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Johannesburg - Standard Bank [JSE:SBK] may have failed to convince analysts that it's able to return to previous earning levels, but it remains the banking stock of choice for many.
On Thursday, Standard posted a 20% decline in annual headline earnings for the period to end-December, vowing to return profitability to the previous year's figures.
Commenting on the results, analysts at investment banking firm Deutsche Bank penned a note to clients, saying the performance was "underwhelming but better than [Standard's] peers".
Deutsche Bank analyst Voyt Krzychylkiewicz told clients he did not believe the bank would achieve management's self-imposed earnings target of equalling 2008 levels. He cited the effects of the stronger rand, lower margins on lending and low demand for credit in the coming year.
Still, BoE Private Clients noted a change in Standard's dividend policy had benefited shareholders.
"Despite a 20% decline in headline earnings, Standard Bank decided to maintain its total dividend distribution at a similar level to that of 2008. The final dividend of 245 cents per share is 27% above that of last year," BoE said.
"With this dividend declaration, Standard Bank broke ranks relative to its peer group. Absa and Nedbank at their recent results decided to cut their dividends, thus maintaining their cover ratios."
However, BoE cautioned Standard's deviation from the traditional dividend policy was not guaranteed to continue. It also cited an anticipated rebound in the earnings contribution from insurance group Liberty Holdings - in which Standard Bank holds a majority share - as a positive for 2010.
Traders at stockbrokerage Barnard Jacobs Mellet advised clients they continued to prefer Standard Bank and FirstRand in the South African-listed banking sector. They added Standard Bank's growth target was ahead of their expectation for 2010.
Shares in Standard Bank were up 1% (107c) to R113.01 in midday trade on Friday. This represents a premium to the one-year price target of R105.00 set by Deutsche Bank.
- Fin24.com
*The author holds ordinary and preference shares in Standard Bank
