Standard sofa. Image: ISASA
Standard Bank claims its anti-divestment fuel costs increased from R18 million in FY21 to R72 million in FY22.
This was one of the main reasons why operating expenses and bank branches increased 9% in the most recent fiscal year, in conjunction with other increases in city taxes.
On Thursday, the bank announced its financial results for the fiscal year ending December 2022, claiming excellent growth in its business despite the country’s adverse conditions.
Total income rose 18% to R156.92 billion in 2021 from R132.72 billion, while total earnings per share increased 33% to 2,087.1 cents (2021: 1,573).
Return on equity (ROE) increased to 16.4% (from 13.5% in FY21). The group’s net asset value increased by 10% and the common equity tier 1 ratio ended the current period at 13.5% (December 31, 2021: 13.8%).
According to the company, the board of directors recommended a final dividend of 691 cents per share, resulting in a final dividend payout ratio of 60%.
Operating expenses increased by 12%, which was below the group’s weighted average inflation rate of 15%. The company stated that the cost increase was impacted by greater inflation in the operating areas of the organization as well as relative edge weakening.
Employee expenses increased 12% due to annual salary increases, an increase in the number of skilled workers and increased performance-based incentives.
IT spending increased by 13%, mainly due to higher spending on cloud migration and software licensing.
Housing costs increased by 9% due to the aforementioned increased municipal taxes and higher fuel-related expenditure on diesel.
The bank stated that its major expansion came amid wider economic turbulence in 2022.
Rising geopolitical tensions, the war between Russia and Ukraine and restrictions related to Covid-19 in China all contributed to inflation, uncertainty, heightened market volatility and an asset price shock this year.
“Inflation concerns led to a tightening of monetary policy and higher borrowing costs weighed on economic activity,” the report said. “The aftermath of the KwaZulu-Natal floods, increasing power outages and stalled structural reforms weighed on sentiment and demand.”
Consumers have been particularly hard hit by the current circumstances. Repo rate increases, which totaled 325 basis points over the year, were both faster and larger than expected, and towards the end of the year began to show symptoms of stress, according to the bank.
Going forward, the bank stated that the problems are unlikely to abate, although the outlook is mixed.
Monetary tightening is expected to moderate, but another rate hike of 25 basis points is expected before the middle of the year.
Inflation is expected to ease to 5.9% in the coming year, but the economy is expected to do poorly and South Africa will also be graylisted by the Financial Action Task Force (FATF).
Standard Bank, echoing widespread market concerns, stated that the load shedding and power crisis are critical to South Africa’s prospects, and that some good progress will have to come from a solution to current energy constraints .
“The level of power outages we have experienced to date is unprecedented. We are concerned about the additional pressure it is likely to place on our customers,” the bank said.
“In South Africa, meaningful structural reforms and improved electricity supply can boost confidence and accelerate economic growth, job creation and social upliftment.”
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