Standard Bank’s profit drops 20%, sees better 2010

JOHANNESBURG – Bad debts knocked profits at South Africa’s Standard Bank last year as consumers struggled to repay loans and Africa’s biggest bank by assets said it expects only a slow economic recovery in key markets.

‘Confidence in a sustainable but slow recovery is growing. While credit demand is expected to improve, a resurgence is only likely to follow a more tangible revival of economic activity,’ Chief Executive Jacko Maree said.Standard said it would focus on restoring normalised headline earnings to 2008 levels but warned credit conditions would remain under pressure after 2009 earnings were hit by rising impairments at its retail and corporate businesses.Normalised headline earnings per share in 2009 fell 20 per cent to 757 cents, in line with its forecast of a 20-25 per cent fall. Its credit impairment charge climbed seven per cent to R12,1 billion.Like its rivals, Standard is battling rising defaults at its retail unit as credit-squeezed consumers struggle to pay back loans on houses and cars under tough economic conditions. Corporate businesses have also been hit by high bad debts.Shares in Standard Bank were 0,5 per cent down at 110 rand by 0753 GMT, when the JSE banking index was down 0,4 per cent and the main market index was down 0,6 per cent.’Impairments are quite a bit better than what we were expecting at this point,’ one Johannesburg-based banks analyst said.’The operational performance was weaker at a top line level than we would have expected but the stronger impairment performance actually supported the reasonably robust bottom line impact.’ While Standard Bank has relaxed lending criteria at its personal and business banking unit in South Africa after a string of interest rate cuts, Africa’s biggest economy is still reeling from the effects of its first recession in 17 years.High debt levels and job insecurity have seen households cutting back on spending and taking further loans, while the appetite for commercial credit has also been curbed.Absa, the first of the big four banks to release its 2009 results, reported a drop in profit last month due to rising impairments, while Nedbank also posted a lower profit last Thursday as retail bad debts jumped.Standard Bank, which offers personal and business, corporate and investment banking and wealth management services, is 20 per cent owned by the Industrial and Commercial bank of China (ICBC), one of the world’s biggest banks by market capitalisation.Standard said it would maintain its dividend payout at the same level as 2008’s total of 386 cents.Headline EPS is the key profit measure for South African firms and excludes non-trading, capital and certain extraordinary items. – Nampa-Reuters