South Africa’s Largest Bank Says Strong Recovery, Aiming For Dividend Yield
According to Standard Bank, there are signs that an economic recovery is underway in South Africa. The country’s largest lender in terms of assets has said it expects to be able to declare an interim dividend in August 2021.
The dividend payout ratio for FY21 is expected to be above FY20 levels, but below historical levels of 45% to 55%, he said in a voluntary trading update for FY20s. four months ended April 2021 and a trading statement for the six month period ending June 2021.
The bank said it expects net earnings per share (HEPS) for the six-month period ending June 2021 to be more than 40% higher than the reported HEPS for the comparable period (HEPS 1H20 : 473.8 cents) and earnings per share (EPS). or more than 2.8 times the reported 1H20 EPS (1H20 EPS: 236.7 cents).
In 1H20, the bank said EPS had been negatively impacted by the finalization of the sale of the group’s 20% stake in ICBC Argentina and certain IT intangible impairments.
“Since our operational update in April 2021, the global environment has improved. Upward revisions to global growth prospects are positive – the IMF has raised its expectations for global gross domestic product (GDP) growth in 2021 to 6%. The cycle of rising interest rates should be delayed, ”Standard Bank said.
Strong demand and global commodity prices are favorable for sub-Saharan Africa and South Africa in particular.
In South Africa, he said strong export prices had resulted in a trade surplus and the fiscal outlook had improved. “There are signs that an economic recovery is underway, and sentiment has improved. Inflation should remain contained and interest rates should stay low. This should support household demand and spending. “
Since the start of the year, the rand has strengthened against other major currencies and most of the currencies of the countries in which the group operates. The stronger rand reduced both revenues and costs by 5% over the period, he pointed out.
In 4M21, mortgage and vehicle and asset finance disbursements in South Africa were well above 4M20 and corporate disbursements increased by double digits. In parts of Africa, personal loan volumes were also higher period-over-period, due to a strong creation of digital channels, the lender said.
He noted, however, that despite a relatively strong start for the investment bank in April 2021, corporate client balances declined as clients seized the opportunity to repay loans. In addition, foreign currency balances decreased due to the impact of the conversion related to the appreciation of the rand.
In 4M21, net interest income (NII) declined to an average figure but remained stable at constant exchange rates. Significantly lower margins – due to the decline in average interest rates from period to period – were partially offset by higher average interest earning assets, he said.
The net interest margin remained at a level similar to 2H20 (2H20: 353bp). NII was down to single digits from 4M19.
South Africa’s card issuance revenue increased double-digit over the period. Digital transaction volumes in African regions have also seen strong growth, Standard Bank said.
Credit performance in 4M21 was better than expected. Credit impairment charges were significantly lower in 4M21 compared to 4M20, due to lower forward-looking provisions and business-related rejections, he added.
The group’s return on equity recovered from the 8.9% recorded in FY20 and was closer to the group’s cost of equity – FY20: 14.4%.
Read: Standard Bank gears up for post-covid economic recovery: CEO