Standard Bank profit decline

Business: Standard Bank sheds 5% on flagged profit decline

The Standard Bank Group share price declined by more than 5 percent on the JSE on Monday after the group flagged an earnings decline of more than 20percent as the Covid-19 outbreak continues to spook the global markets.

The bank said that its headline earnings per share (Heps) and earnings per share (Eps) would tumble by more than 20 percent compared to Heps of 837.4 cents a share and Eps of 827c that had been reported last year.

Africa’s largest bank by assets added that a high degree of uncertainty remained regarding the impact the Covid-19 pandemic and the associated governmental responses would have on the economies in the markets in which the group operates, and in turn, on the group.

Standard Bank intends to release another earnings guidance at a later stage once it is confident about the guidance ranges.

“We will issue a further trading statement with more specific guidance ranges once there is reasonable certainty regarding the extent of the decline relative to the comparable period,” the group said.

Standard Bank is also not planning to declare an interim dividend during the period, in line with the Prudential Authority’s guidance on dividends.

The share price fell to R96.42 a share after the release of the trading update, before closing at R96.50.

Standard Bank’s industry peer, the Absa Group, also warned about a more than 20 percent decline in its earnings for the six months to end June.

Capitec Bank Holdings said on Friday that it expected half-yearly profit to decline by more than 20percent due to the economic impact from the coronavirus-related restrictions.

However, Standard Bank said its current scenario analysis indicated that the group’s credit loss ratio for financial year 2020 would be above the group’s through-the-cycle range of 70 basis points (bps) to 100 bps and may exceed the peak recorded in the global financial crisis of 160 bps.

Its common equity tier-one ratio was 12.9 percent and liquidity coverage ratio was 141.9 percent at the end of March.

“Based on our scenario analysis, the group’s capital ratios are expected to remain strong and above required minimums,” the group said.

Standard Bank said loan growth in the first four months was robust, while the combination of higher digital disbursements, corporate facility draw downs and a weaker rand led to strong double-digit growth period-on-period.

But it said the loan growth was expected to slow down from current levels.

The group operates across the 20 markets in the continent and said all the currencies have weakened compared to the US dollar since the start of the year.

The South African rand, Zambian kwacha and Zimbabwean dollar have weakened the most, and the countries in the group’s East Africa region have held up relatively well.