Standard Bank’s earnings fall as bad debts rise

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Standard bank says risk remains high and should the outcome be worse than expected, additional provisions will be required.

Standard Bank has reported a sharp fall in first-half earnings after it made provisions for an expected rise in bad debts and Covid-19 resulted in fewer transactions and loans. It has also held back on an interim dividend, in line with Reserve Bank guidance for banks to preserve capital due to the fallout from the pandemic.

The bank, which has operations across the continent, said its results for the six months to end-June reflected the resilience of its operations and its diversified underlying franchise, negatively impacted by a very difficult environment, particularly in SA. Its Africa Regions business and Corporate and Investment Banking unit delivered strong top line growth for the period.

Net interest income declined by 2% to R31.2 billion over the six months to end-June, with recent interest rate cuts putting pressure on interest margins. Non-interest revenue was 4% higher at R24.6 billion, resulting in a 1% increase in total income to R55.8 billion. Headline earnings fell 40% to R7.74 billion while headline earnings per share declined by 43% to 473.8c. Attributable income declined by 71% to R3.8 billion, also impacted by the R1.4 billion post-tax gain on the sale of its 20% stake in ICBC Argentina to the Industrial and Commercial Bank of China, as well as the impairment of certain IT intangible assets.

The bank’s credit loss ratio jumped to 169 basis points from 76 basis points a year earlier. Its credit impairment charge was 2.7 times higher at R11.3 billion.

Globally, 1H20 has been dominated by the Covid-19 pandemic and the distressing human and economic cost thereof,” CEO Sim Tshabalala said. “During this time, we have remained steadfast in support of our clients, our employees and the communities in the countries we operate in.”

Life insurance subsidiary Liberty Holdings reported an interim headline loss of R2.3 billion, down from earnings of R2 billion last year, impacted by higher morbidity and mortality claims, new business strain and the creation of a R2.2 billion post-pandemic provision to cover future costs related to Covid-19 which are still expected to arise. After adjusting for treasury shares, Standard Bank’s share of the loss amounted to R700 million.

The bank said customer activity and business turnover levels continued to recover in July, which would support growth in non-interest revenue in the second six months of the year. However, it said ongoing uncertainty was likely to constrain growth in its balance sheet, while net interest income would remain under pressure from lower interest rates. Trading revenue was also expected to decline in the second half of the year. Forecast risk remained high and should the outcome be worse than expected, additional provisions for bad debts would be required.The Board will take into account the SARB’s guidance and group’s capital position and the outlook before deciding whether to declare a final dividend,” Standard Bank said. “We are unable to provide revised medium-term targets at this time.”

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