South Africa’s largest lender, Standard Bank, is set to release full year results on March 5. Recent guidance towards the upcoming results, through a voluntary trading statement, would question the company’s recent participation in the financial sector-based rally.
Favourable currency movements from the international restructuring and the disposal of control in the Standard Bank Plc division is expected to boost earnings and diluted earnings per share to a near double-digit growth. However a truer reflection of current business operations (in terms of headline earnings per share) has been guided to reflect a worst case scenario of minor earnings contraction at -2% to a best case scenario of marginal growth at +2%.
The Corporate and Investment Banking division is the second-largest contributor to group earnings and is likely to be the most significant negative contribution to the company’s underlying profit growth figure. Operating expenses have risen in the investment banking division as cost relating to the African franchise development increase and revenue has slowed (as reported in 2014 interim results). Unfavourable markets’ currency movements are likely to have further increased operating costs and in turn impacted earnings.
Personal Business Banking is the largest contributor to group earnings. The Rest of Africa’s contribution (to this divisions figure) will see a sharp turnaround from a headline loss into a headline profit, although the more meaningful South African contribution, in this department, will see growth subdued against a slowing local economic backdrop.
Liberty Holdings, which contributes a little more than 10% to Standard Bank’s headline earnings (through Standard Banks majority ownership of the company), has already released full year results in which the company showed a near 3% contraction in headline earnings per share.
Standard Bank (as per its own guidance) looks to have had a relatively slow year amid a weak economic environment (especially in South Africa), with none of the sum of its parts looking to have really outperformed over the reporting period. Total revenue for the year is expected at R83.187 million equating to year-on-year growth of 9.6%. A poll of 12 analysts surveyed by Thompsons Reuters has an average rating recommendation of hold for Standard Bank.
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