Standard eyes pools of value
• We don’t want to be the shop; we want to be the mall, says CEO Sim Tshabalala
Standard Bank says it has identified “pools of value” worth a collective $1-trillion that it wants to tap into as part of a broader strategic shift aimed at growing its revenue 7%-9% a year until 2025.
Standard Bank says that it has identified “pools of value” worth a collective $1-trillion that it wants to tap into as part of a broader strategic shift aimed at growing its revenue 7%-9% a year until 2025.
That ambitious revenue target forms part of a strategic overhaul — the Standard Bank Group 2025 Ambition, which includes a reorganisation of its internal business units — as it seeks to become an integrated financial services destination for clients across Africa.
The shift comes while profit margins in financial services are shrinking due to rising competition, a factor that has seen the 158-year-old bank lose retail banking market share to newer entrants such as Capitec, which is now SA’s biggest bank by client numbers.
Standard Bank’ s rejig includes significant changes to its operating structure, with the internal business units organised into consumer and highnet-worth clients; business and commercial clients; and wholesale clients.
The reorganisation is meant to get its business units to work together more closely as it transitions to what it calls a “platform” bank, one that will make greater use of digital tools to engage with clients as they transact, socialise and invest.
To achieve that ambition it will need to integrate an array of capabilities that span everyday retail banking and insurance to cross-border trade finance and investment banking while remaining relevant to clients ranging from low-income consumers with simple financial needs to large multinationals.
CEO Sim Tshabalala says the bank’s scale gives it a competitive edge. It can use its deep relationships in the 20 African markets in which it operates to offer value-added services to its clients, such as linking importers with exporters and helping smaller clients access global supply chains.
“When you are bringing together different players it is quite different to just selling home loans or asset and vehicle finance,” Tshabalala told Business Day in an interview.
“We don’t want to be the shop; we want to be the mall.”
With competition heating up in the banking industry from traditional rivals and new digital upstarts such as TymeBank and Bank Zero, Tshabalala said the group will struggle to achieve revenue growth without undergoing a strategic shift.
The Covid-19 pandemic has accelerated the trend towards digitisation among clients who are increasingly looking for strategic partnerships rather than places to simply park their money or borrow.
UNSHACKLING
Tshabalala said the group’s planned integration of Liberty, the insurer in which it has a 53.6% stake, will “complete the Standard Bank platform” and allow it to offer a broader suite of services to its clients.
While he was loath to divulge details about the R11bn deal as it is still awaiting shareholder and regulatory approval, he said the integration would help unshackle the two businesses from the “arm’s-length bankassurance agreement”, which he felt was no longer relevant for the future.
“Whether [clients] want to make an investment, they want to insure themselves or they want to buy a home loan, we’ll be able to do that in a seamless and integrated way,” he said in reference to the Liberty deal.
Standard Bank is targeting a 17%-20% return on equity, a measure of the profitability of a business relative to its shareholders’ equity. In its results released last Thursday, the bank had a return on equity of 12.9% in the six months to end-June.
Other financial targets include keeping its credit loss ratio within the group’s throughthe-cycle range of 70-100 basis points while maintaining a common equity tier one capital adequacy ratio of more than 11%.
“These targets are challenging but realistic,” said Tshabalala.