Plans to start a prime brokerage

STANDARD Bank Group, Africa’s largest lender by assets, plans to start a prime brokerage next month to benefit from regulatory changes in South Africa it expects will boost the hedge fund industry. The Johannesburg-based company anticipates having five hedge fund clients by the end of the year, said Andy Hall, head of global markets at Standard Bank. The lender will compete against Peregrine Holdings and units of FirstRand, Deutsche Bank, Investec and Barclays Africa Group. “There’s still a big bite to eat in the significant growth we expect in hedge funds,” he said in an interview on Tuesday in Johannesburg. The lender is also being encouraged by guidelines recommending asset managers hire more than one prime broker, Hall said. The business forms a small but important part of Standard Bank’s efforts to improve cost efficiencies and add clients within its global markets unit, accounting for about 20 percent of the lender’s earnings before one-time items in 2016. Standard Bank is counting on using its estimated 60 percent share of the South African securitieslending market to bolster the prime brokerage, even as lenders including Credit Suisse Group retreat from the business globally because of profitability concerns. Nedbank Group, a unit of London-based insurer Old Mutual, scrapped plans to start a prime brokerage in 2015. Prime brokers typically conduct equity trades, cover margins and lend shares used in betting whether a stock price will fall or gain. – Bloomberg