Standard Bank — one of South Africa’s so-called “big four” banking groups — cannot be accused of not delivering on its promises.
A year ago, the bank published what it referred to as its medium-term financial objectives. These included a return on equity of 20%; headline earnings growth of inflation (CPIX) plus 10%, equating to a growth rate of 16,8% for 2003; a cost-to-income ratio of 57%; and a group credit loss ratio of 1%.
On Wednesday, Standard Bank CEO Jacko Maree, announcing another stellar performance by the bank for the past 12 months, disclosed that all of the targets had been met.
The year 2003 saw a return on equity of 22,8% compared with 20,3% in 2002, while headline earnings for the year beat expectations, surging 19% to more than R6,2-billion. The group’s cost-to-income ratio improved to 56,2% from 57,3% and its credit loss ratio improved to 0,91% — all comfortably exceeding the targets.
The group’s capital adequacy ratio increased to 14,8% from 14,3% in December 2002. According to Maree, internal capital generation remains positive, ensuring strategic considerations and normal business growth are not constrained by capital limitations.
And, while expecting some demanding challenges in the year ahead, the group believes it will continue to meet its financial objectives.
Maree says that sound economic fundamentals together with low inflation and lower interest rates in South Africa are expected to support further growth in credit demand, although at a lower rate than that experienced in 2003.
“The performance of our domestic business remains particularly sensitive to net interest margins. Should interest rates remain at current levels, domestic margins will be narrower than in 2003, as less interest will be earned on transactional deposit balances and capital. It is, however, expected that lower credit loss rates and the current momentum of strong asset growth will partly compensate for this effect.
“Reduced cost growth in a lower inflationary environment should also provide further assistance in maintaining domestic financial performance,” he states.
But he adds: “The positive outlook for emerging markets is likely to continue into 2004 and should assist in sustaining earnings in dollar terms from International operations at around 2003 levels. Earnings growth in Africa will benefit from newly acquired operations in Botswana and Mozambique.
“The challenges in the year ahead will be demanding,” he says, “but the group’s diverse spread of business, quality of staff and strong brand should result in the group producing returns to shareholders in line with our published objectives.
“Standard Bank’s principal financial objectives for 2004 remain unchanged at a return on equity of 20% and headline earnings growth of inflation plus 10 percentage points.” — I-Net Bridge