By Nqobile Dludla
JOHANNESBURG (Reuters) -South Africa’s Standard Bank said on Thursday its half-year profit rose by 4%, helped by franchise growth in its banking businesses and strong earnings in its insurance and asset management unit.
Africa’s biggest lender by assets said headline earnings – a main profit measure – rose to 22 billion rand ($1.2 billion) in the six months ended June 30, up from 21.2 billion rand in the previous year.
However, total provisions for credit impairments increased by 8% to 66.8 billion rand, with provision for non-performing loans up at 49 billion rand and accounting for 73% of provisions, Chief Financial Officer Arno Daehnke told investors.
Inflationary pressures, high interest rates, regular power blackouts and logistical bottlenecks are taking a toll on South African banks’ most sensitive retail and small business customers, leading to defaults and a squeeze in loan growth.
Daehnke said provisions on bad loans would remain high in 2024 but the anticipated reduction in interest rates should help cash-strapped consumers and in turn lower impairments and provisions going forward.
“Post the positive (South African) election outcome and anticipated interest rate reductions in the second half of this year, we are expecting lending demand and affordability to improve, both of which will assist working through the current stock of non-performing loans,” Daehnke said.
“Although we expect to continue to see improvements, we anticipate provision levels to remain high through to the end of this year.”
The bank’s loan book inched up by 3% to 1.7 trillion rand, with non-performing loans making up 6% of the book.
In the group’s personal and private banking business, Daehnke said inflows into early delinquency have slowed and while non-performing loans continue to rise, this was at a slower rate than previously.
Many customers were paying part of their loans and becoming better at seeking alternative payment arrangements, he added.
Across the industry, customers in debt review have grown by more than 15% over the last year, with that portfolio now around 88 billion rand, Daehnke said.
($1 = 18.0562 rand)
(Reporting by Nqobile Dludla; Editing by Kim Coghill, Toby Chopra and Emelia Sithole-Matarise)
