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Investor Relations
Leadership 20 August 2020

Standard Bank results for the six-month period ended 30 June 2020

Standard Bank results for the six-month period ended 30 June 2020 impacted by a very difficult environment, particularly in South Africa

Pre-provision operating profit: R24 295 million, up 4%
Headline earnings: R7 541 million, down 44% 
Headline earnings per share (HEPS): 474 cents, down 43% 
Common equity tier (CET) 1 ratio: 12.6% (1H19: 14.0%)
Net asset value (NAV) per share: 11 265 cents up 7% 
Return on equity (ROE): 8.5% from 16.2%
Cost-to-income ratio: 56.4% (1H19: 57.0%) 
Credit loss ratio: 169bps (1H19: 76bps)
No dividend declared

Standard Bank Group’s results for the six months ended 30 June 2020 (1H20) reflect that of a resilient, well diversified underlying franchise, negatively impacted by a very difficult environment, particularly in South Africa. Standard Bank’s Africa Regions business and its Corporate and Investment Banking business, most notably Global Markets, delivered strong top line growth.

Sim Tshabalala, Standard Bank Group CEO says: “Globally, the first quarterhalf of 2020 has been dominated by the Covid-19 pandemic (Covid-19) and the distressing human and economic cost thereof. During this time, we have remained steadfast in support of our clients, our employees and the communities in the countries we operate in. The group’s strong capital and liquidity positions going into this crisis, have allowed us to provide R166 billion ofsignificant temporary relief to our customersclients without constraining our ability to lend to existing and new customersclients or support new projects.”

Standard Bank Group’s banking operationsoperations’ earnings were supported by strong balance sheet growth, robust trading revenues and well contained costs. Positive jaws of 100 bps supported pre-provision operating profit, which grew 4% period on period to R24.3 billion. Credit impairment charges increased to R11.3 billion, 2.7 times those reported in the prior period (1H19) and reflective of the very difficulttough environment and outlook. Consequently, banking operations reported headline earnings of R7.7 billion, down 40% on 1H19, and a return on equity (ROE) of 9.5%.

Group headline earnings were R7.5 billion, a decline of 44% on 1H19, and ROE was 8.5%. The group’s capital position remained robust, with a common equity tier 1 capital adequacy (CET1) ratio as at 30 June 2020 of 12.6%, well in excess of the regulatory minimum of 7%. In line with the South African Reserve Bank’s guidance, the SBG Board has not declared an interim dividend.

Standard Bank Group’s Africa Regions business proved relatively resilient, delivering headline earnings growth of 11%, and 7% in constant currency (CCY). South Africa’s headline earnings declined 72% as the pandemic exacerbated an already difficult environment. As a result, Africa Region’s contribution to 1H20 banking headline earnings grew to 62%. The top six contributors to Africa Regions’ headline earnings remained Angola, Ghana, Kenya, Mozambique, Nigeria and Uganda.

Operating environment

Covid-19 has led to the worst economic shock in living memory. In March 2020, the World Health Organisation declared Covid-19 a pandemic and countries responded with widespread lockdowns.  Supply chains were disrupted, and demand declined. An oil price war and oversupply drove a swift and significant decline in the oil price. Fear and uncertainty drove a precipitous fall in the markets and a liquidity squeeze in the first quarter of the year. This was quickly followed by extraordinary fiscal and monetary actions and fiscal stimulus (in developed markets) and a variety of regulatory actions. These bold actions, combined with flattening infection curves, calmed markets somewhat and drove a recovery in the second quarter.

Mr Tshabalala says: “The considerable uncertainty in the first half of the year drove an Emerging Market risk-off stance for foreign investors. Sub-Saharan Africa experienced record capital outflows and financial conditions tightened. Trade and foreign exchange inflows dried up and oil-exporters were negatively impacted by the lower oil price. Covid-19 related regulatory actions included wide-spread interest rate cuts, easing of capital and liquidity requirements and fee waivers and restrictions. West Africa was impacted by the lower oil prices, East Africa, by lower trade and a halting of travel and the South and Central economies remained closely coupled with South Africa.”

In South Africa, the interrupted power supply extended the last quarter of 2019 recession into the first quarter of 2020. Strict lockdowns brought the economy to a near-standstill. Prospects of a modest economic recovery in 2020 were replaced with expectations for a large decline (Standard Bank Research: South Africa’s real GDP is forecast to decline 8.5% in 2020 followed by a 4.5% recovery in 2021). The poor economic outlook and declining inflation trend paved the way for cumulative interest rate cuts equating to 275 bps in the period. In addition, the South African government implemented a sizablesizeable stimulus package to support those most vulnerable. Whilst necessary, the additional spending poses a material risk to the public debt trajectory, and in turn, the sovereign.. Fiscal diligence and urgent structural reforms are more important than ever.


