Standard Bank regains its appetite for African markets

Tshabalala, who has led the pan-African bank since the middle of the last decade, is unambiguous. If the opportunity arises, SBG will not hesitate to expand its presence in some of the continent’s key markets. “If there was an asset at an appropriate price with acceptable risk, we would certainly consider acquiring it,” he told Bloomberg in late October, in reference to Nigeria.

In 2007, SBG had injected $400m to take control of Stanbic IBTC Bank. Kenya and Ethiopia, where the group has a subsidiary and a representative office, respectively, are also in its sights.

Sharp contrast

This information confirms the bank’s ambitions which Yinka Sanni, the managing director for sub-Saharan markets (excluding South Africa), has previously revealed to us. Standard Bank hopes to quickly increase its stake in Stanbic IBTC Bank, from 67.5% to 70%, while waiting for external growth opportunities to open up.

In Kenya, SBG emphasises its development prospects and what Sanni calls “long-term confidence”. In Ethiopia, the South African group is impatiently awaiting the opening of the banking sector to foreign operators. In early October, Prime Minister Abiy Ahmed’s teams had evoked this possibility, within a limit of 30% of commercial banks’ capital.

Outside the domestic market, Nigeria is the fifth largest contributor to the South African group’s headline earnings, behind Angola, Ghana, Kenya and Mozambique.

SBG’s renewed appetite for expansion in Africa stands in stark contrast to the recent downturn of several international banks, which have sold all or part of their African asset portfolios, including France’s BNP Paribas and the UK’s Standard Chartered.

Strong diversification

SBG is Africa’s largest banking group, and reported R113.56bn (€6.28bn) in net banking income in 2021.

Present in 19 sub-Saharan countries, in addition to its domestic market, it has a “leading footprint in sub-Saharan Africa”, Fitch Ratings analysts said in mid-October. They pointed to the “strong diversification of revenues” by sector of activity and by geographical area.

SBG has also performed well in African markets in the first half of the year. Its half-year revenues jumped 26% year-on-year to R26bn, compared to a 10% increase to R38.9bn in South Africa.

Recurring profit in African markets grew +41% to R5.6bn, compared with a +30% improvement to R7.5bn in Africa’s largest economy. The surge was strongest in East Africa (+46%) and West Africa (+45%). The Central and East African region, which did not perform so well, nevertheless posted half-yearly growth of +36% year-on-year.

Return on equity

“Revenue growth was robust, thanks to strong balance sheet growth, rising interest rates, increased foreign exchange flows in West Africa, and improved transaction volumes,” the South African group told investors in August. It also pointed to the recovery in international trade within a post-Covid-19 environment, and double-digit growth in financial market revenues in East Africa.

Despite a significant jump in operating costs in the first half of the year (R1.6bn year-on-year), return on equity rose sharply in the markets to an average of 20.4% in the first half of the year, up from 17.1% a year earlier. That is almost six points higher than the South African market (14.2%).