Standard Bank said any economic recovery from the Covid-19 pandemic in Africa would likely take until late this year or even 2022, warning of the long wait ahead for lenders struck by a slump in borrowing and spending.
The continent’s largest bank reported a 51% decline in profit after taxes and other adjustments for the year through December, according to a statement on Thursday.
The Johannesburg-based company also declared a dividend of R2.40 ($0.16) per share, after the South African regulator last month eased guidance for banks on withholding payouts to shareholders during the pandemic. The move follows similar decisions by rivals FirstRand last week and Investec late in 2020.
“Prolonged downturns will place additional pressure on weaker countries, sectors and clients, particularly leveraged corporates and certain South African state-owned entities,” Standard Bank said. “A recovery in household spending is expected to gain momentum in late 2021, followed by capital investment in 2022.”
The shares gained 0.5% as of 9:12 a.m. in Johannesburg. The stock has increased 13% so far this year, the second-best performance on the six-member FTSE/JSE Africa Banks Index.
South African lenders, which have set aside billions of rand to guard against souring loans, must now prepare for a potential resurgence in coronavirus infections as the country heads into winter. Plans to vaccinate the two-thirds of the population necessary to reduce deaths and achieve herd immunity are underway, but progressing slowly.
Standard Bank, which operates across 20 African countries, is digitising its systems to fend off fintech firms and other lenders encroaching on its customer base. The company’s widespread presence on the continent has shielded it from some of the pain faced in its home market, where an economic slump and restrictions to contain the Covid-19 pandemic bankrupted businesses and raised the unemployment rate.
Clients in Standard Bank’s retail and corporate banking businesses received a total of R154 billion in relief to help navigate the fallout from the pandemic. The lender also joined its peers in rolling out a government-backed credit extension program to alleviate strain on small to medium-sized businesses.