Standard Bank’s Africa Focus Delivers Growth In Volatile Market
Johannesburg, 23 August 2016: Standard Bank’s decision to change its strategic focus to Africa is being rewarded as the continent continues to deliver sustained growth in a lacklustre global economy. Despite short-term headwinds, the continent is, today, at a pivotal point in its history with sustained domestic growth set to transform Africa’s ability to manage risk and build long-term prosperity.
Recent results showed that Standard Bank Group continued to reap the benefits of growth in its sub-Saharan Africa businesses with the bank’s operations (ex-SA) now contributing 31% to the group’s total income, and 25% to headline earnings. Even in South Africa, with domestic growth hovering around zero, six-year-high interest rates saw loan profits return a 14% increase in earnings in an economy set to return to growth.
Despite global and regional headwinds fanned by Brexit insecurities, low commodity prices, and poor growth in the world’s most developed markets, global multinational companies are continuing to invest in Africa. African multinational companies were also expanding beyond their borders.
In East Africa, for example, Standard Bank returned a 23% increase in headline earnings compared with the first half of 2015. This was driven by East Africa’s more diversified economies sustaining growth rates in the region of 4%.
In South and Central Africa, hard hit by drought, Standard Bank nevertheless returned a 6% increase in headline earnings compared with the first half of last year.
Recent positive secular trends in South Africa, including; labour, government and business convergence, a dramatic reduction in work hours lost to strikes, energy supply stability, vigorous institutional strength, and an improved currency environment hold the potential for the economy to return to growth in the medium term.
In addition to identifying and driving growth, Standard Bank Group’s diversified African portfolio has been particularly successful in managing the volatility experienced by the continents commodity-dependent economies.
While Standard Bank’s West African earnings were negatively impacted by the regions structural over-reliance on oil revenue, the bank’s 20 year presence and deep knowledge of the region has equipped it to adopt a through-the-cycle view of growth. This is especially so for West Africa’s largest economy, Nigeria. With a large and young population, a growing middle class, rapid improvements in health, education and infrastructure, Nigeria’s demographic dividend is set to sustain growth for generations to come. Nigeria remained an exciting lynchpin in the bank’s overall Africa strategy.
Standard Bank’s recent acquisition of a banking licence for Cote d’Ivoire supports the banks longer term positive view of West Africa’s growth potential.
The financialisation of sub-Saharan Africa is being driven by the needs of the continent’s growing middle class to access the formal banking sector. This has made financial services one of the region’s most attractive sectors for investment. Significant in this is the increasing attention enjoyed by the continent’s pensions and insurance industries – driven by investors and regulators seeking to encourage savings and build funding pools.
Standard Bank Corporate & Investment Banking (CIB) continued to deliver robust growth in a volatile market, achieving overall earnings growth of 13% - with an improved return on investment of 18.2%. Significant progress is being made on the bank’s Business Online and signature e-Market Trader platforms, equipping clients to do the right business in the right way to realise opportunity while managing risk.
Realising steady and consistent growth in uncertain times is attributed to Standard Bank’s broad African footprint and full suite of services within all of sub-Saharan Africa’s regions. CIB’s diversified portfolio across the continent exactly matches the spread of growth opportunities in this regard.
For example, consumer-led growth in East Africa is returning CIB earning growth figures north of 20%. Despite macro pressures in key South & Central African markets, good growth across the region has increased CIB earnings 19%. South Africa continues to return stable growth of 17% for Standard Bank’s CIB division despite domestic market constraints. Even in macro-challenged and liquidity constrained West Africa, CIB delivered 9% earnings growth.
As Africans begin to save more, the long-term savings products created by insurance companies and pension firms will deepen domestic capital markets, paving the way for more corporates to issue debt on local exchanges, driving domestic growth.
Significantly, for the first time, Personal & Business Banking (PBB) now accounts for greater Standard Bank revenue in Africa (ex-South Africa) than CIB. This attests to vibrant commercial activity on the ground in Africa, despite a slower global landscape. It also reflects Standard Bank’s depth and presence on the continent. Leveraging growth through relevant personal and business transactional services, keeps Standard Bank’s business alive to opportunity – even as others seek to de-risk from the continent.
PBB headline earnings showed a 14% improvement compared with the first quarter of 2015. PBB results were driven by strong revenue growth, especially in Africa (ex-South Africa) with eight out of 15 countries returning headline earnings growth in excess of 20%. Despite South Africa’s higher interest and inflation rates, PBB’s South African performance registered a 10% growth in headline earnings off a high base.
Standard Bank Group is committed to delivering through-the-cycle earnings growth and return on equity within a target range of 15% - 18% over the medium term. This includes a heightened focus on optimising resource allocations across the group, coupled with tighter management of capital supply, and a diligent focus on costs.
Standard Bank Group is cognisant of the constraints under which its customers are currently operating. Despite increasing credit provisions to reflect this, the group remains well capitalised and in a position to continue to invest and grow in its targeted sectors and countries.
Sim Tshabalala, Standard Bank Group Chief Executive, says: “We continue to monitor developments in the banking sector and financial markets to ensure that we remain appropriately equipped to deliver on our vision to be the leading financial services organisation in, for and across Africa. We are focused on delivering effective solutions tailored to our customers’ needs as we continue to drive Africa’s growth though investment in our franchise, products and people.”
ENDS
About Standard Bank Group
Standard Bank Group is the largest African bank by assets with a unique footprint across 20 African countries. Headquartered in Johannesburg, South Africa, we are listed on the Johannesburg Stock Exchange.
Standard Bank has a 153-year history in South Africa and started building a franchise outside southern Africa in the early 1990s.
Our strategic position, which enables us to connect Africa to other select emerging markets as well as pools of capital in developed markets, and our balanced portfolio of businesses provide significant opportunities for growth.
The group has nearly 49 000 employees and over 1 200 branches, which enable it to deliver a complete range of services across personal and business banking, corporate and investment banking and wealth management. Standard Bank's Corporate & Investment Banking division offers its clients banking, trading, investment, risk management and advisory services to connect selected emerging markets to Africa and to each other. It has strong offerings in mining and metals; oil, gas and renewables; power and infrastructure; agribusiness; telecommunications and media; and financial institutions.
Standard Bank South Africa is the largest operating entity of Standard Bank Group, Africa’s largest bank by assets. Standard Bank Group reported total assets of R1, 98 trillion (about USD128 billion) at 31 December 2015, while its market capitalisation was R184 billion (about USD11, 8 billion).
The group’s largest shareholder is Industrial and Commercial Bank of China (ICBC), the world’s largest bank, with a 20, 1% shareholding. In addition, Standard Bank Group and ICBC share a strategic partnership that facilitates trade and deal flow between Africa, China and select emerging markets.
For further information go to http://www.standardbank.com