Standard Bank has revised its expectations for South Africa’s economic growth in 2025, lowering its GDP forecast to just 0.9%, down from the 1.7% it projected earlier in March. Despite this downgrade, the bank remains confident in its ability to deliver robust financial results and maintain solid earnings growth.
In its interim financial results for H1 2025, Standard Bank highlighted several factors contributing to the subdued economic outlook:
- Global Market Volatility: Initial fears triggered by U.S. tariff announcements caused significant market instability, although these concerns eased toward the end of the reporting period.
- Domestic Challenges: South Africa’s economic sentiment was dampened by both global uncertainty and local political developments, which eroded business and consumer confidence.
As a result, Standard Bank now expects:
- South Africa’s real GDP growth to reach 0.9% in 2025, improving slightly to 1.3% in 2026.
- These figures are notably lower than the bank’s previous forecasts of 1.7% for 2025 and 2.0% for 2026.
The bank emphasized that this outlook remains highly sensitive to tariff developments, particularly regarding the rate and scope of exemptions.
Other financial institutions have echoed this cautious stance:
- Investec and Efficient Wealth have also revised their forecasts below 1%.
- Nedbank remains slightly more optimistic, projecting exactly 1.0% growth.
- International bodies like the IMF are more upbeat, with the latest World Economic Outlook forecasting 1.0% growth for South Africa in 2025.
Market analysts are still assessing the impact of the 30% U.S. tariff, with early estimates suggesting a 0.2 to 0.3 percentage point drag on GDP—potentially bringing growth closer to 0.7%.
Despite the economic headwinds, inflation has been a bright spot:
- Inflation trended downward in the first half of 2025, remaining well below the South African Reserve Bank’s target range of 3% to 6%.
- This allowed for interest rate cuts totaling 75 basis points, bringing the repo rate to 7.00% by July.
Looking ahead:
- Inflation is expected to stay in the lower half of the target range through 2026.
- Interest rates are likely to remain unchanged for the rest of 2025, with a potential 25 basis point cut in early 2026.
- The Reserve Bank’s preference for inflation closer to 3% adds uncertainty to the rate outlook beyond 2025.
Despite macroeconomic challenges, Standard Bank delivered a strong financial performance in H1 2025:
- Headline earnings rose by 8% to R24 billion.
- Return on Equity (ROE) stood at a healthy 19.1%.
- The bank attributed this to:
- Continued balance sheet growth
- Strong fee and trading revenue
- Effective cost management
- Stable credit charges
Additional financial metrics:
- Credit impairment charges increased modestly by 2% year-on-year.
- Credit loss ratio remained stable at 93 basis points (vs. 92 bps in H1 2024).
- The interim dividend was increased by 10%, with a payout ratio of 56%.
Earnings contributions by segment:
- South African operations: R11.6 billion
- Africa Regions: R9.7 billion
- Offshore businesses: R1.6 billion
Key contributors to Africa Regions’ earnings included: Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda, and Zambia.
Standard Bank reaffirmed its core financial targets for FY 2025:
- Banking revenue growth: Mid-to-high single digits (in ZAR)
- Cost-to-income ratio: Flat to slightly lower year-on-year
- Group ROE: Within the target range of 17% to 20%
The bank expects headline earnings per share to grow by 8% to 12%, underscoring its confidence in navigating the current economic landscape.
| Financial indicator (Rm) | Change (%) | 1H25 | 1H24 | FY24 |
|---|---|---|---|---|
| Headline earnings | 8% | 23 785 | 22 006 | 44 503 |
| Total net income | 7% | 94 789 | 88 373 | 181 729 |
| Basic earnings per ordinary share (cents) | 10% | 1 458.0 | 1 328.7 | 2 691.0 |
| Dividend per ordinary share (cents) | 10% | 817 | 744 | 1 507 |
| ROE (%) | – | 19.1% | 18.5% | 18.5% |
