Our opinion on the current state of STANBANK(SBK)Standard Bank (SBK), founded 160 years ago, is South Africa's second-largest bank by market capitalisation, after First National Bank. The bank has significant operations across Africa, which now contribute 34% of its headline earnings. 20% of Standard Bank's shares are owned by the Industrial and Commercial Bank of China (ICBC), and it owns 40% of ICBC Standard Bank (ICBCS), previously Standard Bank Plc in the UK.
The bank has faced operational challenges due to load-shedding in South Africa and the residual effects of the COVID-19 pandemic, during which about 70% of its staff worked remotely. Despite these challenges, Standard Bank remains an excellent long-term investment for private investors, particularly as the economic recovery following COVID-19 is expected to boost profits.
On 15th July 2021, Standard Bank announced an offer to acquire the ordinary shares and preference shares of Liberty Holdings (LBH). Liberty shareholders received 0.5 Standard Bank shares and R25.50 in cash for each LBH ordinary share, giving an implied valuation of just under R90 per share, a 33% premium to its pre-announcement price of R67.48.
The bank has benefited from an increase in client numbers and rising interest rates. For the six months ending 30th June 2024, Standard Bank reported a 4% increase in headline earnings per share (HEPS) and a return on equity (ROE) of 18.5%. The company's net asset value (NAV) also grew by 5%, reaching 14,564c per share. The bank noted that its strong performance was driven by franchise growth in its banking business and robust earnings growth in its insurance and asset management divisions.
In a filing for ICBC for the nine months ending 30th September 2024, Standard Bank reported continued strong organic growth, supported by mid-teens growth in banking earnings and a strong rebound in insurance and asset management earnings. However, the South African rand strengthened against almost all group-related currencies in the three months to 30th September 2024, limiting headline earnings growth to mid-single digits in rand terms.
The share made a cyclical low at 16,707c on 17th April 2024 and has been in a strong upward trend since then. With a price-to-earnings (P:E) ratio of 9.06 and a dividend yield (DY) of 4.94%, Standard Bank offers good value, especially for long-term investors looking to capitalize on Africa's growing banking sector and the bank's diverse operations.
