Standard Bank Rises as African Units Boost First-Half Profit

Johannesburg, South Africa, Capital Markets in Africa: Standard Bank Group Ltd. gained the most in more than a week after first-half profit from continuing operations at Africa’s largest lender by assets climbed, boosted by higher interest rates in its home market that boosted income, and as fees from the rest of the continent increased.

The stock led advances among the biggest lenders on the six-member FTSE/JSE Africa Banks Index, rising 1.8 percent to 145.11 rand by 10 a.m. in Johannesburg on Thursday. Earnings from continuing operations before one-time items increased to 10.9 billion rand ($820 million) from 10.2 billion rand a year earlier, Standard Bank said in a statement. The dividend rose 12 percent to 3.40 rand.

The company achieved “excellent top line growth” as lending margins widened, said Patrice Rassou, head of equities at Sanlam Investment Management in Cape Town. Trading income was “strong,” while the dividend increase was “pleasing,” he said.

Standard Bank’s South African business overcame an economy that contracted in the first quarter as interest rates at their highest levels in six years lifted the profit it makes from charges on loans. Income growth from the company’s 19 units in the rest of the continent accelerated from a year earlier, boosted by gains at its credit-card unit and corporate and investment banking that offset losses in its fledgling vehicle and asset finance division.

Net income in the six months through June declined to 10.8 billion rand from 13.2 billion rand a year earlier after the company recorded one-time gains of 2.8 billion rand in 2015, mainly related to the sale of a stake in its U.K. business, that weren’t repeated.

South Africa’s economy is forecast not to expand at all this year as the central bank grapples with having to bring inflation back below it’s target range. This has put pressure on consumers and caused credit-impairment charges at Standard Bank to increase 16 percent in the first half. 

Challenges are also coming from the rest of sub-Saharan Africa, with the International Monetary forecasting an expansion in 2016 of 3 percent. Return on equity dropped to 14.4 percent from 15.1 percent.

“We are cognizant of the constraints under which our customers are currently operating,” Standard Bank said. “Despite increasing our credit provisions to reflect this, the group remains well capitalized and in a position to continue to invest and grow. We are committed to delivering through-the-cycle earnings growth and return on equity within our target range of 15 percent to 18 percent over the medium term.”

Source: Bloomberg Business News