Bad Loans Mar Standard Bank Profits

March 5 - Standard Bank announced this week that its normalized headline earnings had fallen by 20% per share in 2009.

The fall was in line with the bank's forecast of 20 - 25%, which saw its headline earnings drop to 757c.

Credit impairment charge for the bank increased to R12.1 billion - a growth of 7%.

One of the main factors to influence the drop was the struggling retail unit of the bank due to loan defaults.

Due to the economic recession and rising unemployment, many South Africans lost their ability to keep up with home loans, leading to increased pressure on the banks.

Nevertheless, Standard Bank sees a move towards better days, even though progress to full recovery will be slow.

"Confidence in a sustainable but slow recovery is growing," noted the Chief Executive Officer of Standard Bank, Jacko Maree. "While credit demand is expected to improve, a resurgence is only likely to follow a more tangible revival of economic activity."

Since the beginning of the year, Standard Bank has relaxed lending criteria for South Africans seeking mortgages to purchase new homes. This was possible mainly to the fact that the Reserve Bank cut interest rates substantially.

Standard Bank was not the only bank to report a drop in profits. Absa reported in February a drop in profits because of rising impairments.

Following the announcement about headline earnings, Standard Bank shares dropped 0.5% at R110.

3/12/2010 11:09:40 AM