Standard Bank Reports Solid Results for the Period Ended 30 June 2019

  • Headline earnings: R13 361 million, up 6%
  • Headline earnings per share (HEPS): 837 cents, up 5%
  • Dividend per share: 454 cents, up 6%
  • Common equity tier (CET) 1 ratio: 14.0% (1H18: 13.8%)
  • Net asset value (NAV) per share: 10 511 cents up 8%
  • Return on equity (ROE): 16.2% from 16.8%
  • Cost-to-income ratio: 57.0% (1H18: 57.6%)
  • Credit loss ratio: 76bps (1H18: 62bps)

For the period ended 30 June 2019 (1H19) headline earnings were R13.4 billion, an increase of 6% on the prior period (1H18), and return on equity (ROE) was 16.2%. The group’s capital position remained strong, with a common equity tier 1 (CET1) ratio of 14.0%, which supported the interim dividend of 454 cents per share, an increase of 6% on the prior period.

Sim Tshabalala, Standard Bank Group CEO says: “Standard Bank Group’s African-focused strategy has delivered continued headline earnings growth, driven by the strong underlying momentum in our core operations.”

Banking activities recorded strong growth in headline earnings, increasing 10% to R12.8 billion. ROE was 17.5% in line with the prior corresponding period. Strong balance sheet growth period on period supported net interest income (NII). Pressure on fees and continued customer migration to digital channels dampened non-interest revenue (NIR) growth. Credit impairment charges increased from a low base in 1H18. Stringent cost management resulted in positive jaws of 109 basis point (bps).

After adjusting for currency impacts, in particular the weaker South African Rand (ZAR), group headline earnings grew 5% on a constant currency (CCY) basis. On the back of continued strong earnings growth, Africa Regions’ (AR) contribution to banking headline earnings grew to 34% from 32% in 1H18. The top six contributors to AR’s headline earnings were Angola, Ghana, Kenya, Mozambique, Nigeria and Uganda.

Operating environment

The persistent uncertainty associated with the US-China trade war and the threat of a global slow-down weighed on markets in 1H19. A change in the US interest rate outlook provided some support to Emerging Markets flows in 2Q19, as investors searched for yield.

In sub-Saharan Africa (SSA), inflation decelerated, currencies stabilised, and interest rates moderated. Inflation averaged 9% across the markets in which the group operates. Although Angola and Nigeria recorded inflation in the double digits, period-on-period inflation eased in both countries. In Angola, the continued depreciation of the Angolan Kwanza (AOA) kept inflation at elevated levels. Zimbabwe transitioned to the Real-Time Gross Settlement (RTGS) Dollar as its primary currency in February 2019. Since its introduction, the RTGS has devalued significantly resulting in a spike in inflation. Electricity shortages further exacerbated a difficult operating environment.

In South Africa, ongoing uncertainty weighed on confidence, spending and investment. In 1Q19 GDP declined 3.2%. Despite a weaker average ZAR in 1H19, inflation remained well anchored, allowing for an interest rate cut in July 2019.

Business Units

Personal & Business Banking

PBB’s headline earnings grew 8% to R7.2 billion, underpinned by balance sheet and customer franchise growth. NII increased 9% to R21.7 billion, as balance sheet growth offset the impact of IFRS 16. Active cost containment resulted in positive jaws of 86 bps. Credit impairment charges increased 12% to R3.7 billion (1H18, R3.3 billion) and the credit loss ratio increased marginally to 105 bps (1H18, 99 bps). ROE improved to 19.9% from 19.6% for the same period last year.

PBB SA delivered headline earnings of R6.1 billion, flat period on period, reflecting the impact of the branch reconfiguration costs combined with the continued difficult macroeconomic backdrop and an increasingly competitive environment. In the six months to June 2019, the number of branches in SA declined by 98 to 531 branches and square meterage declined 14% to approximately 314 000 square metres.

In 1H19, the business digitised key branch activities (electronic account payment limits, debit order reversals, real-time clearance, pin view and statements older than six months) and launched a number of new products (MyMo, My360, SimplyBlu and BizFlex) and product enhancements (tiered-priced mortgages, Shyft for non-Standard Bank customers, personal lending and current account online origination), aimed at improving customer experience, driving retention and attracting new-to-bank customers.

Customers continued to migrate to our digital platforms, in particular the SBG mobile app. SBG mobile app active users increased 55% to 1.8 million and the value of transactions executed via our mobile banking increased 47% to R173 billion. Instant Money, our digital wallet and money transfer platform, continued to gain traction with customers; transactional volumes increased 20% to 12.6 million, and turnover increased 27% to R9.3 billion.

PBB Africa Regions more than doubled its headline earnings once again to R471 million (1H18, R211 million), driven by ongoing customer acquisition, increased activity levels, as well as growth in loans and deposits. The business was negatively impacted by declining rates and regulatory pressure on fees, most notably in Angola, Lesotho, Malawi, Nigeria and Zambia.

PBB Africa Regions’ active customers increased to 5.2 million, driven by client acquisition in Ghana, Malawi, Nigeria, Uganda and Zimbabwe. Transaction volumes increased 18% driven by digital channels which increased 23%, while branch transactions declined 15%. Digital transaction volumes increased to 92% of total volumes. A growing customer base, combined with strong take up of mobile banking, resulted in an increase in mobile banking transaction volumes of 57% to 36.9 million transactions. The group’s market leading digital solutions, e.g. remote onboarding, digital and paperless channel fulfilment (Moby Banker), digital card/wallet container (SlydePay) and instant unsecured personal loans (launched in eSwatini and Zambia), assisted in driving customer and balance sheet growth.

