Standard Bank gets 37% earnings boost from high interest rates

Standard Bank expects its headline earnings per share (HEPS) and earnings per share (EPS) to increase by between 30% and 40% in the first half of this year.

The bank released a trading update, stating that it expects the following changes to its earnings in its interim results for the six-month period ended 30 June 2023, compared to H1 2022:

• HEPS: 30% to 35% increase
• EPS: 32% to 37% increase

This would bring the bank’s HEPS for the period to between 1,254 and 1,292 cents per share and EPS to between 1,297 and 1,346 cents per share.

Standard Bank said it continued to benefit from its growing client franchise, tailwinds from higher interest rates, and elevated market volatility into June 2023.

The bank said it is finalising its interim results for the first half of 2023, which should be released on 17 August. 

This update follows an announcement the bank made on 20 June 2023, when it informed shareholders that its results for the period would differ by at least 20% compared to the previous comparable period.

 In this announcement, the bank said that, despite a volatile global economist and geopolitical environment, the company’s results for the five-month period ended 31 May 2023 “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,” the bank said.

“Our Africa Regions franchise has delivered remarkable growth during this period and contributed 46% of the group’s headline earnings.”

The company reported that its banking activities recorded revenue growth over 20% higher in the five-month period compared to the previous period.

“Higher-than-expected average interest rates across most of our markets and good balance sheet growth supported net interest income growth,” the bank said. 

“Non-interest income growth was supported by continued growth in transactional volumes, fee and commission income and trading revenue.”

The company also reported significantly higher credit impairment charges, almost 50% higher than the previous period.

The bank attributed this to larger lending books, consumer strain in South Africa, and increased sovereign debt risk in Africa Regions. 

The credit loss ratio for the five months was also elevated but still within the through-the-cycle target range of 70 to 100 basis points.