Standard Bank Misses Estimates as Impairment Charges Jump

(Bloomberg) --

Standard Bank Group Ltd.'s adjusted full-year profit rose 1.1%, missing estimates, as a moribund South African economy weighed on the continent's largest lender.

• Adjusted earnings per share before one-time items increased to 17.67 rand in the 12 months through December, Standard Bank said in a statement on Thursday. That compares with the 17.90 rand average estimate of 11 analysts.
• Credit impairment charges increased 23%, albeit off a low base, pushing the Johannesburg-based lender's credit loss ratio to 68 basis points from 56 basis points the prior year. The ratio is expected to remain “at the lower end” of Standard Bank's 70-100 basis points range.
• Return on equity declined to 16.8% from 18% a year earlier, and will move closer to the lower end of its 18%-20% goal in 2020, Standard Bank said.

Key Insights:

• South Africa's economy expanded at the slowest pace in a decade in 2019, meaning that Standard Bank and its other Johannesburg-based peers are likely to continue to struggle to boost revenue as consumers and companies battle to repay their debt.
• Standard Bank has focused on lowering costs by reducing its headcount and encouraging customers to use digital channels rather than going to its decreasing branch network. It is also targeting income from trade in Africa and between the continent and China for other sources of revenue.
• The firm continues to invest in its African footprint to shield earnings from its floundering home market. Spanning 20 nations on the continent, the bank expects growth in its businesses can outpace that of some of the region's fast-expanding economies such as Kenya, Uganda and Ivory Coast.

Market Reaction:

• Standard Bank shares are down 9.4% this year, the best performer after Capitec Bank Holdings Ltd. in the the six-member FTSE/JSE Africa Banks Index, which is down 11%.

Read More:

• Standard Bank CEO Says Clear, Sustainable Plan Needed for SAA
• Standard Bank has Africa-Growth, Capital Surety: Company Outlook
• Link to statement

To contact the reporter on this story: Roxanne Henderson in Johannesburg at rhenderson56@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, Renee Bonorchis

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