Standard Bank reaches highest profits ever

South Africa’s largest banking group by assets Standard Bank reported record-high full-year profits for the period ended in December 2023, as local banks benefit from the endowment effect of higher interest rates boosting top-line earnings.

Standard Bank noted that the revenue boost means that it is now ahead of its 2025 commitments.

Group headline earnings surged 37% to R34.2 billion, the bank said on Thursday, while its return on equity (ROE) improved to 16.4% from a previous 13.8%.

“Strong average balance sheet growth and margin expansion, primarily due to higher interest rates, supported robust net interest income growth,” said Standard Bank.

The group is the latest major bank to report record financial results. Earlier this week, competitor Nedbank also posted double-digit growth.

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“A larger client base, recovery in transactional and foreign exchange activity, as well as increased digital volumes, drove growth in net fee and commission revenue,” Standard Bank said.

Standard Bank Activities net interest income jumped 24% to R77.1 billion, up from R62.4 billion, while non-interest income grew 11% to R56.2 billion from R50.8 billion previously.

The local banking sector is currently enjoying the benefits of higher interest rates following the South African Reserve Bank’s (Sarb) aggressive fight against sticky inflation.

Its hiking cycle, since November 2021, has seen interest rates rise a cumulative 375 basis points to the current prime lending rate of 10.75%.

During the reporting period, Standard Bank Activities saw headline earnings surge 22% to R30.5 billion, compared to a previous R24.9 billion, while its pre-provision profits increased 26% t R60 billion, up from R47.8 billion.

In its “Banking Solutions” division, Standard Bank saw headline earnings rise 25%, driven by loans and advances to customers growing by 9% to R1.4 trillion.

The bank saw “strong growth in the corporate, business lending and vehicle and asset finance portfolios,” although home services, card balances and personal unsecured portfolio growth was muted.

As a result, total provisions for the unit increased 9% to R55.8 billion, Standard Bank said.

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The board also approved a final dividend of 691 cents per share, translating to a final dividend pay-out ratio of 60%.

“Standard Bank Group delivered strong earnings growth which drove returns higher,” said group CEO Sim Tshabalala.

“Earnings growth and robust capital levels supported higher dividends for shareholders. The group is ahead of plan and confident it will deliver its 2025 targets,” he added.