Standard Bank’s Africa-focused strategy pays off

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Standard Bank Group’s Africa-focused strategy and differentiated franchise approach has made a significant contribution to it recorded headline earnings of R21.2 billion in the six months to 30 June 2023, up 35 percent relative to the prior period and delivered a return on equity of 18.9 percent.

Standard Bank Group’s Africa-focused strategy and differentiated franchise approach has made a significant contribution to it recorded headline earnings of R21.2 billion in the six months to 30 June 2023, up 35 percent relative to the prior period and delivered a return on equity of 18.9 percent.

CEO Sim Tshabalala said, “This performance is underpinned by robust earnings growth across our three banking businesses and improved earnings and returns in our insurance and asset management businesses. Our Africa Regions franchise performed particularly well, contributing 44 percent to group headline earnings.”

“In 1H23, the group mobilised R28 billion in sustainable finance for clients, of which 40% was for clients in Africa Regions,” he said.

In sub-Saharan Africa, inflation rates remained at elevated levels. However, the earnings statement noted that positive actions in Ghana, Kenya, Nigeria and Zambia have reduced sovereign credit risks in these markets.

Despite continued management focus, banking cost growth is likely to remain elevated on the back of ongoing inflationary pressures, particularly in Africa Regions, the statement added.

The credit loss ratio is expected to remain in the upper half of the group’s through-the-cycle target range of 70 to 100 basis points driven by year-on-year increases in credit impairment charges across all three banking business units. The group’s FY23 ROE is expected to be inside the group’s 2025 ROE target range of 17 percent to 20 percent.

“As in previous cycles, we will continue to support our clients through these difficult times. We remain committed to our purpose of driving Africa’s growth. This includes supporting Africa’s just energy transition and, particularly, South Africa’s renewable energy projects,” Sim said.

Standard Bank’s prior year numbers have been restated following the introduction of IFRS 17 Insurance Contracts (IFRS 17), with the new standard becoming effective from 1 January 2023 and applied retrospectively from 1 January 2022.

Net asset value grew by 10 percent and the group ended the current period with a common equity tier 1 ratio of 13.4 percent.

Nonetheless downside risks to global growth remain and the International Monetary Fund (IMF) forecasts global real GDP growth of 3 percent for 2023 and 2024.

For the six months to 31 December 2023, Standard Bank expects high interest rates to constrict demand and balance sheet growth, although banking revenue growth is expected to be stronger than previously expected.

Standard Bank Group's chief finance and value management officer and executive director Arno Daehnke was named the 2022 CFO of the Year and also walked away with the Moving into Africa award at the prestigious CFO Awards. Read the full interview here.

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