A LARGE SUM DIS­COV­ERED

Finweek English Edition - - INVESTMENT -

The big four banks have all is­sued their re­sults (FSR is for the six months to end De­cem­ber, the other banks’ re­sults are all for year end­ing De­cem­ber). It’s largely a de­cent set of num­bers, with FSR the leader and Bar­clays Africa Group lag­ging be­hind. But what in­ter­ested me was the Stan­dard Bank* re­sults, with its very mod­est re­turn on eq­uity (RoE) of only 14.1%. The is­sue here is that the more cash you hold that is not ‘work­ing’ and not earn­ing money, the lower a RoE, as the cash sits as eq­uity but makes no real profit. When Stan­dard Bank an­nounced the sale of its Lon­don op­er­a­tions, I com- mented that a spe­cial div­i­dend would be nice, and pulling apart these re­sults the bank has to do some­thing. My rough cal­cu­la­tions show that it could have as much as R15bn in free cash. Part of this is sit­ting in the Tier 1 cap­i­tal ad­e­quacy ra­tio that is at 13.2% and up a full 2% since the pre­vi­ous year. This is more than what is re­quired and, cou­pled with a bunch of cash stuck off­shore and from the Lon­don sale, it has a moun­tain. See­ing as this has not been re­turned to share­hold­ers via a spe­cial div­i­dend, what is the bank plan­ning on buy­ing? Most likely it won’t be a lo­cal deal but a large ac­qui­si­tion some­where in the rest of Africa.

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