- Standard Bank Group reports healthy franchise operations
- Higher net interest and non-interest revenue anticipated
- Credit loss ratio expected to increase towards upper end of target range
Standard Bank Group Limited has released a voluntary trading update, covering the five months to May 31, 2023, and a trading statement for the six-month period ending on June 30, 2023. The update indicated that, despite the challenging global economic and geopolitical environment, the bank recorded healthy and growing franchise operations.
The update highlighted that the global economic growth has slowed due to persistently high inflation and interest rates, and public debt as a ratio of GDP has increased across the world. South Africa's macroeconomic environment has also deteriorated, with expectations that inflation and interest rates will remain higher for longer, while economic growth will be constrained.
Standard Bank Group's banking activities recorded revenue growth in excess of 20% higher than the same period in the previous year, driven by higher-than-expected average interest rates and good balance sheet growth. However, credit impairment charges for the period ended 31 May 2023 (5M23 or the current period) were almost 50% higher than the charges in 5M22, mainly due to the combination of larger lending books, consumer strain in South Africa, and increased sovereign debt risk in Africa Regions.
Despite these challenges, the group's capital and liquidity levels remain strong, with the common equity tier 1 ratio at 12.9% at the end of April 2023, and the return on equity (ROE) for the period comfortably exceeding the group cost of equity.
Liberty Holdings Limited, a subsidiary of Standard Bank Group, recorded improved claims experience and strong earnings growth during the period, despite losses experienced in the Shareholder Investment Portfolio due to market movements. The subsidiary remains a key player in the South African insurance industry, providing life insurance, short-term insurance, and investment management services to individuals and businesses. The Standard Bank Group continues to support Liberty's growth plans and strategic initiatives, as it remains committed to delivering value to its stakeholders.
Looking forward, the group expects higher net interest income growth and higher non-interest revenue growth, with cost growth slightly higher than the weighted average inflation rate for the year. The group's credit loss ratio is expected to increase towards the upper end of the group's through-the-cycle target range of 70-100 basis points, while the 2023 ROE is expected to show continued progress into the group's ROE target range of 17-20%.
Despite the volatile and uncertain economic and geopolitical outlook, the Standard Bank Group remains committed to serving its clients and achieving the 2025 targets laid out in August 2021. The bank expects to publish financial results for the six months to 30 June 2023 on 17 August 2023.
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