Business Day

Company Comment:

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It might be too much to hope that Standard Bank’s annual executive salary bill narrows dramatical­ly with the departure of Ben Kruger from the joint CEO position.

Kruger’s 2016 salary, benefits, bonus and performanc­e rewards bill was R44.5m in 2016, as was that of his co-CEO, Sim Tshabalala.

In fact, since deeming it necessary to appoint two CEOs in 2013, following the departure of Jacko Maree, Standard has lavished a truly colossal R320m, give or take a few cents, on its two top chiefs.

Hardly “selfless leadership” for which the bank is now lauding Kruger.

Also, that “good momentum” that Standard says it’s achieved in its “refreshed strategy” does, hopefully, not include backpedall­ing from operations abroad, the clean-ups from ATM heists and the lessons learnt from Chinese metal financing losses. Standard Bank argues that its succession process, in which Tshabalala finally becomes the reigning king, was “carefully managed” although at the time of establishi­ng a joint CEO structure it wasn’t clear whether the move would be a temporary one.

The bank has described the joint CEO structure as a “resounding success”.

Shareholde­rs, however, may beg to differ. Unlike the top two execs, whose pay packages essentiall­y doubled between 2012 and 2013 alone, your return in Standard Bank, excluding dividends, between March 2013 (when Kruger and Tshabalala were appointed) and March 1 2017 was all of 24%.

In fact, it’s hard not to sympathise with those who regard SA’s banks as the face of corporate greed, not least because steering a mammoth supertanke­r with its own momentum, built up over years, supported by layers of middle management, requires little more than a light touch at the tiller.

After the JSE all share crossed the 56,000 level in early August, techni- cal analysis suggested some consolidat­ion before a breakout from these levels was likely.

The all share dipped to around 55,000 last week, but again this week, it rose above 56,000, with industrial­s, banks and property recording gains.

How likely is it that this confidence will continue?

Based on recent results from Spur, FirstRand and Sanlam, economic conditions remain challengin­g so, don’t expect fireworks from stocks with large exposures to the local economy. The rand has been surprising­ly strong against the dollar in recent trade. However, in a generally weaker dollar environmen­t, this strength may not be sustained over the medium to longer term, with analysts saying the greenback is oversold.

That means rand hedge stocks and other offshore groups may be more beneficial for those investors hoping to benefit from a weakening rand. But this relies significan­tly on the performanc­e of global markets and currencies. And therein lies the rub. US markets are trading at high valuations, with any possible future gains heavily dependent on macroecono­mic issues. The gains in global markets in 2017, therefore, rest on future happenings with a lot of good news already priced in.

While volatility remains low, the biggest problem could be complacenc­y among investors that the good times will continue forever. Caution is needed and a preference for market diversific­ation as markets remain carefully poised.

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