Standard Bank is cracking necks, and its shareholders are cashing cheques. Africa's largest bank by assets has just reported the strongest first half in its history, with profit climbing 10% to a record R26.1 billion in the six months to the end of June. It also pushed its return on equity, a measure of how much profit it squeezes from shareholders' money, up to 19.8% - comfortably inside its own 18% to 22% target range.
Where the money came from
The engine was a mix of steadier customers and calmer risk. Bad-loan charges fell 12% to R7.1 billion as the economy found its footing, and the bank's credit loss ratio, the share of its loan book going sour, improved to 73 basis points from 93. At the same time fee and commission income rose 7% to R18.4 billion and trading revenue climbed 8%, while costs stayed in check, with the cost-to-income ratio nudging down to 49.3%. Net interest income, the gap between what the bank earns on loans and pays on deposits, grew 4% to R53.6 billion even as the margin narrowed in a lower-rate world. The bank says the value it created for shareholders, earnings minus the cost of capital, rose 55% to R8.4 billion.
A bigger payout
Shareholders are the direct winners. The board declared an interim dividend of 902 cents a share, up 10% and equal to 56% of earnings, at the upper end of what the bank likes to pay out. The group spread its earnings across the continent too: South African operations delivered R13.4 billion, or 51% of the total, and the Africa Regions business another R10.4 billion, or 40%. Its active customer base grew to 19.5 million, and it still sits on R79 billion of capital above its regulatory minimum.
Management left its full-year guidance unchanged, which is its own kind of confidence: after a record half, Standard Bank is betting the second half looks a lot like the first. The number to watch is whether bad debts keep falling as South African households feel their way through the rest of the year.