Business Units

Personal & Business Banking

PBB revenues declined 1% to R35.1 billion. Negative endowment, and related margin compression, more than offset the revenue increases related to balance sheet growth. Net Interest Margin declined 42 bps to 559 bps. Net Interest Revenue declined 5% as increased digital transactional volumes and modest annual price increases were insufficient to offset the significant lockdown-related decline in physical channel volumes, turnover reductions, a drop in trade activity and regulatory restrictions introduced on certain fees in Africa Regions. Operating expenses were well contained and supported by the savings derived from the branch reconfiguration concluded in in the first half of last year. This was partially offset by the continued investment in client experience and digitisation workstreams, as well as certain Covid-19 specific expenses, for example front-line staff and customer safety measures. Against the difficult revenue environment, jaws were negative 327 bps and cost-to-income ratio increased to 62.6% (1H19: 60.6%). Credit impairment charges increased to R8.6 billion (1H19: R3.7 billion), 2.3 times the first half 2019 charges. Lockdowns disrupted businesses and impacted client incomes. The deterioration in macro-economic assumptions drove higher forward-looking provisions. Credit Loss Ratio increased to 231 bps (1H19: 105 bps). PBB headline earnings declined 60% to R2.9 billion and ROE declined to 7.5% (1H19: 20.1%).  

“Lockdowns encouraged customers to transition to our digital channels. Digital transaction volumes increased 78% in SA, and comprised 99% of total transactions, while in Africa Regions volumes increased 24% and comprised 94% of total transactions. Physical transactions are expected to continue to decline as the transition to digital accelerates post Covid-19.” Says Mr Tshabalala

PBB SA was impacted by negative endowment, elevated impairments, lower transactional volumes and a significant decline in loan disbursements in in the second quarter of the year. To accommodate the lockdown requirements and protect our people, certain branches were temporarily closed, and teams were reorganised to maintain the delivery of key functions to our clients.  A partial resumption of economic activity, following the relaxation of the lockdown regulations in the second half of May and in June, resulted in a partial recovery of transactional volumes and values and, in turn, Net Interest Revenue by the end of the period. Despite the pandemic-related disruptions, PBB SA released several new digital capabilities and product enhancements. In addition, system resilience and security remained key to driving digital adoption. Digital active customers increased 13% to 2.6 million.

PBB Africa Regions recorded strong revenue growth. Ongoing customer acquisition and digital origination supported balance sheet and Net Interest Income growth. Negative endowment was a headwind in the period. Lower turnover, trade and transactional levels alongside regulatory directives placed a strain on fees. This was more than offset by higher insurance, asset management and foreign currency service fees as well as higher point of representation fees. Below-inflation cost growth of 5% (CCY, 2%) delivered positive jaws of 4.0% and a cost-to-income ratio of 73.1%. Credit impairment charges increased across most countries, with notable increases in Kenya, Tanzania, Uganda and Zimbabwe.  

Wealth International revenues were negatively impacted by lower interest rates (USD and GBP), albeit partially offset by higher fees from higher client FX transactional volumes. Structural balance sheet changes required, following the South African sovereign downgrade, also impacted performance. Underlying client growth has continued, with both client lending and discretionary assets under management increasing period on period.

Corporate & Investment Banking

CIB revenues grew 11% to R21.4 billion. During this period of significant volatility and disruption, CIB continued to proactively engage with clients to provide tailored funding, liquidity and risk management solutions. CIB’s capabilities and reach remains attractive to domestic clients and multi-national corporates already operating, seeking to operate or seeking to expand on the continent. The business continued to benefit from diversification across clients, sectors and regions. Africa Regions delivered a strong performance. Significant margin pressure offset strong balance sheet growth to deliver flat Net Interest Income. Cost growth was contained at 5%, delivering positive jaws of 639 bps and an improved cost-to-income ratio of 49.6%.  Pre-provision operating profit grew 19% period on period.

The stressed global economic conditions drove downward equity valuation adjustments (affecting Net Interest revenue in South Africa) and a substantial increase in credit impairments. Significant increases in impairment charges were recorded in East Africa, South & Central Africa, as well as in South Africa. CIB’s Credit Loss Ratio to customers was 88 bps (1H19: 40 bps). CIB’s headline earnings declined 7% to R5.7 billion. The deteriorating credit environment drove a 39% increase in risk-weighted assets (RWA) period on period. The decline in earnings and increase in capital utilisation, led to a decline in ROE to 15.1% (1H19: 19.2%)

Global Markets (GM) revenue grew 43% on the back of strong risk management and increased client activity in volatile markets. Africa Regions had a strong half with revenue increasing by 53%, driven principally by Nigeria and Angola. In South Africa, the business maintained its foreign exchange market share and improved its equities market share. Investment in technology platforms resulted in cost growth of 7%. GM headline earnings increased 88% to R4.4 billion.

Transactional Products & Services (TPS) revenues were negatively impacted by margin pressure as well as adverse regulatory requirements, in particular in Nigeria. Credit impairment charges increased significantly as certain older Africa Regions exposures moved into default. Costs were well contained despite ongoing investment in digital capabilities and higher regulatory charges. TPS headline earnings decreased 36% to R1.2 billion.

