- Headline Earnings: ZAR22 billion, record performance.
- Return on Equity (ROE): 18.5%.
- Dividend: ZAR7.44 per share, highest ever, with an 8% growth and a payout ratio of 56%.
- Common Equity Tier 1 Ratio: 13.5%.
- Active Client Growth: 5%, resulting in 19.5 million clients.
- Fee Income Growth (Personal and Private Banking in South Africa): 10%.
- Assets Under Management (South Africa): 11% growth.
- Disbursements in South Africa: ZAR61 billion (ZAR40 billion for PPB clients and ZAR21 billion for BCB clients).
- Death, Disability, and Annuity Payouts: ZAR13 billion.
- Cloud Processing: 44% of processing in the cloud.
- Dividend from Subsidiaries: ZAR5.7 billion in distributions so far this year, ZAR11 billion since the transaction announcement, and ZAR4.2 billion from offshore entities.
- Average Income Growth (Past Decade): 7%.
- Average Headline Earnings Growth (Past Decade): 10%.
- Return on Equity Improvement (Past Decade): 580 basis points.
- Dividend Growth (Past Decade): 12% average growth.
- Cost-to-Income Ratio: 49.7%.
- Loan Growth: 3% overall, with corporate and sovereign lending growing 8%.
- Net Interest Income (NII): 7% growth to ZAR50 billion.
- Net Fee and Commission Revenue: 4% increase to ZAR15.1 billion.
- Credit Loss Ratio: 92 basis points.
- Insurance and Asset Management Earnings Growth: 19% to ZAR1.6 billion.
- Insurance Operations Earnings Growth: 15% to ZAR2.1 billion.
- Asset Management Operating Earnings: Decreased by 19% to ZAR472 million.
- Solvency Capital Requirement Cover: Robust and within target ranges.
- Risk-Weighted Assets Growth: 4% since December.
- Banking Revenue Growth Guidance (2024): Low single digits.
- Cost-to-Income Ratio Guidance (2024): Flat to lower year-on-year.
- Return on Equity Guidance (2024): 17% to 20% target range.
Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Standard Bank Group Ltd (JSE:SBK, Financial) delivered record headline earnings of ZAR22 billion for the first half of 2024.
- The company declared its highest dividend ever of ZAR7.44 per share, growing at 8% with a payout ratio of 56%.
- Return on equity improved to 18.5%, reflecting strong financial performance.
- The group achieved a 10% increase in fee income in personal and private banking in South Africa.
- Assets under management in South Africa grew by 11%, showcasing robust asset growth.
Negative Points
- Currency weakness in several major African economies negatively impacted the group's costs and income.
- Economic challenges in Nigeria and Kenya led to reduced confidence and slower growth in these regions.
- The banking business experienced pricing pressures, particularly in South Africa, Kenya, Angola, and Mozambique.
- The credit loss ratio remained high at 92 basis points, indicating ongoing credit risk concerns.
- West Africa's performance was down by 17% in ZAR due to currency devaluation, particularly in Nigeria and Angola.
Q & A Highlights
Q: On credit losses and the outlook for the rest of the year, given the backdrop of rising NPLs in the last six months, how should we think about that as we model out for the rest of the year?
A: We are seeing early delinquencies and the formation of nonperforming loans declining, indicating that peak credit is behind us, especially in our retail business in South Africa. We expect a gradual recovery in the credit outlook, with the credit loss ratio around the top end of our through-the-cycle range of 70 to 100 basis points. (Arno Daehnke, CFO)
Q: Can you elaborate on the noninterest revenue guidance, which seems to have changed from up mid-single digits to down low to mid-single digits?
A: The change is due to certain liquid assets now being held at amortized cost in the NII line instead of fair value in the NIR line. This adjustment is not material and does not affect the total revenue line. (Arno Daehnke, CFO)
Q: Regarding the headline earnings adjustment of ZAR428 million, can you provide some color on that?
A: This adjustment relates to Zimbabwe. We changed the functional currency to USD from the Zimbabwe dollar, which affects earnings in terms of property valuations now in USD. (Arno Daehnke, CFO)
Q: On the NIM outlook, how do you see pricing and mix evolving, and what is the impact of deposit insurance on your margins?
A: We expect a slight widening in margins due to endowment tailwinds, but this will likely reverse into 2025 with endowment headwinds. Deposit insurance has not impacted client behavior but is a cost to the company, estimated at around ZAR250 million for this financial year. (Arno Daehnke, CFO)
Q: Given the better credit losses in personal banking, what will you be looking for to start reducing coverage in this part of your business?
A: We are seeing a reduction in new NPL formations, but clients are still under pressure. An interest rate reduction would improve affordability and likely result in lesser impairments and coverage over time. (Funeka Montjane, CEO, Consumer & High Net Worth Clients)
Q: On West Africa's performance, which was down about 17% in ZAR, how do you see this trending in the second half of the year?
A: In constant currency terms, our West African businesses are doing well, but the weakening of the naira and Angolan currency has had a significant impact. We expect the naira to stabilize over time, which will improve performance. (A. Kenny Fihla, CEO, Corporate and Investment Banking)
Q: What range of loan growth is possible in South Africa in 2025 given the expectation of lower rates and higher growth?
A: We expect loan growth to revert to mid- to higher single digits as interest rates ease, particularly in retail and small enterprises. CIB may see higher loan growth as well. (Arno Daehnke, CFO)
Q: Do you expect a different trend in deposits under this positive scenario?
A: Deposit growth will likely follow a similar trend to loan growth. We will raise more wholesale deposits while continuing to grow our retail client base and transactional deposits. (Arno Daehnke, CFO)
Q: What are your key assumptions behind your expectations for lower FX headwinds in 2025?
A: The major devaluations of the naira and kwanza occurred in the first half of last year, so the impact will be less severe going forward. We expect a more subdued translation impact due to currency weakness in 2025 compared to 2024. (Arno Daehnke, CFO)
Q: One of your peers has indicated potential capital management activities due to a high CET1 ratio. Is this something Standard Bank Group is considering?
A: We continue to manage our capital considering organic and inorganic growth opportunities. While our focus is on returning capital through ordinary dividends, we will update the market if we decide on share buybacks. (Arno Daehnke, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
