Standard Bank flags consumer pressure as credit impairments rise

Finance group Standard Bank has reported positive results for the first quarter of 2023.

In an update on the group’s operational performance for the three months ended 31 March 2023, it reported that it delivered earnings of R10.2 billion, up from last year’s first quarter earnings of R7.4 billion.

According to the bank, on a comparable basis, earnings grew by 28% for the period. The group said that it would release further results in line with international reporting standards (IFRS17) in June this year.

Standard Bank said its performance was supported by higher average interest rates, good balance sheet momentum from 2022, continued growth in transactional volumes, strong trading performance and an ongoing recovery in Liberty Holdings Limited.

“A weaker rand exchange rate flattered earnings growth rates in South Africa in the period. Headline earnings adjustable items were not material in 1Q22 or 1Q23.”

It added that its higher average interest rates and a larger balance sheet supported the group’s net interest margin and net interest income growth period-on-period.

“Trading revenue benefitted from higher client activity driven by continued global market volatility and client demand for forex products. Quarter 1 2023 trading revenue was ahead of the comparative period and ahead of expectations.”

“Inflationary pressure, combined with higher transactional activity, annual staff cost increases and higher premises expenses linked to load shedding in South Africa, drove higher operating expenses period on period.”

As South Africans struggle to make month-to-month payments, Standard Bank reported credit impairment charges in 1Q23 were higher than in the comparative period, given balance sheet growth, client strain on the back of higher than anticipated interest rates and corporate and sovereign risk migration.

The group’s credit loss ratio for 1Q23 was closer to the upper end of the group’s through-the-cycle target range of 70 to 100 basis points.

Standard Bank reported that it remains well-capitalised and liquid.

“We continue to monitor the impacts of potentially higher inflation for longer and hence higher interest rates, electricity supply constraints in South Africa, global geopolitical tensions, and banking sector vulnerabilities, all of which pose risks to our outlook,” it said.

On 9 March, the bank reported in its financial results needing December 2022 that its fuel costs to combat load shedding quadrupled to R72 million, driving up operational costs by 9%.

Despite the current economic landscape in South Africa, Standard Bank said that it remains stable in serving its 18 million customers.

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