TIDM68IG
RNS Number : 7770O
Standard Bank Group Limited
14 June 2022
Standard Bank Group Limited
14 June 2022
Voluntary trading update for the five months to 31 May 2022 and
trading statement for the six-month period ending 30 June 2022
Since reporting in March 2022, the global macro-economic outlook
has deteriorated. Growth has slowed, inflation has risen, and
uncertainty has increased. Key drivers include the ongoing conflict
in Ukraine, the strict lockdowns in China, and persistent global
supply chain disruptions. In sub-Saharan Africa, higher food,
fertilizer, and fuel prices have started to filter through, driving
inflation upwards. Higher inflation has prompted monetary
tightening.
In South Africa, inflation reached 5.9% in April 2022. By 31 May
2022, the Monetary Policy Committee had raised the repo rate by 100
basis points to 4.75% and indicated that there were likely to be
further increases in the second half of the year. In March 2022, SB
Research expected interest rates in South Africa to increase by 100
basis points for the full year. This has been revised up to 175
basis points.
Standard Bank activities:
In the five months to 31 May 2022 (5M22 or the current period),
the group recorded low double digit revenue growth. A larger
average balance sheet and higher interest rates drove low-teen net
interest income growth. A growing client franchise and higher
client activity (fewer Covid-related restrictions in 5M22 than in
5M21) drove higher transactional turnover and supported mid-single
digit growth in banking fees. Higher insurance premiums and lower
pandemic-related claims were partially offset by higher short-term
insurance claims. The latter was driven by inclement weather and
floods in KwaZulu Natal, South Africa. Trading revenue grew
mid-teens supported by continued client activity; this is off a
high base in the five months to 31 May 2021 (5M21 or the prior
period) and ahead of expectations.
Costs grew high single digits driven by a combination of higher
staff costs, normalisation of certain post-pandemic spend and
inflation more generally. In 5M22, weighted average inflation
across our countries of operation was close to 10%. Revenue growth
exceeded cost growth, delivering positive jaws.
Credit impairment charges in 5M22 were marginally lower than in
5M21. A decline in the Consumer and HNW and the Business and
Commercial client segments credit impairment charges period on
period was partially offset by the normalisation of Corporate and
Investment Banking charges from a net recovery in the prior period
to a net charge in the current period. The credit loss ratio for
the current period was at the lower end of the group's
through-the-cycle target range of 70 - 100 basis points. It is
important to note that as we enter a rising interest rate cycle,
the group's balance sheet provision levels remain well above
historic levels.
Liberty Holdings Limited
Liberty Holdings Limited's (Liberty) operational earnings
improved period on period driven mainly by lower funeral and death
claims in SA Retail and Liberty Corporate, and improved persistency
in SA Retail. Sales on both SA Retail and Liberty Corporate have
increased relative to the prior period. While the pandemic impact
was broadly in line with expectations, and significantly lower than
in the prior period, risk claims remain elevated. The future
pandemic-related experience remains uncertain. The pandemic reserve
was used to absorb adverse experience variances as intended and
will be re-assessed as part of the 1H22 reporting process. STANLIB
and the shareholder investment portfolio were negatively impacted
by market movements. Liberty remains well capitalised with a
solvency capital ratio within our target range of 1.5x to 2.0x
cover.
Liberty's earnings were 100% consolidated from 1 February 2022.
The adjustment for Standard Bank shares held for the benefit of
Liberty policyholders (Treasury Share Adjustment) was negative due
to the increase in the group share price from 31 December 2021 to
31 May 2022. Post the Treasury Share Adjustment, Liberty's
contribution to the group was marginally negative for 5M22.
The Liberty integration plan is on track. The focus is on
unlocking value and delivering the synergies identified as part of
the transaction.
ICBC Standard Bank plc
Despite difficult market conditions, ICBC Standard Bank plc
recorded an operational profit in 5M22 (i.e. excluding the
insurance recovery reported on 11 March 2022). The group's 40%
share of the insurance recovery equated to R1.2 billion post
tax.
Capital and returns
The group's capital and liquidity levels remain strong. The
group's common equity tier 1 ratio was 13.5% as at 31 March
2022.
Group return on equity (ROE) for the period was close to group
cost of equity (FY21 cost of equity was 14.7%).
Outlook
Group guidance for the twelve months to 31 December 2022 remains
largely unchanged. A higher average balance sheet and positive
endowment from higher interest rates should drive strong net
interest income growth. A larger client base and higher client
activity is expected to continue to support fee growth. Trading
revenues are subject to market volatility and related client
activity. While the group's credit loss ratio is expected to remain
at the lower end of the group's through-the-cycle target range,
balance sheet provisioning and associated credit charges are
subject to macro-economic developments, including the frequency and
quantum of further interest rate increases across our countries of
operation throughout the rest of the year. We remain committed to
delivering cost growth below inflation, positive jaws and an ROE
above cost of equity in 2022.
While the economic outlook has deteriorated and uncertainty
increased, opportunities exist to help our clients and in turn,
grow our business. We remain convinced that the strategy we laid
out in August 2021 remains valid and that the 2025 targets we set
are achievable.
Trading statement
In terms of the Listings Requirements of the JSE Limited, a
listed company must publish a trading statement once it is
satisfied that a reasonable degree of certainty exists that the
financial results for the period to be reported will differ by at
least 20% from reported financial results for the previous
corresponding period.
Shareholders are advised that Standard Bank Group's headline
earnings per share (HEPS) and earnings per share (EPS) for the
six-month period ending 30 June 2022 are expected to be more than
20 % higher than the reported HEPS and EPS for the comparable
period (1H21 HEPS: 721.4 cents, 1H21 EPS: 717.4 cents).
We will provide a more specific guidance range once there is
reasonable certainty regarding the extent of the increase in
earnings.
Standard Bank Group will report financial results for the six
months to 30 June 2022 on 19 August 2022. The event details will be
made available on the group's Investor Relations website in due
course.
Investor call
Standard Bank will host an investor call at 17h00 (South Africa
time) on 14 June 2022. To register for the call please use the link
below:
Chorus call Registration
Alternatively, the call registration details are available on
the Standard Bank Group Investor Relations website -
https://reporting.standardbank.com/
A replay will be available on the Investor Relations website
shortly after the end of the call.
Shareholders are advised that the information contained in this
voluntary trading update and trading statement has not been
reviewed or reported on by the group's external auditors.
For further information, please contact:
Ann Hunter
Standard Bank Group Limited
9th Floor
5 Simmonds Street, Johannesburg PO Box 2001
South Africa
Telephone number: +27 11 415 4194
DISCLAIMER
This Announcement is not intended to, and shall not, constitute
or contain an offer to sell or solicitation of an offer to purchase
the securities referred to herein by any person in any jurisdiction
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END
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