The recent disposals are part of Standard Bank's strategy to re-scope its overseas operations to sharpen its focus on growing its franchise in Africa.
Speaking at the interim results presentation yesterday, 11 August 2011, Standard Bank Group CEO Jacko Maree said this is part of Standard Bank's intention over time to halve the amount of capital utilised in operations outside Africa from US$3 billion.
Standard Bank and its Argentinean partners last week signed an agreement with the Industrial and Commercial Bank of China (ICBC) for the sale of an 80% stake in Standard Bank Argentina (SBA) for US$600 million. The sale of the SBA stake follows the announcement earlier this year of the sale of its 36% stake in Troika Dialog in Russia, and the total proceeds from both disposals is expected to be US$750 million.
Maree said a tighter focus with robust productivity assessments of each overseas business line should further reduce capital demand outside of Africa, offsetting the increased capital demand the group expects to originate from its focus on African and natural resources businesses.
"Our refined strategic focus is on serving the needs of our customers through first-class, on-the-ground, operations in chosen countries in Africa. We will also connect other selected emerging markets to Africa and to each other, applying our sector expertise, particularly in natural resources, globally. We have continued to invest tactically in these businesses in chosen countries," he said.
"In some African markets Standard Bank has proved that it can grow sustainable universal banking platforms, with strong Personal & Business Banking and Corporate & Investment Banking franchises and the bank is earning good returns. In other markets Standard Bank is just beginning this journey and the returns in these markets dilute the overall performance from the rest of Africa".
Maree said the removal of investments in Russia and Argentina will further strengthen the group's capital position and meet increasing capital requirements from its South African and Africa businesses. He also said there will be greater clarity on uses of potential surplus capital when the group announces its full year results in March 2012, by which time the proceeds of these transactions may have been received.
He said the largest portion of capital outside Africa is now in Standard Bank's subsidiary bank in London and the strategic requirement for a London base has been re-evaluated.
"We remain convinced that the London presence, as a legal entity with a banking licence, is critical for the growth of our Corporate & Investment Banking franchise. However, the capital base is too big and the costs are too high. We aim, therefore, to make better use of the prudential limit for foreign currency lending on SBSA's balance sheet for transactions in our core sectors which will reduce the capital demand in London, but increase the capital requirements in South Africa and Africa," said Maree.
