Standard Bank headline earnings per share surge in the interim reporting period

Key Takeaways:

1. Headline earnings increased by 35% compared to the same period in 2022.
2. The Africa Regions franchise was a standout performer, contributing 44% to the group's headline earnings.
3. SBG's banking businesses experienced growth due to continued client franchise expansion, larger balance sheets, and increased transaction volumes.
4. Revenue growth outpaced cost growth, resulting in positive operating leverage and a decline in the cost-to-income ratio to 50.5%.
5. The insurance and asset management business unit showed improved operational performance and generated headline earnings of R1.4 billion.

Standard Bank Group Limited (SBG) has delivered a solid performance in the first half of 2023 (1H23).

The group's strong performance in 1H23 saw headline earnings reach R21.2 billion, a significant 35% increase compared to the same period in 2022. The return on equity also improved to 18.9% from 15.7% in 1H22. This growth was driven by robust earnings across the group's three banking businesses and improved earnings and returns in its insurance and asset management businesses. The Africa Regions franchise was a standout performer, contributing 44% to the group's headline earnings.

The group’s net asset value grew by 10% and the common equity tier 1 ratio remained steady at 13.4%. The board approved an interim dividend of 690 cents per share, reflecting an interim dividend payout ratio of 54%.

The group's banking businesses reaped the benefits of continued client franchise growth, larger balance sheets, and increased transaction volumes. Revenue growth outpaced cost growth, leading to strong positive operating leverage and a decline in the cost-to-income ratio to 50.5%. However, credit impairment charges increased across all portfolios due to the challenging macroeconomic environment and deteriorating outlook.

The group’s South African banking franchise saw headline earnings grow by 17% to R8.4 billion. The Africa Regions franchise's headline earnings grew by an impressive 65%. The top six contributors to Africa Regions headline earnings were Ghana, Kenya, Mozambique, Nigeria, Uganda, and Zimbabwe.

The insurance and asset management business unit, which combines the businesses previously housed in Liberty Holdings, recorded improved operational performance and headline earnings of R1.4 billion. The life insurance operations saw increases in indexed new premiums and the short-term insurance business recorded increased gross written premiums. Group assets under management increased by 6% to R1.4 trillion.

Standard Bank Group’s strong 1H23 performance demonstrates the effectiveness of its Africa-focused strategy and differentiated franchise. Despite the uncertain and volatile market conditions, the group has been able to deliver robust earnings growth and improved returns.

Standard Bank – trading view

Standard Bank currently trades in a long-term uptrend, as considered by the price still trading firmly above the 200-day simple moving average (blue line). In the short term however, the price is correcting.

Trend followers might look for long entry on signs that the short-term correction of the longer-term uptrend is nearing its end. Confirmation thereof might be considered on a bullish candlestick / price reversal closer to either the 18415 or 17895 support levels. In this scenario, the high at 19750 would become a favoured upside resistance target, while a close below the reversal low could be used as a stop loss consideration.