STANDARD Bank grew its normalised headline earnings 11% to R8.2bn in the first half of the year despite weak economic conditions and increasing bad debt, while its operations in the rest of Africa have started to gain traction.
Africa’s largest lender by customer numbers and market capitalisation saw its bad debt grow to R5bn from R3.9bn last year, with inclusive banking taking a big hit, it said on releasing its interim results to June on Thursday.
Other loans and advances, which included inclusive banking or personal unsecured lending, rose from R1.3bn in the first half of last year to R2.1bn this year. Standard Bank has now tightened its lending criteria.
Kagiso Asset Management equity analyst Jihad Jhaveri said some of the bad-debt charge was "tolerable in the light of very strong net interest income growth". "However, reporting by the three banks thus far has pointed to a definite upturn in the credit loss cycle," he said.
Standard Bank’s credit impairments included exposure to First Strut’s R925m potential corporate bond default.
The bank would not reveal its full exposure to First Strut, but the credit impairment charges in its corporate and investment banking unit increased from R63m in the first half of last year to R226m in the same period this year.
The increase was "primarily First Strut" but the bank had provided against that, said joint CEO Ben Kruger.
The group — divided into two main business units: corporate and investment banking and personal and business banking — grew its diluted headline earnings per share 11% from 452.4c in the first half of last year to 505.8c in the same period this year.
The South African personal and business banking operation grew headline earnings by 17% to R3.8bn. But the Africa operation reported a loss due to poor credit performance.
The corporate and investment banking unit grew headline earnings 25% to R3.5bn, with the rest of Africa accounting for 36% of the unit’s total revenue.
This reflected the group’s growth in the rest of Africa, where its operations contributed a quarter of the group’s revenue, Standard Bank said.
The group has grown its personal and business banking customers across the continent by 9% in the six months compared to the same period last year.
Businesses in the rest of Africa grew headline earnings by 27% over the reported period, said joint CEO Sim Tshabalala.
Mr Kruger said Africa was the core of the group’s strategy, with South Africa remaining centre stage.
However, it was difficult to determine the exact contribution of the rest of Africa operations to Standard Bank’s bottom line, said Patrice Rassou, head of research at Sanlam Investment Management in Cape Town.
Mr Rassou said the way in which Standard Bank now reported its results made it difficult to separate the rest of Africa from its South African operations.
The corporate and investment banking unit does not break down its reporting into separate African countries. "You can sort of draw an inference from what is going on in the legal entities but it is not meaningful," he said.
But Mr Jhaveri said Standard Bank’s African network was a positive differentiator, making up 36% of corporate and investment banking revenue and 18% of personal and business banking revenue. "Our expectation remains that in the medium term, the attractive African network will mean that Standard Bank enjoys a higher level of sustainable growth than peers," he said.
The growth in Standard Bank’s unsecured lending book by 47% to R44bn was "well calculated and thought through", Mr Tshabalala said. "It’s in the sweet spot with middle income and wealthy customers," he said.
He said this was in line with the restructuring of the domestic financial market as unsecured lending made up a higher proportion of banks’ balance sheets.