Standard Bank flags interest rate hikes and Ukraine risks for South Africa

Standard Bank has published its annual results for the year ended 31 December 2021, with the group reporting a 57% increase in profits to R25 billion as the economy recovered from Covid.

Headline earnings per share increased to 1,573 cents, compared with 1,002.6 cents a year earlier, while a 52% decline in credit impairments to R9.9 billion.

Other key financial figures show:

  • Return on equity (ROE) improved to 13.5% (FY20: 8.9%);
  • Revenue grew by 5% and pre-provision operating profit grew by 5%, both with double-digit growth in the second half of the year;
  • Net asset value grew by 13% and the group ended the year with a common equity tier one ratio of 13.8% (31 December 2020);
  • The group saw a 52% decline in credit impairments to R9.9 billion;
  • The board approved a final dividend of 511 cents per share. This equates to a dividend payout ratio of 55% for the full year.

Looking forward to 2022, Standard Bank said global growth is expected to remain above trend and financing conditions are expected to tighten.

“The International Monetary Fund is forecasting global real GDP growth of 4.4% and 3.7% in Sub-Saharan Africa. Pent-up consumer demand should fuel spending and support trade. In many sub- Saharan economies, debt levels are high, and there will need to be a balance between fighting inflation and supporting the economic recovery.”

A broad hawkish bias is expected, with interest rate increases expected in South Africa and several other countries the group operates in, it said.

It added that South Africa’s economic rebound is expected to continue, albeit at a slower rate, as policy stimulus fades and terms of trade retreat from the recent record highs.

“Inflation is expected to moderate, supporting a gradual rate hiking cycle. We expect three further 25 basis point increases over the course of the year. Persistent idiosyncratic risks remain, particularly electricity disruptions and high levels of unemployment. If structural reforms were accelerated, it could boost confidence, investment and drive faster growth.”

Geopolitical tensions, particularly the developments in Ukraine, present risks to this outlook, it said.

“The situation in Russia and Ukraine is complex and constantly evolving. We are actively monitoring these events in order to comply with all relevant local and international laws and guidelines.

“The group has limited direct exposure to Russia and Ukraine through its controlled operations. We are, however, giving due consideration to the potential secondary impacts across our countries of operation, for example, financial markets, trade, transport logistics, commodity and food prices.”

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