UPDATE 2-Standard Bank FY earnings up, warns on China, tapering

Thu Mar 6, 2014 11:03am EST

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* Full year earnings up 14 pct, boosted by lending

* Rest of Africa contributes 26 pct of income

* Shares rise 1 pct (Adds CEO, analyst)

By Helen Nyambura-Mwaura

JOHANNESBURG, March 6 (Reuters) - Standard Bank, Africa's largest lender by assets, reported a 14 percent rise in full-year earnings on Thursday but flagged risks including the rand's weakness and ebbing Chinese demand for the continent's exports.

The bank, which is 20 percent owned by Industrial and Commercial Bank of China (ICBC), has hived off most of its businesses outside Africa and is now positioning itself as a full-service gateway to the continent.

It said lending income strengthened. Africa, outside Standard's mainstay market of South Africa, contributed 26 percent to total income last year, from 17 percent in 2010.

"The storm clouds are really related to China and also (U.S. Federal Reserve) tapering, and the fact that emerging market currencies get hit as a consequence," Co-Chief Executive Sim Shabalala told Reuters.

The South African rand lost nearly a quarter of its value in 2013 as investors sold the high-yielding emerging markets assets they had bought with the cheap money pumped out by the Fed. Weaker Chinese demand for African oil and metals exports poses a risk to economic growth on the continent.

Last year, Standard Bank set up representative offices in Ethiopia, a huge market with limited banking services, and in Ivory Coast to target francophone nations on the continent.

Excluding South Africa, the region's earnings grew by 44 percent although losses at the retail bank widened to 361 million rand ($33.7 million).

"What a lot of investors will be excited about will be the solid growth in that African business outside South Africa," said Nic Norman-Smith, chief investment officer at Lentus Asset Management.

"They have been spending a lot of time and money and building up their African presence and hopefully that will bear fruit in the years to come."

Shabalala put the African retail bank's losses down to expansion costs and bad debts in a few countries. Credit impairments in its African operations outside South Africa rose nearly 14 percent to 1.3 billion rand.

LENDING BOOST

The lender is selling a 60 percent stake in its London-based global markets unit to China's ICBC for $765 million, the latest sale in its strategy to focus on fast growing sub-Saharan economies.

Shabalala declined to say what the bank would spend the money on once it was received.

Standard Bank said headline earnings per share totalled 1,064.9 cents for the period ended in December, from 935 cents last year. Headline EPS, the benchmark profit measure in South Africa, excludes certain one-time items.

Net interest income, a measure of earnings from lending, increased by 15 percent to 39 billion rand ($3.64 billion). Total credit impairments, or bad debt charges, rose 5 percent to 9.2 billion rand.

Non-interest income, which includes deal and advisory fees, was up 6 percent 34.3 billion rand.

Standard's shares finished up 1.3 percent at 126.87 rand, outperforming a 0.7 percent rise in Johannesburg's blue-chip Top-40 index.

($1 = 10.7042 South African rand) (Editing by Ruth Pitchford)

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