After holding back on an interim payout, the Standard Bank says a final dividend will depend on a host of factors including regulatory guidance.
Standard Bank is undecided on whether it will pay a final dividend this year as its operations continue to be affected by the fallout from Covid-19. It held back on an interim payment after the Reserve Bank’s Prudential Authority cautioned banks to conserve capital due to the impact of the lockdown on the financial system.
In a trading update, the bank said before deciding on a dividend for the year to end December it would review its capital position, the economic outlook, and latest regulatory guidance when releasing its results in March. As it stands, its capital and liquidity levels have remained well above regulatory minimums and its own internal risk appetite thresholds.
The bank said trends highlighted in an October update had continued, including slower balance sheet growth, pressure on margins due to the spate of interest rate cuts this year, and elevated credit losses. However, it said it remained capital generative.
The continued increase in retrenchments as a result of the lockdown had triggered additional stage 3 provisions, putting pressure on the loan books for its local Personal and Business Banking (PBB) portfolio, particularly within personal unsecured lending. Stage 3 is where the financial asset is credit impaired. But it said collection rates continued to improve, leading to positive transfers from stage 2 to stage 1. Its PBB client relief portfolio in SA declined to R47 billion by the end of October from R61 billion in September and R107 billion in June. Requests for relief from its Corporate and Investment banking (CIB) clients had also tapered off.
The lapsed client relief portfolio continues to reflect strong payment behaviour and has performed in line with our previous expectations,” the bank said. “Provisions on the remaining client relief portfolio remain elevated in line with the risk associated with that portfolio and the total coverage increased from 2.5% as at 30 June 2020 to 4.0% as at 30 October 2020.”
The bank’s credit loss ratio for the 10 months was lower than the 169 basis points reported at the end of the June. It said the outlook for credit impairment charges beyond this year remained very uncertain.
It guided shareholders to expect a decline in earnings and headline earnings per share of at least 20% for the year. For the nine months to end-September, group headline earnings were down 39% from the same period last year.
Standard Bank’s shares fell 4.8% to R121.14 yesterday. The JSE’s Banks Index declined by 3.9%.
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