by Africa Regions, which delivered 11 percent growth in earnings and 7 percent on a constant currency basis.
The group said its credit impairment charges surged to R11.3bn from R4.2bn last year.
Tshabalala said the considerable uncertainty drove an Emerging Market risk-off stance for foreign investors and sub-Saharan Africa experienced record capital outflows and financial conditions tightened.
Victor von Reiche, a portfolio manager at Citadel, said the biggest driver of earnings decline was a combination of factors specifically related to the personal & business banking (PBB) franchise.
“A significant increase in credit impairments, which more than doubled, was amplified by revenue slow down due to lower net interest income as the Reserve Bank aggressively cut interest rates which impacted net interest margins,” Von Reiche said.
Credit impairment charges in PBB increased to R8.6bn compared to R3.7bn while revenues declined by 1 percent to R35.1bn .
Von Reiche said non-interest revenue surprised on the upside, supported by growth in trading revenues and the net result was a 60 percent drop in earnings in PBB.
Meanwhile, Nedbank said yesterday that its profit for the half year that ended June would fall between 67 and 72 percent from the same period last year. It will be announcing its half yearly results on August 26.
Standard Bank shares declined 0.98 percent on the JSE to close at R108.63.