JOHANNESBURG – Standard Bank Group Ltd, Africa’s biggest lender by assets, recorded a 12 percent rise in net profit in 2014 as it continued to dispose of business outside the continent.
The Johannesburg-based bank said net profit rose to R15.93 billion South African rand from 14.26 billion rand in 2013, on a one percent rise in group headline earnings to 17.32 billion rand in the year ended 31 December. Noninterest revenue climbed 14 percent from 2013 to 39 billion rand.
Last month, the lender completed the sale of 60 percent of its London-based business to the Industrial and Commercial Bank of China Ltd, a key bloc of its strategy to expand in Africa. In its statement, it said it would also sell its Brazilian operation in 2015.
Banks in Africa are positioning to take advantage of growth in the continent’s middle classes, which are amassing savings and requiring more sophisticated financial services. Standard Bank recorded a 22 percent increase in commercial deposits across Africa in 2014 alone. The lender’s decision to sharpen its focus on Africa indicates the potential it sees there.
Standard Bank said it would distribute a dividend of 598 rand cents to shareholders, a 12 percent increase on 2013 and at the higher end of market expectations.
But Sim Tshabalala, the bank’s co-chief executive, said South Africa’s sluggish economic growth represents a risk in 2015 and beyond, stressing that this was a key reason to diversify to the rest of the continent.
“Structural and cyclical headwinds in 2015” will be worsened by electricity shortages plaguing South African businesses, the bank said. The country’s economy grew 1.5 percent last year, well below the continent’s average rate.
Revenue from the rest of Africa, excluding South Africa, was 28 percent of total revenue in 2014, Mr Tshabalala said, noting that this was the fastest-expanding part of the operation, recording 41 percent growth last year.
“The reason this is exciting is the rest of the continent will grow at about 5 percent in the next few years…as the continent grows wealthier and more people enter the middle class, they need banking services, and we are ideally placed to pursue that,” Mr Tshabalala said in an interview.
He said he was optimistic on oil-dependent African economies that are currently suffering because of low oil prices, especially Nigeria, Angola and Ghana.
“Oil-producing countries are going to be challenged but I think that will normalize in the next 18 months,” Mr Tshabalala said.
East Africa was the fastest-growing African subregion for Standard Bank, he said, singling out Kenya as a particularly high achiever, especially as it is set to grow faster than previously anticipated, according to a World Bank report released Thursday.
Mr Tshabalala lamented what he called a “regulatory tsunami” that is increasingly making it “impossible to be commercially viable.”
He said Standard Bank and other South African lenders were top performers in compliance with Basel capital-adequacy regulations, but “too many regulations and too many regulators,” including Dodd-Frank in the US and European Union regulations, were seriously increasing the “risk of noncompliance.” – WSJ
