A LARGE SUM DISCOVERED
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.