Standard Bank Group (SBK) Trading Update summary

Macroeconomic and operational trends

• African currencies weakened against the rand, with notable devaluations in Angola, Malawi, Nigeria, and Zambia; inflation moderated in East Africa but remained high in West Africa.

• Interest rates increased in nine African countries and decreased in four; Zimbabwe changed its reporting currency to USD, ending hyperinflationary status.

• In South Africa, inflation is well within the central bank's target, and policy rates are higher year-on-year.

• Banking headline earnings grew by mid-single digits, with group headline earnings up low to mid-single digits in rands and mid-teens in constant currency, driven by higher interest rates and client volumes but offset by lower trading revenues and currency effects.

• Africa Regions contributed 43% to group headline earnings, despite a marginal decline in rands.

Financial performance and guidance

• Operating expenses were well contained due to cost initiatives and lower performance-linked incentives, resulting in positive jaws.

• Total income growth outpaced operating expenses, with credit impairment charges marginally higher and credit loss ratio above the 100bps target, mainly in Business and Commercial Banking.

• Insurance and Asset Management earnings increased, driven by improved claims experience in South Africa and better performance in Shareholder Assets, but offset by currency devaluation impacts in Africa Regions.

• Return on equity remains within the 17%-20% target range, with positive jaws and ROE expected to be maintained for the full year.

• Group remains well capitalised and liquid, with ICBC Standard Bank Plc profitable though group-attributable earnings declined from a high base.

Outlook and strategic initiatives

• Interest rate cuts are expected to be delayed, with 100 basis points of cumulative cuts forecasted, starting in September 2024.

• South Africa's positive election outcome is expected to boost confidence, support fiscal consolidation, and improve credit growth.

• Balance sheet growth slowed in the first half but is expected to improve in the second half, especially in South Africa.

• Investment Banking and Transaction Banking showed strong loan growth and a robust deal pipeline, with improved performance anticipated in global markets.

• Sustainable finance is on track, with ZAR 105 billion financed in 2023 and a 2024 target of ZAR 55 billion, aiming for ZAR 250 billion by 2026.