2nd UPDATE: Standard Bank 1st Half Profit Falls; Expects Lower 2009
August 13 2009 - 8:53AM
Dow Jones News
Standard Bank Group Ltd. (SBK.JO), Africa's largest lender by
assets, Thursday said it expects a decline in earnings this year
after its first-half profit was hit by rising impairments amid the
global economic recession.
The Johannesburg-based company said it wouldn't provide specific
guidance for the year, but that current trends suggest so-called
normalized earnings will be lower than in 2008.
South Africa's banks have proved relatively resilient to the
global economic crisis. Still, the economy is feeling the lagging
effect of last year's high inflation and interest rates that has
been compounded by the country's first post-apartheid recession.
This has knocked investments and given rise to a rise in bad
debts.
Standard Bank said its first-half earnings fell 24% to 5.41
billion rand ($674.3 million), excluding one-time items and
adjusting for shares used to fund ownership by black South Africans
and stock held for policyholders of its insurance unit Liberty
Holdings Ltd. (LBH.JO). Liberty was pushed to a loss of ZAR1.21
billion in part by a rise in lapses of insurance policies.
Net profit was down 31% at ZAR5.11 billion, or 343.5 cents a
share, from ZAR7.4 billion, or 521.2 cents, a year earlier.
Credit impairments for the half-year were 58% higher at ZAR7.12
billion, which resulted in a credit loss ratio of 1.84% against
1.31% a year earlier.
"High consumer indebtedness and the lagged effect of previously
high interest rates, together with high food and fuel prices in
South Africa, continued to impact on customers' ability to service
debt," the company said.
Still, net interest income was 15% higher on the year at
ZAR16.52 billion and non-interest revenue was up 6% at ZAR15.28
billion. And Standard Bank said it would pay an interim dividend of
141 cents a share, albeit 27% less than last year.
At 1155 GMT, Standard Bank's shares were up 0.7% at ZAR96.40 in
a broadly positive market. Its stock has risen about 15% since the
start of the year, matching a rise in Johannesburg's blue chip Top
40 index.
Finance Director Simon Ridley in a presentation to analysts said
the company hadn't seen any improvement in credit impairments, with
the benefit of lower interest rates only likely to come through in
coming periods. Impairments in corporate and investment banking in
Africa are likely to rise in the second half of the year, said Rob
Leith, head of the division.
South Africa's economy contracted an annualized 6.4% in the
first three months of the year - the most since 1984 - after
shrinking 1.8% in the final quarter of 2008. The country's largest
banks, however, are profitable and have said they remain well
capitalized.
Absa Group Ltd. (ASA.JO), South Africa's biggest retail lender,
earlier this month said it expects to remain under pressure for the
rest of the year due to rising arrears and non-performing loans.
The bank, majority owned by the U.K.'s Barclays PLC (BCS), posted a
39% drop in its first-half net profit after impairments rose and
business volumes fell.
Standard Bank, which is 20% owned by Industrial & Commercial
Bank of China (0349.HK), operates in 17 African countries and 16
other mainly emerging market nations.
Company Web site: www.standardbank.com
-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848;
robb.stewart@dowjones.com