Investment Banking (IB) revenues were negatively impacted by muted growth in fees and equity investment valuation declines on the back of the difficult economic environment. Robust gross loan origination and an increase in drawdowns of unutilised facilities supported average balances, which drove Net Interest Income growth of 22%. Credit impairment charges increased significantly relative to the first half of 2019, driven by the non-repeat of a prior year recovery coupled with deteriorating risk grades and increased provisioning across the IB portfolio. Costs were flat. IB headline earnings declined 91% to R181 million.

Other banking interests

ICBC Standard Bank (ICBCS) recorded a profit of USD70 million in the first half of 2020 (1H19: loss of USD130 million). The turnaround was driven by the non-repeat of a single client loss in reported in the first half of last year, as well as revenues earned on the back of the market volatility experienced in the fistfirst half of 202022020 and an insurance recovery payment related to the aluminium-related losses the business incurred in Qingdao in 2015. The group’s 40% share of ICBCS’ earnings equated to R508 million.

On 29 June 2020, the group completed the sale of its 20% stake in ICBC Argentina to ICBC.

The gain on sale and the Foreign Currency Translation Reserve (FCTR) impact are both outside of headline earnings and therefore, did not impact group headline earnings. The release of the FCTR balance to earnings was a movement between reserves and therefore did not impact the net asset value of the group. The gain on sale added 11 bps to the group’s common equity tier 1 ratio.


In 1H20, Liberty’s performance was negatively impacted by higher morbidity and mortality claims, new business strain and the creation of a R2.2 billion post-tax pandemic provision to cover future costs related Covid-19 which are still expected to arise. The Shareholder Investment Portfolio performance reflected negative investment market returns, particularly in respect of foreign and local equities. Liberty reported a headline loss of R2.3 billion (1H19: earnings of R2.0 billion). After adjusting for treasury shares, the group’s 57% share of the loss amounted to R0.7 billion (1H19: earnings of R0.9 billion).

Profit attributable

Profit attributable to ordinary shareholders declined 71% to R3.8 billion. The difference between headline earnings and profit attributable can be ascribed to the sale of the group’s 20% stake in ICBCA and to the impairment of certain IT intangible assets. During the period, the group performed a review of certain of its IT capabilities. It was found that aspects of work performed to develop improvements to CIB’s client engagement system were no longer suitable. Applying the group’s accounting policy on IT intangibles, it was deemed necessary to impair the previously capitalised asset. 


In the month of July, customer activity and business turnover levels continued to recover. While this should be supportive for Net Interest revenue growth into the next half of the year, ongoing uncertainty is expected to constrain balance sheet growth. Lower interest rates are expected to persist throughout the course of the year , which will put pressure on Net Interest Income. Trading revenues are expected to be below 2020 first half levels. PBB provisioning isPBB provision levels, while deemed sufficient, are sensitive to macro-economic developments as well as client behaviour. Where appropriate, PBB has agreed to extend payment holidays and other relief measures. Client behaviour post the expiry thereof will be key. Forecast risk remains high and should the outcome be worse than expected, additional provisions will be required. While current CIB provision levels are deemed appropriate, CIB exposures, by their nature, are lumpy and additional provisions may be required if ratings deteriorate further and/or individual customersclients experience difficulties. The Board will take into account the SARB’s guidance and group’s capital position and the outlook before deciding whether to declare a final dividend. We are unable to provide revised medium-term targets at this time.

“Covid-19 has already had a profound impact globally and there remains much uncertainty as to the ultimate human and economic toll.” Says Mr Tshabalala... In addition, US/China tensions remain a risk. In contrast, lockdowns will be rolled back, and economies will reopen. The International Monetary Fund is forecasting global real GDP to contract by 4.9%, sub-Saharan Africa by 3.2% and South Africa by 8.0% in 2020, followed by a recovery of 5.4%, 3.4% and 3.5% respectively, in 2021. Forecast risk remains high, however, lockdowns will be rolled back, and economies will reopen. Accordingly, we shift our focus to recovery. Leveraging the group’s strong capital position, we will continue to work with our individual, business and corporate clients, in a responsible manner, to find suitable solutions to enable them to participate and support the much-needed transition to the recovery phase.

“The world changed fundamentally and, to some extent, permanently, in a matter of weeks. While the pandemic has created distress and anxiety for many people, it has also created new opportunities, specifically the opportunity to accelerate change. As a group operating across the continent, with operations and clients across the globe, we need to adapt to remain relevant. As we re-imagine the future, we remain of the view that our future-ready strategy remains valid. However, we recognise the need to accelerate our digital delivery and, in parallel, drive operational efficiency. We remain committed to delivering a positive societal, economic and environmental impact. Combined, this will ensure we remain relevant to our customers, attractive to our employees and enable us to deliver value to all stakeholders. And, in doing so, we will also deliver on our purpose of driving Africa’s growth.” says Mr Tshabalala. 

“The safety and wellbeing of our customers and employees has been, and remains, of utmost importance. Despite the obvious risks, our employees have shown great fortitude and commitment as they have continued to support and service our customers. We thank them for their service. We wish all our stakeholders’ strength during this difficult time and ask that they continue to partner us as we drive a return to growth for all. “ says Mr Tshabalala




Ross Linstrom

Standard Bank Media Relations

E Mail – [email protected]