Standard Bank Group (SBG) – Africa’s biggest bank by assets – reported on Friday that its core SA business delivered double-digit revenue growth last year.
This played a key part in the group’s robust rebound from the 2020 financial fallout, which hit global markets following the outbreak of the Covid-19 pandemic.
SBG said overall headline earnings for the twelve months to December 31, 2021 (FY21) rebounded by 57% to R25 billion.
“The group’s South African business, The Standard Bank of South Africa Limited, bounced back strongly. Headline earnings increased by 172% and return on equity (ROE) recovered to 12.5%. Revenue grew double digits, boosted by higher trading and other revenues up 31% and 67% respectively,” SBG noted in its latest results Sens statement.
Group revenue grew 5% and pre-provision operating profit grew 5%, however SBG also pointed out that both these metrics saw double-digit growth in the second half of the year.
Overall group ROE improved to 13.5% (FY20: 8.9%), while its net asset value grew 13% and the group ended the year with a common equity tier one ratio of 13.8% (December 31, 2020: 13.2%).
SBG declared a final dividend of 511 cents per share. This equates to a dividend payout ratio of 55% for the full year.
“The group’s earnings rebounded to R25 billion in 2021, driven by a recovery in client activity, an improvement in client balance sheets, as well as growth in our franchise,” Sim Tshabalala, the group’s CEO commented in the Sens.
Muted ‘rest of Africa’ performance
The more robust rebound of the JSE and A2X listed banking giant’s SA operations offset a more muted recovery in its rest of Africa operations.
“Africa Regions headline earnings declined by 2% [grew by 6% in constant currency] and ROE remained accretive at 18.2%,” SBG noted.
“Our Africa Regions franchise delivered strong top line growth in local currency terms. Inflation and weaker currencies in key markets dampened translated earnings growth. Revenue growth from ongoing client acquisition, balance sheet growth and improved activity was offset by higher costs driven by inflation and investment in our digital lending and payment solutions,” it explained.
According to SBG, its Africa Regions business contributed 36% to the group’s overall FY21 headline earnings. The top six contributors to Africa Regions’ headline earnings remained Angola, Ghana, Kenya, Mozambique, Nigeria and Uganda.
“Despite the pandemic-related disruptions, the group made significant strategic progress across several areas in 2021. The group’s three client segments delivered client franchise growth, expanded their leading market positions and delivered an improved client experience,” the group said.
“Our banking solutions recorded a strong recovery, with headline earnings up 62% year on year. Our investment and insurance solutions grew headline earnings by 11% and by 3% respectively, supported by assets under management and policy base growth,” it added.
SBG, which is bedding down its takeover of majority-owned insurance group Liberty Holdings, pointed out that the group has retained its position as the third largest asset manager on the continent.
“The Liberty Holdings Limited minority buyout, announced in July 2021, was successfully completed and Liberty delisted on March 1, 2022.”
According to the group, Liberty and Standard Bank together represent a formidable competitor on the continent, with over R1.4 trillion in AUM (assets under management) and R73 billion in gross written premium across its short and long-term businesses.
“In 2022, our focus will be on integration. We have a plan and will be executing against it with urgency,” it said,
“Standard Bank Activities recorded headline earnings growth of 59% to R24.9 billion and ROE recovered to 14.7% (FY20: 9.6%),” SBG noted, which highlights the much stronger position of the group’s banking business.
“Liberty showed progress operationally but was negatively impacted by excess claims and a pandemic provision top-up,” it said.
SA GDP forecast
SBG has forecast SA’s 2022 real GDP growth will come in at 2%, which is slightly more optimistic than general sentiment of around 1.7% growth this year.
“South Africa’s economic rebound is expected to continue, albeit at a slower rate as policy stimulus fades and terms of trade retreat from the recent record highs. Inflation is expected to moderate, supporting a gradual [interest] rate hiking cycle,” it said.
“We expect three further 25 basis point increases over the course of the year. Persistent idiosyncratic risks remain, particularly electricity disruptions and high levels of unemployment.”
“If structural reforms were accelerated, it could boost confidence, investment and drive faster growth,” it added.
However, SBG warned that geopolitical tensions, particularly the developments in Ukraine, present risks to this outlook.
“The situation in Russia and Ukraine is complex and constantly evolving. We are actively monitoring these events in order to comply with all relevant local and international laws and guidelines,” it said.
“The group has limited direct exposure to Russia and Ukraine through its controlled operations. We are however, giving due consideration to the potential secondary impacts across our countries of operation, for example financial markets, trade, transport logistics, commodity and food prices,” it noted.
SBG’s share price was up around 1.3% in morning trade on Friday (R161.32), following the release of its 2021 annual results.