Standard Bank losses 31% of profit on insurance unit
Standard Bank Group Ltd., Africa’s largest lender, reported a 31 percent decline in first-half profit on losses at its insurance business and as a stronger rand eroded overseas earnings.
Net income fell to 5.1 billion rand ($638 million), or 3.55 rand per share, from 7.4 billion rand, or 5.41 rand, a year earlier, the Johannesburg-based bank said in a statement today.
Earnings at Standard Bank’s core banking business fell less than the 40 percent drop reported earlier this month by rivals Absa Group Ltd. and Nedbank Ltd. Liberty Holdings Ltd., the insurer the bank controls, reported a loss of 1.26 billion rand as recession in South Africa prompted customers to cancel policies while the rand’s 25 percent gain against the dollar this year hurt profit from overseas investments.
“Standard Bank has been weighed down by Liberty and offshore,” said Patrice Rassou, a fund manager at Cape Town- based Sanlam Investment Management. “Management still has to prove that the strategy of investing offshore will deliver superior returns.”
Standard Bank rose 0.9 percent to 96.56 rand as of 10:58 a.m. in Johannesburg trading, bringing this year’s gain to 16 percent. That made it the best performing stock on the five- member FTSE/JSE Africa Banks Index.
“We remain cautious in our outlook for the rest of 2009,” Standard Bank said in the statement. “Interim results together with current trends indicate that normalized earnings for the year will be lower than those of 2008.”
South Africa’s economy has slid into its first recession in 17 years and consumer spending remains muted even after five interest rate cuts since December. Standard Bank said it plans to relax mortgage lending, after home loans slumped 79 percent to 7.3 billion rand in the first half.
“High consumer indebtedness and the lagged effect of previously high interest rates, together with high food and fuel prices in South Africa, continued to impact on customers’ ability to service debt,” Chief Executive Officer Jacko Maree said in the statement.