AN ACCELERATION of structural reforms could boost confidence, investment and drive faster economic growth, Sim Tshabalala, chief executive of the biggest bank on the continent by assets, Standard Bank Group, said on Friday.
Geopolitical tensions, particularly in Ukraine presented risks to this outlook he said at the release of the group’s results. The group operates in more than 20 African markets.
“The situation in Russia and Ukraine is complex and evolving. We are monitoring the events to comply with all relevant local and international laws and guidelines,” he said.
The group has limited direct exposure to Russia and Ukraine. However, potential secondary impacts across the countries where the bank operates, were being assessed for example in financial markets, trade, transport logistics, commodity, and food prices.
The Industrial and Commercial Bank of China (ICBC) a global bank specialising in emerging markets, commodities and fixed income business in which Standard Bank has a 40 percent stake but which Standard is trying to exit, has exposure to certain entities that were being impacted, directly and indirectly, by developments in Ukraine and Russia.
ICBC holds 60 percent of ICBCS. Standard is trying to get ICBC to buy its shareholding in ICBCS, a stake it acquired when it once wanted to be a global bank, but is now instead focused on Africa.
“ICBCS is responding with its contingency plans. Given the uncertainties and fluid nature of the developments, it is not possible for ICBCS to assess the impact on its 2022 result,” said Tshabalala.
He said the bank expected the SA Reserve Bank’s Monetary Policy Committee to raise interest rates in South Africa by a further three 25 basis point increases this year.
“Persistent idiosyncratic risks remain, particularly electricity disruptions and high levels of unemployment,” he said.
Higher average interest rates would support bank margins, which, together with higher average balance sheets would support net interest income growth, he said.
Pent-up consumer demand should fuel spending and support trade, he said.
In many sub-Saharan economies, debt levels were high, and there would need to be a balance between fighting inflation and supporting the economic recovery.
Interest rate increases were expected in Botswana, eSwatini, Ghana, Lesotho, Mauritius, Namibia, South Africa, Uganda and Zambia and possibly Angola.
South Africa’s economic rebound was expected to continue, albeit at a slower rate – SBG Research has forecast 2022’s real GDP growth to be 2 percent. Inflation was expected to moderate, supporting a gradual rate hiking cycle.
Standard Bank of South Africa’s local bank operations grew headline earnings 172 percent in the 12 months to December 31, following higher trading and other revenues, more than halving credit charges and cost containment.
Group earnings rebounded to R25 billion after client activity recovered after the pandemic, with an improvement in client balance sheets and growth of the bank’s franchise, Tshabalala said.
Group headline earnings rebounded 57 percent. Revenue grew 5 percent and pre-provision operating profit was up 5 percent, both with double-digit growth in the second half of the year.
A 511 cents a share final dividend was declared.
The group’s three client segments delivered franchise growth and expanded their market positions, said Tshabalala.
Their banking solutions operations made a strong recovery, with headline earnings up 62 percent.
Growth in the investment and insurance solutions segment was supported by assets under management and policy base growth.
“We made good progress in building new revenue streams and scaling digital payments, platforms and partnerships,” he said.
Standard Bank Activities’ – group excluding ICBCS and Liberty – grew revenue 5 percent year-on-year and by 12 percent in the second six months of the year.
Pressure on net interest income from negative endowment faded, activity related fees continued to recover, and trading revenue remained robust.
Revenue growth exceeded cost growth. Credit impairment charges declined by 52 percent, but remained above pre-pandemic levels.
Standard Bank Activities’ headline earnings grew 59 percent to R24.9bn.
Their Africa Regions franchise reported strong top line growth in local currency terms.
Africa Regions headline earnings declined by 2 percent (grew by 6 percent in constant currency). Africa Regions’ contribution to group headline earnings was 36 percent.
The top six contributors to Africa Regions’ headline earnings was Angola, Ghana, Kenya, Mozambique, Nigeria and Uganda.
BUSINESS REPORT ONLINE