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Johannesburg - Although Standard Bank has benefited from its ties with the Industrial and Commercial Bank of China (ICBC), it has had to make provision for mounting bad debts.
Speaking at the presentation of the group's results for the six months to end-June, Standard Bank CEO Jacko Maree said the partnership with ICBC has contributed R127m in headline earnings during the period, adding that the partnership won significant deals across several product areas.
An example was being selected as the lead financier for a $1.6bn Botswana power station.
ICBC, the world's largest banking group, holds a 20% stake in Standard Bank and analysts have been watching to see whether meaningful deal flow would emerge from the relationship.
"Together with ICBC we are strongly positioned to capture the major flows between Africa, China, Russia and other emerging markets," Maree said. He added that ICBC had seconded a number of executives to Standard Bank to build on the relationship.
However, the benefit derived from the ICBC connection paled in significance to the R7bn bad debt provision the group put through its balance sheet.
This had risen 58% compared to the previous corresponding period, and followed a full-year bad debt provision of R11bn in 2008.
Impairment losses in personal and business banking rose 35%, which the group attributed to the "lagged effects" of high interest rates, fuel and food prices from 2008.
It said losses in instalment sale and finance leases grew 70%, with the credit loss ratio worsening to 3.6.
Although debts at Standard's credit card division shrank by 27%, impairment charges on corporate lending increased by 353%.
Life insurance subsidiary Liberty Holdings also weighed on the group with a R1.2bn operating loss for the six months. This compared with a profit of R913m during the previous period.
As for Standard's overall performance for the period, normalised headline earnings dropped 27% to 351.3c, in line with its forecast of a 25% to 30% fall.
By Thursday noon Standard Bank was up 0.4% (39c), with the financial index 0.5% higher.
*The writer holds Standard Bank ordinary and preference shares.
- Fin24.com