It has been a turbulent few weeks for Standard Bank, after it was revealed that it was one of the banks facing allegations in the FX price rigging scandal. However, last week saw the release of very solid numbers in the provisional year end ‘16 results announcement. Furthermore, Standard Bank are confident they will be cleared by the Competition Commission and after an internal investigation, have not set any funds aside for a potential fine.
Immediately after the results were released last Thursday, the share price climbed over 6.5% to close the day at 155.95. The positive results exceeded expectations and led to the rally. A look at the numbers confirms ROE was down by 0.3% to 15.3%, but was above the 15% that was expected. Revenue growth was up 10% and operating expenses came in at 9%, also better than expectations. Notably the credit loss ratio showed a slight improvement on the previous year, but well ahead of expectations, as were total credit losses. Furthermore, the dividend was up 16% from the previous year.
The personal banking and corporate and investment banking sectors contributed positively, with revenue up 11% and 12% respectively. However, Liberty was a drag on profitability after its contribution declined by 60%.
The biggest driver of the price rally though has to be attributed to the surprisingly good impairment numbers. This implies that the typical client is under less financial stress. While far from out of the woods, this is yet another small green shoot suggesting that the economy may be turning, and that the current cycle may in fact be bottoming out.
Portfolio Manager and Securities Trader
Cheyne has spent the last 10 years working in London, holding numerous positions within Equity and Equity Derivatives at various Investment Banks. His main focus has been on South African and Emerging Markets and also gained good exposure to global equity markets and products. He completed both his BCom degree in Economics and his BCom. Honours in Financial Analysis and Portfolio Management at the University of Cape Town. After completing each of the rigorous exams, Cheyne became a CFA Charterholder in 2014.