Standard Bank keeping the taps shut

Standard Bank reported solid results for the first half of its 2024 financial year, with the bank flagging a decrease in bad debt and improving household finances in South Africa. 

Despite this, the bank remains conservative in its lending, particularly in South Africa. It said many of its clients remain part-paying, while some have entered debt review.

Africa’s largest bank by assets reported headline earnings of R22 billion for the six months and increased its interim dividend by 8% to 744 cents per share amid improved capital efficiency. 

It said first-half profit fell 2% after earnings from its joint venture with China’s largest lender almost halved. Net income declined to R21.5 billion in the six months ended June 30.

The bank’s African regions continued to drive its growth as its South African franchise remains limited by the country’s stagnant economy. 

“Our performance is underpinned by continued franchise growth in our banking businesses and robust earnings growth in our insurance and asset management business,” CEO Sim Tshabalala said. 

The banking business is set to recover as interest rates decline across the bank’s key markets, opening the door for increased lending. 

In contrast to some of its peers, Standard Bank’s credit loss ratio declined compared to the same period in 2023 to 92 basis points. 

Tshabalala said this reflected a strong improvement in credit trends in South Africa, with the bank’s conservative approach to lending paying off. 

Over the past two years, the bank tightened its lending criteria and specifically focused on credit extension to businesses and governments rather than individuals, limiting its exposure to rising bad debt. 

Its lending taps remained tightly shut in the first half of 2024, with gross loans and advances growing by a mere 3%. 

A decline in demand for lending from businesses and higher early repayments due to elevated interest rates was offset by strong momentum in corporate and sovereign lending. 

The bank also increased its provision for credit impairments by 8% to R66.8 billion to cover any potential upticks in bad debt. 

In South Africa, inflows into early arrears have slowed, and this has been supported by customer assistance programmes and collection process enhancements.

 Many retail customers are part-paying, and most of the debt review customers are making the required payments, the bank said. 

“The Africa Regions’ franchise delivered another exceptional performance in local currency,” Tshbalala said. Its African business contributed 41% of its earnings and has a higher return on equity compared to the South African franchise. 

Standard Bank grew its active clients to 19.5 million and aims to cross-sell more of its insurance and asset management products to its banking clients. 

Tshabalala explained that this is part of the bank’s drive to diversify its income streams and improve its capital efficiency. 

The bank’s ambitious plans come after it reincorporated the Liberty insurance business and asset manager Stanlib into the Group’s operations in 2022.

Standard Bank already controlled the companies but decided to merge them to enhance efficiency and enable it to become a full-service financial institution.

“The group’s strong capital position, together with our well-diversified and resilient earnings streams, provide us with both the scope to fund the growth opportunities in our portfolio of businesses.”

“These include, most notably, increased investments in our subsidiaries in Angola and Nigeria, and funding to support growth opportunities in South Africa and the East Africa Region.”

The bank is also eyeing an increasing share of the value generated by Africa’s transition towards a low-carbon economy. 

It mobilised over R21 billion in sustainable finance in the first half of 2024 and aims to mobilise over R250 billion for sustainable finance solutions by 2026.

“We are focused on delivering against our strategic priorities and remain on track to deliver on our 2025 targets and our ambitious sustainable finance targets,” Tshabalala said.