Standard Bank’s lending taps are opening 

Standard Bank is poised to grow its lending strongly towards the end of 2024 and the first half of 2025 as consumer confidence picks up due to anticipated interest rate cuts, lower inflation, and better economic growth. 

Africa’s largest lender by assets recently released its results for the first half of 2024, revealing moderate growth in a challenging economic environment. 

The company 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. 

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.

This was largely due to slower growth in net interest income and increased provisions. The bank now has raised R66.8 billion in provisions for credit impairments. 

However, the bank believes it has seen the peak in terms of its credit loss ratio at 92 basis points and bad debt, with it expecting lending to pick up in the second half of the year. 

Early delinquencies have begun to decline, and the growth of non-performing loans has slowed. 

In an interview with Daily Investor, Standard Bank CEO Sim Tshabalala said the bank had never shut its taps, explaining that it had applied the same criteria to all clients across the past two years. 

What has happened is that consumers have come under increasing financial pressure and can no longer meet affordability criteria. 

“Furthermore, other players have come back to the market and they have been undercutting in price. Our approach to this is that after the point where this becomes uneconomic for us, we do not extend credit.”

“The summary of my point to you is that we never shut the taps. We were simply applying age-old principles of banking, and we stood by our clients now when you turn them to the health of the consumer.” 

Standard Bank’s slowed growth in lending is shown in the graph below. 

Tshbalala said the bank has hit the peak of bad debt in South Africa, with the consumers expected to experience relief from declining inflation and interest rates in the coming months. 

Standard Bank’s research suggests a 25 basis point cut in interest rates in September, followed by 25 basis points in November and 50 basis points in the first half of 2025. 

This will result in increased lending over the next 12 months as clients demand more credit and are able to absorb more debt. 

Coupled with improved confidence in the South African economy, Tshabalala expects banking revenue to grow by mid-single digits over the year. 

“So, in other words, we’ve seen the worst of it as interest rates decline as inflation declines and consumer confidence improves. We should see a growth in the loan book.”

“The taps are open, and we are just waiting for more demand from individuals.” 

However, this lending will be driven by particular sectors and the bank’s strategic direction will also play a role in where it extends credit. 

“We continue to grow, for example, our home loans, which are now the highest and the largest in the market. We are being a bit more competitive in decline and asset finance, trying to grow market share,” Tshabalala said. 

“And then in personal unsecured, we were just being disciplined in our business and credit cards, which grew just 3%.”

Lending to big corporates and sovereigns will remain strong as they are able to take on more debt. 

In particular, the credit loss ratio in Standard Bank’s Corporate and Investment Banking (CIB) division remained uniquely low, indicating significant room for growth. 

This will also be coupled with the bank’s desire to dominate the financing of Africa’s transition to a low-carbon economy, with its aim to mobilise R250 billion in sustainable financing by 2026.