Biggest Africa Bank’s Dividend Lays Ground for Post-Pandemic Era

Standard Bank Group Ltd. has signaled that by declaring a modest dividend, it’s preparing to bulk up its businesses once the worst of the Covid-19 pandemic passes.

“Our view is post-pandemic there are going to be vast opportunities to grow,” Chief Executive Officer Sim Tshabalala said at a news conference on Thursday. For Standard Bank, he said these possibilities include adding new businesses, investing in non-banking activities and accelerating digitization.

“While cautious we are very very confident about the future,” Tshabalala said.

The continent’s largest bank declared a dividend of just 2.40 rand ($0.16) per share, according to a statement on Thursday, after the South African regulator last month eased guidance for banks on withholding payouts to shareholders during the pandemic. The move follows similar decisions by rivals FirstRand Ltd. last week and Investec Ltd. late in 2020.

Shares fell as much as 2.9% in Johannesburg, the most on an intraday basis in almost two weeks, before paring losses to 1.3% by 3:34 p.m.

The restraint was surprising because money received from the sale of ICBC Argentina last year could have been used to sweeten the payout to shareholders, Nolwandle Mthombeni, a banking analyst at research house Intellidex, said by phone.

“The big letdown was the dividend,” Mthombeni said.

On Alert

South African lenders, which have set aside billions of rand to guard against souring loans, must now prepare for a potential resurgence in coronavirus infections as the country heads into winter. Plans to vaccinate the two-thirds of the population necessary to reduce deaths and achieve herd immunity are underway, but progressing slowly.

Standard Bank sees financial pressure in the wake of the pandemic persisting for many customers. “A recovery in household spending is expected to gain momentum in late 2021, followed by capital investment in 2022,” it said.

The company, which operates across 20 African countries, is digitizing its systems to fend off fintech firms and other lenders encroaching on its customer base. Its widespread presence on the continent has shielded it from some of the pain faced in its home market, where an economic slump and restrictions to contain the Covid-19 pandemic bankrupted businesses and raised the unemployment rate.

Clients in Standard Bank’s retail and corporate banking businesses received a total of 154 billion rand in relief to help navigate the fallout from the pandemic. The lender also joined its peers in rolling out a government-backed credit extension program to alleviate strain on small to medium-sized businesses.

©2021 Bloomberg L.P.

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