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Shares in Africa's largest bank by assets, Standard Bank, lifted more than 4% on Friday morning, when it flagged profit growth of more than a third in its half-year to end-June, when it benefitted from a sharp rise in interest rates and growth in its client base.
Headline earnings per share are expected to rise between 33% and 38% in the period to end-June, the group said, also providing a guidance range, taking into consideration the effects of new accounting rules, of up to 35%.
The bank, which generated record headline earnings of R15.3 billion in the prior comparative period, had said in June that it had been boosted in the period by the endowment impact of higher interest rates, which means debtors need to pay more on their loans, as well as "improved customer activity levels".
The South African Reserve Bank left its key repo rate unchanged at a 14-year high of 8.25% at its July meeting, but as of the end of June 2022, it was at 4.75% - a climb of almost 74%.
Standard Bank, valued at almost R325 billion on the JSE, had also warned in June it was seeing increased pressure on customers as a result, while remaining concerned about the increased risk of sovereign defaults in Africa.
"Credit impairments related to consumer banking customers are currently elevated, primarily in SA and, particularly, in home loans, on the back of rapid interest rate hikes and sustained high inflation levels, which has resulted in some customers being unable to meet their debt obligations in full," the bank said at the time.
Standard Bank said that while its credit loss ratio at the group level was still within its target range of 70 to 100 basis points, it's now outside the scope the bank set for itself in the consumer banking unit.
That unit has a credit loss ratio of 100 to 150 basis points through the cycle, though coverage remained strong.
The bank expects the group's credit loss ratio to increase towards the upper end of its target range in the coming months. Standard Bank likely expects the deterioration to come from the SA consumer banking franchise as the bank said it anticipates a further 25 basis point interest rate increase in the second half of the year.
READ | Standard Bank's impairments have surged almost 50%, and it expects another rate hike in 2023
Shares in Standard Bank had gained almost 4.7% to R190.99 and is up more than 17% on a one-year basis. Other SA banks were up on Friday as well, with Capitec faring best in adding almost 3%.
