Aug. 15 (Bloomberg) -- Standard Bank Group Ltd., Africa’s largest lender, reported first-half profit that missed analyst estimates as bad debts climbed.
Net income rose to 8.07 billion rand ($815 million) from 7.1 billion rand a year earlier, the Johannesburg-based bank said today in a statement. Earnings per share excluding some items rose 10 percent to 5.06 rand, missing the 5.22 rand median estimate of four analysts in a Bloomberg survey. Bad debt charges rose 28 percent to 5.06 billion rand.
Standard Bank appointed Sim Tshabalala and Ben Kruger as joint chief executive officers in March after Jacko Maree stepped down after 13 years. The bank is seeking to attract more low-income earners in South Africa while trying to boost returns at its operations in 17 other African nations.
“South African households continue to struggle with high overall debt burdens, coupled with sluggish income growth and rising inflation,” the lender said in the statement.
Standard Bank is the second-worst performing stock on the six-member FTSE/JSE Africa Banks Index this year after Barclays Africa Group Ltd., having dropped 4.2 percent compared with the average decline of 3.7 percent. The stock fell 1.6 percent to 113.95 rand in Johannesburg trading today. Standard Bank increased its first-half dividend 10 percent to 2.33 rand.
South Africa’s gross domestic product expanded 0.9 percent in the first quarter, the slowest pace since a 2009 recession, while unemployment climbed to 25.2 percent, up from 24.9 percent in the previous three months. The price of gasoline in the country has gained about 22 percent from July last year.
“Cost pressures will continue in the second half of the year given the weaker rand,” Standard Bank said in the statement, referring to a 15 percent decline in the South African currency against the dollar this year. “We remain confident in our ability to grow revenues.”
While Standard Bank’s bad debt charges advanced almost a third in the first half, Nedbank Group Ltd.’s impairments rose 23 percent and Barclays Africa’s losses from loans and advances fell 14 percent to 3.55 billion rand over the same period.
“We’re clear that the question is whether or not clients have the capacity to take on loans,” Tshabalala said in a telephone interview from Johannesburg. “We’re not applying a blanket rule on unsecured lending, but we’re reducing our exposure.”
South Africa’s biggest banks, including FirstRand Ltd. and Barclays Africa, started offering more loans not backed by assets to low-income earners about four years ago as they sought to boost profit. The growth in unsecured lending outstripped that in mortgages before falling back in the first quarter of this year as consumers struggled to repay debt amid rising unemployment, increasing inflation and a slowing economy.
“What happened over the last few years with all the banks and all the mono line lenders growing loan books over 30 percent per year was crazy, and to a large extent ignored by regulators till it was too late,” said Neville Chester, who helps oversee the equivalent of $44 billion at Coronation Fund Managers Ltd. in Cape Town. “Fortunately the unsecured loan sector is not that big in the overall size of the South African economy, and it will not destabilize the banking system.”
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