Standard Bank Group Limited (JSE: SBK) is struggling to gain traction after a disappointing earnings report on Thursday. The share price tumbled 6.8%, reflecting weaker-than-expected profits despite a 27% year-on-year jump. This decline comes amidst a challenging economic environment in South Africa, characterised by high inflation and rising interest rates.
While the group boasts a robust and growing African franchise and a successful digital banking transition (2.8 billion digital transactions in FY23), these positive developments were overshadowed by concerns about credit impairments. Credit impairment charges surged by 22% to R16.3 billion, with expectations for them to peak in the first half of 2024. This suggests that client strain, particularly in personal and private banking, is likely to persist in the near term.
Despite the headwinds, Standard Bank remains optimistic about 2024. The group anticipates a more favourable economic landscape with potentially softer inflation and easing interest rates. They project low-to-mid single-digit growth in net interest income and mid-single-digit growth in fees and commissions. The bank’s commitment to sustainable finance (mobilising over R50 billion in 2023) is also a commendable step.
Technical
The technical outlook for Standard Bank is currently uncertain. The share price is trading flat near the 38.20% Fibonacci retracement level (18,541 cents) following a sharp 6.8% decline on Thursday. This decline resulted in the price falling below all three key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)], indicating a short-term bearish bias. The downward slope of the 50-SMA reinforces this bearish sentiment.
With the price action finding support at the 38.20% Fibonacci retracement level, a sustained break below this level could expose the 50.00% Fibonacci retracement level (17,812 cents) as the initial area of support. Further downside pressure on significant volume could bring the 61.80% Fibonacci retracement level (17,083 cents) into play.
However, the oversold RSI (30.05) suggests a potential short-term bounce. If the bulls can push the price above the 200-SMA (red line), they could encounter initial resistance at the 23.60% Fibonacci retracement level (19,442 cents). A decisive break above this resistance level on significant volume would open the door for a potential retest of the five-year high of 20,900 cents.
Summary
Standard Bank’s post-earnings price action reflects investor uncertainty. The group’s long-term prospects seem promising, but near-term headwinds persist. Technically, the stock is hovering near a support zone. A break below the 38.20% Fibonacci level could trigger further downside, while a break above the 200-SMA could lead to a short-term rally.
Sources: TradingView, Business Tech, Reuters, MoneyWeb, News24, Bloomberg, Simply Wall Street.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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