Standard Bank signals interest rate hikes and Ukrainian risks for South Africa

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

Overall earnings per share rose to 1,573 cents from 1,002.6 cents a year earlier, while a 52% drop in credit write-downs to 9.9 billion rand.

Other key financial figures show:

  • Return on equity (ROE) improved to 13.5% (EX20: 8.9%);
  • Revenue increased by 5% and operating profit before provision by 5%, both with double-digit growth in the second half;
  • Net revalued assets increased by 13% and the group ended the year with a common equity tier one ratio of 13.8% (December 31, 2020);
  • The group recorded a 52% drop 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 ahead to 2022, Standard Bank said global growth should remain above trend and funding conditions should tighten.

“The International Monetary Fund forecasts 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 a balance will need to be struck between fighting inflation and supporting economic recovery.

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

He added that South Africa’s economic rebound is expected to continue, albeit at a slower pace, as stimulus measures fade and terms of trade decline from recent highs. .

“Inflation is expected to moderate, supporting a cycle of gradual rate hikes. We expect three further 25 basis point hikes over the course of the year. If structural reforms were accelerated, this could boost confidence, investment and accelerate growth.

Geopolitical tensions, particularly developments in Ukraine, pose risks to this outlook, he said.

“The situation in Russia and Ukraine is complex and constantly changing. We actively monitor these events 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. However, we give due consideration to potential secondary impacts in our countries of operation, for example, financial markets, trade, transport logistics, commodity and food prices.

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