South Africa's capacity to grow its economy into the future will depend on its capacity to integrate with the rest of Africa, Sim Tshabalala, CEO of Africa’s biggest bank by assets Standard Bank, said Thursday.
In an interview with The National he said Africa's growth engine just keeps running. And, South Africa’s massive installed economic capacity, along with its relatively minuscule trade with other countries on the continent, presents a competitive advantage for further investment and growth for South Africa and foreign businesses and investors."
For Standard Bank, the scale of its African operations is also reflected in the group’s earnings. Africa Regions contributed 40% of group headline earnings in the first half of the year, with operations in Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda and Zambia contributing to the R10.4 billion result. South Africa contributed R13.4 billion, or 51% of group headline earnings.
"These days growth on the continent doesn't get slowed down much by developments in the rest of the world.
"Despite two major wars taking place elsewhere in the northern hemisphere, and despite a sharp spike in oil prices, average GDP in countries where the group operates is only likely to be slightly lower than the bank was expecting earlier in the year,” he said.
“Why? Because through talks with our clients and across their businesses, we see that worldwide demand for Africa’s resources and products remains strong. Equally, Africa's own entrepreneurial energy and governance continue to transform our continent.”
Monetary and fiscal discipline among African countries is also boosting their economies, he said at the release of the group financial results for the six months to June 30 yesterday.
After many years of underperformance, South Africa’s economy is also looking increasingly positive, with a clear improvement over the first half.
Standard Bank Group reported a solid financial performance for the six months, with headline earnings of R26.1 billion up 10% period-on-period. Africa Regions contributed 40% of group headline earnings, while the South African business delivered strong earnings growth and a substantial improvement in return on equity (ROE).
“We are particularly encouraged by the resilient outlook for South Africa," he said.
As an indication of improving prospects, he said the bank had forecast an decrease in interest rates this year depending on the outcome of the war in Iran, and a further three interest rate cuts next year.
A higher ROE of 19.8% (19.1% at the same time last year) during the six months was comfortably within the group's 2028 ROE target range of 18% to 22%. The dividend was raised 10% to 902 cents a share. Prior earnings guidance for the full financial year remains in place, he said.
Tshabalala said they are focused on delivering client-led growth, supported by disciplined capital allocation and robust risk management. This, with investment in people, technology and capabilities, provided a framework for reaching medium-term earnings growth and return targets.
South Africa contributed to R13.4bn, or 51% of group headline earnings. Actions to grow digital retail transactional clients drove a 9% increase in digital clients. As a result, 69% of transactional clients now use digital channels, and digital transactional volumes grew by 17%.
Africa Regions’ R10.4bn headline earnings contribution was supported by good contributions from Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda and Zambia.
Offshore businesses contributed R1.3bn, while the group’s 40% stake in ICBC Standard Bank (ICBCS) added R1bn, representing 5% and 4% of group headline earnings respectively.
The banking businesses saw solid balance sheet growth, robust increases in fees and trading income, lower credit impairment charges and well-managed costs.
The Insurance & Asset Management business delivered continued strong earnings growth and improved returns.
The cost to income ratio, an important measure of efficiency in a banking group, improved to 49.3% from 49.5% at the same time last year. The credit loss ratio, another important measure of performance as it measures the proportion of a bank’s loan book that might go bad relative to the total loan book, improved to 73 basis points (bps) from 93bps at the same time last year.
Since 2022, the group has cumulatively mobilised over R328bn in sustainable finance for clients, against its target of R450bn by 2028. In the first half of this year, the group has mobilised R50.6bn.
“Our balance sheet remains strong, and we are well positioned to continue supporting our clients and capturing the opportunities emerging across Africa,” he said.
All business units delivered healthy returns. Corporate & Investment Banking increased headline earnings by 15% and delivered an ROE of 24.8%.
Business & Commercial Banking reported a ROE of 36.3%. Personal & Private Banking delivered a ROE of 18.6%. Insurance & Asset Management achieved a ROE of 21.1%.
THE NATIONAL
Edward.West@natiionalMG.co.za