No mistake, says Standard about disposal of affiliates
STANDARD Bank does not regard the sale of two subsidiaries outside Africa last year as premature, even though it faces low growth on the continent and at home.
Global economic growth, as measured by the IMF, posted a moderate 3.1% rise last year, helped along by a recovery in developed markets such as the US, which is gradually raising interest rates, and others, which are implementing accommodative monetary policy measures.
In sub-Saharan Africa, growth fell sharply to 3.5% last year. The region is Standard Bank’s core market after it shed a controlling stake in Standard Bank plc and sold Brazil’s Banco Standard de Investimentos to Mexican billionaire Carlos Slim’s Grupo Financiero Inbursa in deals that netted R2.8-billion and R262-million respectively.
But joint CEO Ben Kruger feels the disposals were right for the bank. Not even in the US was growth higher than in Africa, he said after the release of the bank’s results on Thursday. “African growth is higher than [that of] the developed world.”
The group reported a 27% surge to R22-billion in headline earnings for the year to December, with OPTIMIST: Standard Bank joint CEO Ben Kruger says growth in Africa beats that in the US growth mainly driven by its corporate and investment banking division, which lifted earnings 59%.
But credit impairment charges in that unit rose 59%, as economic conditions in the rest of Africa — mainly affecting the energy, mining and metals and infrastructure sectors — led clients to default on debts.
Kruger said the mining and oil cycle was bound to turn into positive territory, which would see credit impairments in the unit returning to normal. “We’re not that directly exposed to oil and metals. Previously, the London business was heavily exposed.”
Kagiso Asset Management analyst Jihad Jhaveri agreed. “The London business is a trading business specialising in commodities. The current commodity downturn and emerging market currency volatility have actually worsened operating conditions for this entity.”
The Institute of International Finance, a global financial industry association, said in January that emerging markets, which include South Africa, experienced $735-billion (about R11.46-trillion) in net outflows last year, spurred by the plunge in commodities prices and worries over Chinese growth. This had risen from $111-billion the year before, and reversed 25 years of net inflows peaking in 2007 just before the global financial meltdown. The institute expects emerging markets to remain under pressure this year.