Standard Bank share price gains on mostly positive trading update

Standard Bank posts resilient trading update

The Standard Bank Group has demonstrated resilience and growth in a challenging environment where inflation and interest rates are now expected to remain high, while economic growth stays constrained both domestically and internationally.

The group's results update for the five months ending 31 May 2023 reflect a strong franchise, with continued balance sheet expansion, higher interest rates, improved customer activity, and greater use of risk management capabilities in volatile trading environments. The Africa Regions franchise has delivered remarkable growth, now contributing 46% of the group's headline earnings.

Banking activities during this reporting period recorded revenue growth of over 20%, buoyed by higher-than-expected average interest rates and solid balance sheet growth. Non-interest income growth was supported by continued transactional volume expansion, fee and commission income, and trading revenue.

Operating expense growth, however, has risen to the mid-teens, driven by higher fixed remuneration in a high-inflation environment, increased incentives in line with business performance, and greater technology spend on USD-denominated software licenses and cloud migration costs. Credit impairment charges have also surged by nearly 50%, due to larger lending books, consumer strain in South Africa, and increased sovereign debt risk in Africa Regions.

The bank's headline earnings per share (HEPS) and earnings per share (EPS) for the six-month period ending 30 June 2023 are expected to be more than 20% higher than the comparable period.

Outlook

The Standard Bank Group's guidance for the twelve months ending 31 December 2023, has changed, with higher net interest income growth and non-interest revenue growth than previously estimated (low double digit). The group anticipates slightly higher cost growth than the weighted average inflation rate for the year. Strong positive jaws are expected for the group although Standard’s credit loss ratio is expected to increase towards the upper end of the target range of 70-100 basis points. The 2023 return on equity (ROE) figure is expected to show continued progress into the target range of 17-20%.

Standard Bank – trading view

The Standard Bank Group continues to trade in a broad range bound environment over the medium to long term. The recent move above 166.45 suggests 188.30 to be the next upside resistance target for the share price.

The share price does however trade in overbought territory. Traders not already committed to the move higher might instead prefer to see a pullback towards the 16645-support level for new long entries into the stock.