For the period ended 30 June 2018 (1H18) group delivered headline earnings of ZAR12.7 billion, up 5% on the prior period (1H17), and return on equity improved to 16.8% from 16.1% in 1H17.
The group’s capital position remained strong, with a common equity tier 1 (CET1) ratio of 13.8%. Accordingly, an interim dividend of 430 cents per share has been declared, an increase of 8% on the prior period.
Banking activities headline earnings grew 6% to ZAR11.7 billion driven by strong growth in non-interest revenue (NIR) and lower credit impairment charges, in Africa regions in particular. Banking activities ROE improved to 17.5% from 16.8% in 1H17.
The stronger South African Rand, on average, adversely impacted the group’s reported results. On a constant currency basis, group headline earnings increased by 8% boosted by Africa Regions which grew earnings by 32%. Africa Regions contribution to banking headline earnings increased to 32% from 29% in 1H17. The top five contributors to Africa regions headline earnings were Angola, Ghana, Mozambique, Nigeria and Uganda.
Global growth has been less synchronised than previously expected. Key drivers were escalating trade tensions, rising oil prices and higher US yields. Global risk aversion led to increased volatility and emerging market (EM) currency pressures.
In many of the sub-Saharan African countries in which we operate, inflation continued to ease, interest rates declined and exchange rates were relatively stable. One exception was Angola, where the managed devaluation of the currency resulted in a 23% decline in average AOA/USD period on period.
In South Africa (SA), on average, the Rand was stronger, rates lower and inflation surprised on the downside. Consumer and business confidence improved but have not necessarily translated into higher spending or fixed investment. The VAT increase, tax bracket creep and higher fuel prices have all negatively impacted discretionary spending capacity.
IFRS 9 became effective on 1 January 2018 and the group provided a transition report with its first quarter results for 2018. The day one impact of implementing IFRS 9’s expected credit loss impairment requirements included a 31% increase in balance sheet impairments from ZAR22.4 billion to ZAR29.4 billion, a ZAR6.6 billion decline in group reserves and a 70 bps decline in the group’s CET1 ratio on a fully loaded basis. The CET1 impact will be phased in over three years.
Banking activities achieved revenue growth of 4%, with strong NIR growth dampened by slower net interest income (NII).