Standard Bank flies high on interest rate tailwinds

Standard Bank saw a significant increase in its earnings for the first half of this year due to higher interest rates and other market tailwinds.

The largest bank in Africa released its results for the six months ended 30 June 2023 today, which revealed strong results.

The bank recorded headline earnings of R21.2 billion, up 35% relative to the six months to 30 June 2022 and delivered a return on equity of 18.9% (H1 2022: 15.7%). 

“This performance is underpinned by robust earnings growth across our three banking businesses and improved earnings and returns in our insurance and asset management businesses,” the company said. 

“Our Africa Regions franchise performed particularly well, contributing 44% to group headline earnings.” 

The bank’s net asset value per share grew by 10% from 12,652 cents in H1 2022 to 13,928 in H1 2023.

The bank ended the current period with a common equity tier 1 ratio of 13.4% (31 December 2022: 13.4%). 

Standard Bank said its banking businesses benefitted from continued client franchise growth, larger balance sheets, increased transaction volumes, and certain market and interest rate tailwinds. 

Revenue growth was well ahead of cost growth which supported strong positive operating leverage and a decline in the cost-to-income ratio to 50.5% (H1 2022: 55.5%). 

However, Standard Bank, like many other large South African banks, saw its credit impairment charges increase over this period.

Standard Bank’s credit impairment charges increased by 42% to R8.4 billion. 

The bank said a combination of macroeconomic pressures, higher interest rates, and negative sovereign credit risk migration in certain African markets drove the increase in charges. 

In South Africa, credit impairment charges increased across all Standard Bank’s portfolios, exacerbated by the non-recurrence of credit recoveries on the payment holiday portfolio in H1 2022 (R470 million). 

In the bank’s Africa Regions, balance sheet growth, client-specific provisions, and risk migrations led to higher credit charges. 

Standard Bank’s credit loss ratio increased from 82 basis points in H1 2022 to 97 basis points in H1 2023, remaining inside but at the upper end of the bank’s through-the-cycle credit loss ratio target range of 70 to 100 basis points.

Standard Bank’s banking operations recorded headline earnings growth of 42% to R18.7 billion, and return on investment improved to 19.0% (H1 2022: 15.3%). 

The bank’s insurance and asset management business unit – which now includes the businesses previously housed in Liberty Holdings – also recorded improved operational performance and headline earnings of R1.4 billion (1H22: R1.1 billion). 

Its life insurance operations recorded increased indexed new premiums, and the short-term insurance business recorded increased gross written premiums. 

Group assets under management increased by 6% to R1.4 trillion. 

The Standard Bank board approved an interim dividend of 690 cents per share (H1 2022: 515), which equates to an interim dividend payout ratio of 54%.