Wealth International produced an exceptional result, growing headline earnings 54% (42% in CCY) to R664 million. The performance was driven by ongoing client acquisition, effective margin optimisation and positive endowment from higher rates in the US and UK.

Corporate & Investment Banking

CIB delivered headline earnings of R6.2 billion, an increase of 9% (6% in CCY). This is a pleasing result considering the subdued market activity levels in key markets, the difficult business environment in SA and the legislative changes and currency-related headwinds faced in some of the Africa Regions markets. CIB’s strong underlying operational performance is a testament to its growing client franchise, effective credit management and continued cost control. Revenue increased by 7% (5% in CCY). Impairment charges increased off a low base in 1H18 resulting in a credit loss ratio to customers of 40 bps (1H18, 4 bps), on the lower end of CIB’s through-the-cycle range of 40 – 60 bps. Cost growth of 5% (3% in CCY) lead to positive jaws of 156 bps and an improvement in cost-to-income ratio to 52.3% (1H18, 53.1%). During the period, CIB closed the Hong Kong office and took steps to rightsize the London office. Higher capital demand, on the back of strong growth in IB assets, higher capital requirements in Global Markets (GM) and portfolio ratings downgrades in SA, resulted in a dip in ROE to 19.3% (1H18, 20.5%).

Client revenues increased 12% (10% in CCY), underpinned by strong underlying client activities. In 1H19, client revenues from large domestic corporates grew 24%, driven by SA, West and East Africa, whilst multinational corporates grew 7%. From a sector perspective, client revenue growth was driven by client activities in the Financial Institutions, Oil & Gas (O&G), TMT and Sovereign & Public Sector. At a regional level, client revenues in SA grew 9% and in AR, 15%.

Transactional Products and Services (TPS) delivered a solid set of results with headline earnings up 11% to R1.8 billion (1H18, R1.6 billion). Strong growth in loans and deposits, driven by client acquisitions and increased share of wallet, more than offset some of the headwinds from declining interest rates, the depreciation of the AOA and higher cash reserving requirements in Nigeria.

IB headline earnings increased 10% to R2.0 billion (1H18, R1.9 billion). Revenue growth was driven by double digit average loan book and NII growth and fees from participation in several landmark deals and client activity in the O&G and Telecoms & Media sectors. Impairment charges increased, but remained well below historic levels.

Despite a difficult start to the year, GM remains a sizable business that contributed R2.3 billion of headline earnings in the period. The Equities, Interest Rate Trading and Structured Solutions desks experienced headwinds, in line with markets businesses globally. The Africa Regions GM businesses performed well, providing some respite to those in SA.

Other banking interests

Other banking interests recorded a headline loss of R320 million. ICBC Standard Bank Plc (ICBCS) recorded a loss of USD129.5 million in the period. This disappointing result comprises two primary components i) an operating loss of USD19.5 million and ii) a provision of USD110 million arising from a single client relationship. The operating loss should be viewed in the context of the difficult environment in which the business operated in the period. The single-client loss arose as a result of Philadelphia Energy Solutions (PES) operations being severely disrupted after an industrial incident, which in turn impacted its ability to fulfil its contractual obligations. PES has since filed for bankruptcy and the matter is in the courts. Standard Bank is comfortable that ICBCS is following due process and ICBCS is keeping Standard Bank updated as appropriate. The group’s 40% share of ICBCS’ loss equated to R752 million.

ICBC Argentina continued to perform well, delivering a headline earnings contribution from the group’s 20% stake of R432 million (1H18, R202 million).


Liberty continued to make progress against its strategic objectives and delivered a pleasing improvement in its normalised operating earnings, up 14% to R1.1 billion. Headline earnings attributable to the group, adjusted down by R248 million for the impact of deemed treasury shares, was R875 million, 2% higher than in the prior period.


Whilst flagging global growth and the US-China trade war remain key risks to the global macro-economic outlook, SSA is expected to remain on its recovery path in 2019 and into 2020. Higher consumption and looser monetary policy will provide support. Regional real GDP is expected to grow 3.5% in 2019 and stabilise at around 4% over the medium term.

Given SA’s fiscal constraints and weak consumer and business confidence, consumption and investment are likely to remain subdued. Against a backdrop of a deteriorating fiscal position, increasing unemployment and slower than expected reform, GDP growth expectations have been reduced to 0.6% for 2019.

Mr Tshabalala says: “Whilst there may be headwinds in certain markets, the diversity of our businesses and breadth of our footprint provide us with some shelter. In addition, our on-the-ground presence and deep understanding of the macro, political and regulatory dynamics in each of these markets, enable the group to continue to support our customers and our employees, whilst managing risk appropriately. We expect balance sheet growth in Africa Regions to continue to outpace that in SA, NII to outpace NIR and the credit loss ratio to remain at the lower end of our new target range of 70 – 100 bps. We remain committed to driving operational efficiencies, whilst continuing to invest judiciously to deliver a future-ready Standard Bank Group. We remain committed to our medium-term targets of delivering sustainable earnings growth and an ROE in our 18% – 20% target range.”

“Recognising that the group’s sustainability, over the medium to long term, is inextricably linked to that of all our stakeholders, we remain committed to our shared value model and steadfast in delivering on our purpose of driving Africa’s growth,” says Mr Tshabalala.

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