Standard Bank Group Ltd., Africa’s largest lender, warned of a “challenging” six months ahead for its consumer and corporate banking operations as costs at the unit jumped 17 percent in the first half.
Operating expenses climbed to 19.2 billion rand ($2.3 billion) from 16.3 billion rand in the year-earlier period, outstripping the 15 percent rise in income from banking activities, the Johannesburg-based lender said in a statement today. Loan impairments surged 35 percent to 3.9 billion rand.
Standard Bank has cut jobs and put an end to its expansion in emerging markets to focus on boosting returns in its existing operations in Africa. To lure customers and gain market share, it has focused on offering services to low-income customers in South Africa. It has also increased mortgage lending to become the country’s biggest provider of home loans, according to data submitted to the central bank.
The bank’s “inability to rein in an out-of-control cost line, especially after the big head count reduction in 2009 and 2010, is a big disappointment,” Neville Chester, a shareholder and fund manager at Cape Town-based Coronation Fund Managers Ltd. (CML), said by e-mail. “The growth has failed to exceed cost growth.”
Finance Director Simon Ridley said costs won’t rise by as much as 17 percent in the second half. Increases will be in the “high teens,” he told investors on a call today.
Standard Bank dropped as much as 3.5 percent, the most of all South African banks, and was 2.9 percent lower at 112.77 rand as of 10:45 a.m. in Johannesburg trading.
Net income increased to 7.17 billion rand from 6.58 billion rand in the year-earlier period, the company said. Total lending increased 10 percent to 814 billion rand.
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