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As Covid-19 continues its onslaught on economies worldwide, the fragile South African financial system is not without its battle scars. Standard Bank Group Ltd, the largest bank in Africa, has warned of first-half profits falling as much as 50%. Looking at the global context, Germany’s Deutsche Bank, the UK’s Barclays PLC and Spain’s Banco Santander all reported a big jump in loan-loss charges in the second quarter, as the companies they bank for struggle to repay debts, and unemployment rises across the regions in which they operate, reports BizNews partner Wall Street Journal. For more on that, see BizNews Premium. – Jarryd Neves
By Vernon Wessels and Roxanne Henderson
Earnings per share before one-time items in the six months through June probably fell 30% to 50% from a year earlier, the Johannesburg-based lender said in a statement on Wednesday.
South African banks are preparing for what could be the worst earnings slump since World War II as measures to curb the coronavirus drag the economy deeper into recession. Lenders are having to boost provisions for doubtful debts and restructure loans with companies and consumers struggling to meet their obligations.
“Despite considerable effort, the pandemic appears to be gaining momentum in certain of the markets in which the group operates on the continent, particularly in South Africa,” Standard Bank said. “The path from here remains uncertain and this continues to weigh on sentiment and demand.”
Standard Bank will release a detailed first-half earnings report on Aug. 20. FirstRand Ltd., the continent’s second-largest bank, will release full-year earnings in September. Absa Group Ltd. and Nedbank Group Ltd. have said that their interim profit will also drop by at least 20%, while Capitec Bank Holdings Ltd. has said its earnings in the six months through August could fall more than 70%.
Standard Bank’s basic EPS probably declined as much as 80% due to accounting charges on the sale of its 20% stake in ICBC Argentina to Industrial and Commercial Bank of China and the impairment of some IT costs, it said.
Standard Bank’s shares rose 2.3% by 9:59 a.m. in Johannesburg, leading gains on the six-member FTSE/JSE Africa Banks Index was up 0.4%. The stock earlier fell as much as 1.7%.
“It’s hard to say what’s good or bad,” Nolwandle Mthombeni, an analyst at Mergence Investment Managers in Cape Town, said by phone. “The decline in earnings is driven by provisioning and without knowing how much banks should be provisioning in this kind of environment the market can’t react.”
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