TIDM68IG
RNS Number : 2931D
Standard Bank Group Limited
20 June 2023
Standard Bank Group Limited
20 June 2023
Voluntary trading update for the five months to 31 May 2023 and
trading statement for the six-month period ending 30 June 2023
The global economic and geopolitical environment remains
volatile and global growth has slowed in response to persistently
high inflation and interest rates. Earlier hopes of inflation
easing and steady economic growth in 2023 have receded. Public debt
as a ratio to GDP increased across the world during Covid-19 and is
expected to remain elevated, posing a growing challenge for
policymakers as interest rates are rising and revenue collections
are slowing in many African countries.
Since providing an update on the group's operational performance
in April, the macro-economic outlook in South Africa has
deteriorated further. Expectations are now that inflation and
interest rates will be higher for longer and that economic growth
will remain constrained. At the end of May , the South African repo
rate had increased by 125 basis points in 2023 to 8.25% and a
further 25 basis point increase is anticipated in the second half
of the year. The ZAR has been pressured by a strengthening USD and
dampened investor sentiment.
The group's results for the period ended 31 May 2023 (5M23 or
the current period) reflect a healthy and growing franchise.
Continued balance sheet growth in support of our clients, the
endowment impact of higher interest rates, improved customer
activity levels and increased use of our risk management
capabilities in volatile trading environments all contributed to
strong top-line growth. Our Africa Regions franchise has delivered
remarkable growth during this period and contributed 46% of the
group's headline earnings.
Standard Bank activities:
In the current period, banking activities recorded revenue
growth in excess of 20% higher than the same period in the prior
year (5M22). Higher than expected average interest rates across
most of our markets and good balance sheet growth supported net
interest income growth. Non-interest income growth was supported by
continued growth in transactional volumes, fee and commission
income and trading revenue.
The operating expenses growth rate was in the mid-teens for
5M23, driven by a combination of higher fixed remuneration in a
high-inflation environment, higher incentives in line with business
performance; as well as increased technology spend on
USD-denominated software licenses and cloud migration costs.
Weighted average inflation across our countries of operation for
5M23 was 11.8%. Strong positive jaws was achieved in the current
period.
Credit impairment charges for 5M23 were almost 50% higher than
the charges in 5M22 as the combination of larger lending books,
consumer strain in South Africa, and increased sovereign debt risk
in Africa Regions took effect. The credit loss ratio for the
current period was elevated but still within the through the cycle
target range of 70 - 100 basis points.
Credit impairments related to consumer banking customers are
currently elevated, primarily in SA and, particularly, in home
loans, on the back of rapid interest rate hikes and sustained high
inflation levels which has resulted in some customers being unable
to meet their debt obligations in full. Overall, the credit loss
ratio for consumer banking clients is currently outside of the
target range of 100 - 150 basis points. Coverage levels remain
strong for this business.
Business and Commercial Banking credit impairments have
increased due to a buildup of new non-performing loans,
particularly in single names in Africa Regions and across the small
enterprise segment in South Africa. The credit loss ratio for this
business is currently outside the target range of 100 - 120 basis
points.
Corporate and Investment Banking corporate credit losses are
currently below the 40 - 60 basis point through the cycle range for
customer impairments, although we note the weak trading results of
several closely monitored clients across our network. The knock-on
impacts of the deterioration in the SA consumer sector into our
corporate client base are being carefully analysed. Sovereign
default continues to be a risk and current levels of credit
provisions for financial investments are elevated (compared to no
impairments in 5M22). Our provisions adequately reflect our
assessment of these risks across our network as at May 2023.
Liberty Holdings Limited
Liberty Holdings Limited continued to record improved claims
experience and strong earnings growth despite losses experienced in
the Shareholder Investment Portfolio due to market movements.
ICBC Standard Bank plc
ICBC Standard Bank plc continued to record an operational profit
in 5M23, however its contribution to the group declined period on
period due to the non-recurrence of an insurance recovery
recognised by the group in January 2022.
Capital and returns
The group's capital and liquidity levels remain strong. The
group's common equity tier 1 ratio at 30 April 2023 was 12.9%. The
group's return on equity (ROE) for the period comfortably exceeded
group cost of equity.
Outlook
Group guidance for the twelve months to 31 December 2023 has
changed. Our latest estimates indicate higher net interest income
growth than the low teen guidance given in March, and higher
non-interest revenue growth than earlier mid-single digits
guidance. In turn, cost growth is anticipated to be slightly higher
than our weighted average inflation rate for the year. Our
expectation for strong positive jaws remains. The group's credit
loss ratio is expected to increase towards the upper end of the
group's through-the-cycle target range of 70 - 100 basis points.
The group's 2023 ROE is expected to show continued progress into
the group's ROE target range of 17 - 20%.
While the geopolitical and economic outlook remains volatile and
uncertain, we remain committed to serving our clients and achieving
the 2025 targets we laid out in August 2021.
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 2023 are expected to be more than
20 % higher than the reported HEPS and EPS for the comparable
period (1H22 HEPS: 936.2 cents, 1H22 EPS: 961.4 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 2023 on 17 August 2023. The event details will be
made available on the group's Investor Relations website in due
course.
IFRS17 transition report
A comprehensive IFRS17 transition report, with fully restated
and comparable prior year results and opening equity adjustments,
will be released during June 2023.
Investor call
Standard Bank will host an investor call at 17h00 (South Africa
time) on 20 June 2023. 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
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END
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