Standard Bank Group Ltd. gained the most in six years in Johannesburg trading after it reported profit boosted by expansion in Africa, lower bad debts and curbs on costs.
Standard Bank rose as much as 6.6 percent, the biggest intraday advance since April 2009. Full-year net income climbed to 17.9 billion rand ($1.52 billion) from 16.2 billion rand a year earlier, the bank said in a statement on Thursday.
Customer deposits in Africa, where the 151-year-old Johannesburg-based bank operates in 19 countries outside its home market, jumped by 22 percent in 2014, the lender said. Bad debts at Africa’s biggest lender by assets declined, with the credit-loss ratio improving to 1 percent from 1.12 percent.
The performance “was driven higher by healthy revenue growth of 15 percent and a lower credit-loss ratio,” Liam Hechter, analyst at Anchor Capital in Johannesburg, said in an e-mailed response to questions. The bank also benefited from good results in fixed-income, currency and commodities trading “and currency tailwinds in corporate and investment banking,” he said.
After saying on Feb. 25 that earnings may fall as much as 2 percent, the bank on Thursday reported per-share earnings excluding one-time items increased 1 percent.
During 2014, Standard Bank sold a controlling stake in its London-based global markets business to its biggest shareholder the Industrial & Commercial Bank of China Ltd. The bank booked a loss from this unit of 3.75 billion rand.
‘Very Good’
“Stripping out discontinued operations, the overall result is very good, driven by excellent top-line growth and efficiencies,” Greg Saffy, head of Cast Iron Capital in Johannesburg, said in an e-mailed response to questions.
The stock was 4.5 percent higher at 155.53 rand at 10:29 a.m. The FTSE/JSE Africa Banks Index was 1.8 percent higher.
Balance sheet growth outside of South Africa was “good,” while there was a “good” fixed income and currency trading performance and a reduction in impairments in the rest of the continent, Standard Bank said in its statement.
Personal and business banking in the rest of Africa generated earnings of 105 million rand, compared with a loss of 366 million rand in 2013.
While Standard Bank’s overall return on equity fell to 12.9 percent from 14.1 percent, the cost-to-income ratio improved to 54.5 percent from 56.8 percent. The final dividend was 3.39 rand per share.
Chinese Warehouses
The loss from the markets business stems from the writedown of metal stockpiles in China. Standard Bank started legal proceedings in July after $167 million of aluminum it claimed ownership of was placed under lockdown by Chinese authorities probing irregularities at warehouses in Shandong Province.
The aluminum stockpiles held in bonded facilities, mostly at the Qingdao port, were allegedly pledged to banks as collateral for loans multiple times. The bank isn’t accused of wrongdoing. As of Dec. 31, the bank recognized a charge of $147 million on the metal, the lender said.
“The group continues to pursue various alternatives in order to recover the client exposure in respect of this matter, including claiming under the group’s insurance policies,” the bank said. “At this time, the precise quantum and timing of recoveries remains uncertain.”
The return on equity from continuing operations, excluding the global markets business, increased to 14.6 percent, according to Adrian Cloete, money manager at PSG Wealth in Cape Town.
Looking forward, the lender said South Africa continues to face “both structural and cyclical headwinds,” exacerbated by electricity shortages. “The group’s medium-term return on equity target of between 15 percent and 18 percent remains in place and reflects our confidence in the ability of our people to deliver the necessary consistent growth to achieve this target.”