JOHANNESBURG (The Southern African Times) – South Africa’s Standard Bank reported a 43% drop in half-year profits on Thursday, in the middle of its forecast range, as bad loans soared due to the fallout of the coronavirus pandemic.
Africa’s largest bank by assets is the first of South Africa’s major lenders to report results and give a firm picture of how badly the pandemic has hit the country’s already heavily indebted consumers and struggling companies.
Bad loans nearly tripled to 11.3 billion rand ($654.2 million) in the first six months of 2020 versus the same period in 2019, the bank said.
That dragged headline earnings per share (HEPS) down to 473.8 cents ($0.2742), versus 837.4 cents reported a year earlier, and in the middle of a forecast range of 418.7-586.2 cents. HEPS is the main profit measure in South Africa.
The lender said its results “reflect that of a resilient, well-diversified underlying franchise, negatively impacted in a very difficult environment”.
As well as rising bad debts, the coronavirus has also prompted rapid interest rate cuts and falling fee income in South African banks’ home market, already delivering very slim profit growth after the economy tipped into recession at the end of 2019.
Standard Bank’s personal and business bank was the worst-hit, with earnings declining 60% in the first six months of the year compared to the same period in 2019, though its corporate and investment bank also saw a 7% drop in earnings.
Insurer Liberty Holdings, in which Standard Bank has an over 50% stake, also swung to a loss.
Standard Bank warned that more provisions against bad debt could be required, but said its capital position remained robust. Its common equity tier 1 capital adequacy ratio – a key measure of banks’ financial strength – was at 12.6% as of June 30, down from 12.9% in April and still above regulatory minimums.
The bank said it could not yet provide new medium-term targets, which it said it would revise amid the crisis.