By Lehlohonolo Lehana.
Banking group,Standard Bank said on Thursday, its annual profit jumped by 27% and it declared a final dividend of 733 cents per share, for the year end-December.
The lender posted full-year headline earnings of R42.9-billion, while total net income grew by 20% to R177.6-billion, driven by net interest income growth of 25% and non-interest revenue growth of 13%.
The top five private South African banks, including Standard Bank are generally known to have well-capitalised balance sheets and conservative lending practices.
But inflationary pressures, high interest rates, regular load shedding and logistical bottlenecks are taking a toll on their most sensitive retail and small business customers, leading to defaults.
Standard Bank said credit impairment charges increased by 22% to R16.3-billion, which pushed its credit loss ratio – a measure of bad loans as a percentage of total loans – up to 98 basis points from 83bps and close to the upper range of its target of 100bps. As a result, total provisions increased by 15% to R64-billion.
The group’s loans and advances grew by 7% to R1.7-trillion as strong growth in corporate and sovereign lending offset subdued retail lending growth together with a decline in business lending.
Chief executive Sim Tshabalala warned that tough times are likely to continue into the first six months of 2024.
“Our clients are likely to remain constrained until interest rates start to decline,” Tshabalala said. He said credit impairment charges were expected to peak in the first half of 2024, driven primarily by ongoing strain in personal and private banking.
For FY24, the credit loss ratio is expected to remain within but near the top of the group’s through-the-cycle credit loss ratio range of 70 to 100 basis points – with 2023’s ratio toeing the line at 98 bps.
Several credit providers in South Africa have reported an increase in bad debts, resulting in a rise in impairments across all major banks.
In Absa’s case, their credit impairment charges increased by 13.4% to R15.5 billion in the financial year that ended on December 31, 2023.
The everyday banking segment contributed to almost half of these impairments. Absa also noted that the credit loss ratio increased from 96bps to 118bps, which is beyond the group’s through-the-cycle target range of 75 to 100bps.
However, the credit loss ratio improved in the second half of 2021 to 109bps from 127bps in the first half.
Absa’s group headline earnings increased by 1% overall, but when looking only at South Africa, they dropped by 18% to R14.676 billion.
On the other hand, Nedbank’s overall headline earnings per share increased by 15% over the same period. However, this growth was partially offset by the 30% increase in the impairment charge.
Although Nedbank’s credit loss ratio improved from 121 bps in the first six months of the year to 109 bps by the end, it was still higher than the 89bps seen in FY22.
During the six months leading up to 31 December 2023, FNB experienced a 31% increase in its impairment charges. This caused the credit loss ratio to rise from 128 basis points in the previous reporting period to 155 basis points.