A year ago Standard Bank’s extensive African operations were shooting the lights out for the group, whose headline earnings surged 27% for financial 2023 with earnings from the rest of Africa up 49% and markets hailing the success of the group’s three decade long strategic bet on the continent.
This time around the group felt the effect of wild swings in African currencies, whose volatility reduced the group’s 2024 headline earnings growth in rand terms to just 4% for the year to end-December — just as the banking group had warned a year ago.
In constant currency terms, however, Standard increased earnings by 14%. Its Africa operations, which now account for more than 40% of its earnings, were up 22%. And group CEO Sim Tshabalala is unfazed.
Standard has a diversified portfolio across the Africa region which has grown at 14% on average since 2014 and over the same period the group has grown at about 10% on average. “So if you take a long view, you look through the volatility,” he said in an interview on Thursday after the release of the group’s results. “That we are still able to grow by 4% tells you the franchise is in rude health.”
Tshabalala said 2025 would not see the same level of currency deterioration in African countries as in 2024. The biggest down drafts were mainly the Ghanaian cedi, the Nigerian naira and the Angolan kwanza. The economic drivers that caused the depreciation would not happen again.
“Those countries have taken on the structural reforms necessary to make a repeat improbable,” he said. In the case of Nigeria the structural reforms included the collapsing of the parallel market in the currency, closing the gap between the parallel market and the official market, hence the devaluation.
The IMF projects 4% growth for Sub-Saharan Africa in the medium term. In the case of the countries where Standard Bank operates, the average GDP growth rate is expected to be 2.7% this year — including SA, which the bank forecasts to grow at 1.7% this year while countries such as Angola, Ghana, Uganda and Mauritius will grow at 5%-6%.
The group’s share of earnings from outside SA is likely to continue to grow, Tshabalala said. But if SA’s growth were to accelerate to 3%, off the big base of a $400bn (R7.32-trillion) economy, “it would be a very different game”, he said.
But the group’s SA operations were in good health too, posting earnings growth of 11% to R18.5bn as they benefited from growth in the client base, higher levels of activity and improved credit performance. The decline from 98 to 84 in the credit loss ratio spoke to an improving clientele.
“People have greater disposable income as a result of the decline in interest rates and inflation and healthy salary increases,” he said. There was also a benign outcome in the group’s corporate and investment bank in SA.
Commenting on this week’s budget, Tshabalala said getting the debt to GDP ratio right was the place to start and based on what was presented, 76.2% was not an unreasonable outcome, suggesting SA could end up below where the ratings agencies projected. Hopefully the budget would arrive at a place where there was agreement among the political parties, he said.
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