Standard Bank, Africa’s biggest bank by assets, says SA’s worst riots in decades may have dented investor confidence but is unlikely to derail a nascent economic recovery that has bolstered its confidence in its own growth prospects.
The 158-year old bank is due to announce major changes to its strategic direction on Friday, a day after unveiling a plan to build in-store branches at selected Pick n Pay outlets in Gauteng and the Western Cape. Standard Bank said the partnership is aimed at expanding its contact with existing and potential new retail clients.
The venture with Pick n Pay may bring Standard Bank into conflict with smaller rival TymeBank, which is owned by Patrice Motsepe’s African Rainbow Capital Investments. But Standard Bank’s CEO Sim Tshabalala shrugged this off, saying it views the initiative as similar to having a branch in a shopping mall where its peers can also be found.
“We won’t be so churlish as to tell our partners what to do with other partners, we will just compete,” Tshabalala said.
While he would not be drawn into giving clues about Standard Bank’s new direction ahead of Friday’s announcement, he said the group is not planning major job cuts, even though costs remain a focus.
Standard Bank revealed in its interim results on Thursday it had shed more than 1,000 staff, or about 2% of its workforce, in its fiscal half-year.
The results showed that SA’s gradual economic recovery helped Standard Bank grow headline earnings 52% to R11.47bn in the six months to end-June. Credit impairment charges declined 49% to R5.8bn in the interim period, down from elevated levels in the first half of 2020.
Wayne McCurrie, portfolio manager at FNB Wealth and Investments, said it was a good set of results from the group, and further demonstrates how well SA banks have fared during the pandemic, and that they have been overly aggressive in holding back dividends and making provisions.
“Credit growth didn’t even go negative,” McCurrie said. “Banks have weathered the Covid-19 storm, and now also weathered the unrest storm.”
Patrice Rassou, chief investment officer at Ashburton Investments, said Standard Bank’s results were within guidance, but added its personal and business banking unit in SA is lagging peers Nedbank and Absa, and has some way to go.
The return on equity of below 13% was disappointing, said Rassou, but the group did have a strong balance sheet, which bodes well for future dividends.
Standard Bank expects revenue growth to outpace costs in the second half of its fiscal year as SA’s economic recovery continues towards an expected 4% expansion in 2021. Though that economic growth forecast is lower than it might have been due to July’s unrest, it will be supported by record low interest rates that are likely to remain unchanged for the year.
Nevertheless, Tshabalala said, SA’s growth prospects still very much depend on the pace of structural economic reforms. July’s riots exposed the urgent need for reducing rising inequality through accelerated growth.
“At the end of the day we need a set of changes that will have the effect of improving consumer and business confidence firstly,” he said. “That entails the strengthening of the rule of law and processes, which one sees in the buttressing of law enforcement, the Zondo commission, and so forth — this needs to continue.”
SA needs to pursue other matters too such as the release of telecommunications spectrum and the refurbishment of bricks-and-mortar infrastructure.
“One of the jewels of SA is actually our ports, airports, rail system and road system,” Tshabalala said. “This is actually at the centre of our competitive advantage.”
Standard Bank, which operates in 20 countries in sub-Saharan Africa, said its regional performance continued to reflect the underlying recovery trends of countries of operation. Still, the stronger rand experienced in the interim period has negatively affected its operations in the rest of Africa.
The improving momentum in Standard Bank’s underlying business along with its strong capital position allowed it to declare an interim dividend of 360c per share. That represented a 50% dividend payout ratio and a R5.72bn cumulative windfall for ordinary shareholders.
Update: August 19 2021
This article has been updated with additional information throughout.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.