Standard Bank, hit by naira devaluation – but not knocked out

Despite problems in Nigeria, the bank said it anticipates more growth from its Africa operations

Nigeria-exposed companies have been dealt a blow in the wake of the naira’s devaluation.  Standard Bank, however, has managed to close its financial year with minimal injury. 

Speaking to the Mail & Guardian after the release of the bank’s annual results, Yinka Sanni, the chief executive of Standard Bank Africa Regions, said business in Nigeria continues to trade profitably despite the currency devaluation. 

“We are excited about the reforms in Nigeria but you can see the impact [on earnings] and we believe that over the medium to long term, the reforms will be beneficial to the country and ultimately to our business,” Yinka said on Thursday. 

The group noted that Nigeria took steps to liberalise the naira during its reporting period. This resulted in mixed currency movements across the group’s portfolio of countries and they were weaker on average by the end of the year. 

In January, the West African country sharply devalued its currency for the second time in eight months in a bid to tidy up its haphazard system of exchange rates. The naira was trading at ₦464.48 to the dollar in May 2023 and now is trading at ₦1600. 

This move has greatly affected companies that operate in Nigeria with South African mobile operator, MTN, being the first to show its scars. Early this month MTN warned investors in a trading update of a fall in profits caused by a rapid decline in the value of the naira.

Nigeria is MTN’s biggest market, with 40% of the company’s revenue coming from the country and so any changes are likely to affect the mobile operator.

The company said the previous official currency devaluation had a material effect on its results and it put pressure on its finances. The MTN 2023 result represents an overall earnings decrease of 70% to 90% compared with the 2022 financial year.

Wayne McCurrie, of FNB Wealth and Investments, commended Standard Bank on a good set of results and that it had not been affected materially. 

Standard Bank’s headline earnings rose 27% to R42.9 billion for the year, with the group’s Africa regions outperforming South Africa with 49% growth versus 3%.

McCurrie noted that Standard Bank has been in the rest of Africa for a long time and had been quite successful. 

“Obviously Standard Bank is in the right countries and they haven’t suffered like MTN did in Nigeria because of the massive currency devaluation and that does not surprise me at all,” he said. 

Standard Bank has been in Nigeria since 1992 while MTN ventured into the populous country in 2001. 

McCurrie said there is still more growth for Standard Bank in its rest of Africa because the South African economy is depressed and some African countries are doing reasonably well. 

“South Africa is not a place to make profits,” he said. 

Arno Daehnke, the chief finance and value management officer of Standard Bank, said the group sees future profits coming outside of South Africa. 

“The strength of the group is really the diversity of its offering. The growth will be higher in the Africa region specifically because those economies and markets are growing faster but our outlook for South Africa in 2024 is quite positive,” he said during a media briefing. 

Standard Bank group chief executive Sim Tshabalala forecast that the sub-Saharan economy will grow at 4% in 2024, with this growth rate probably being sustained over the medium term. South Africa’s growth rate will improve significantly to about 1.2% this year as the electricity supply improves.