Bloomberg News

Standard Bank to Use Troika Proceeds for African Purchases

June 23, 2011

(Updates with CEO comment starting in second paragraph, analyst comment in fourth.)

June 23 (Bloomberg) -- Standard Bank Group Ltd., Africa’s largest lender, said it will use the profit from the sale of its Troika Dialog stake to make acquisitions in Africa, where it has identified Nigeria, Angola, Ghana and Kenya for expansion.

“These are the big high-growth markets where we’re still relatively small,” Chief Executive Officer Jacko Maree said by phone today. “If you’re refocusing on Africa, you have to question whether you can do anything in these markets just by building new branches and opening accounts.”

With operations in 17 African countries, Johannesburg-based Standard Bank is concentrating on the continent and its 1 billion people to benefit from increased trade and investment- banking transactions with emerging-markets. The lender last year cut 1,641 jobs in Johannesburg and London to offset lower earnings as lending growth slowed and impairment charges rose.

The renewed focus on acquisitions is “symptomatic of the tough revenue environment” for South African banks, Khaya Gobodo, head of equities at Afena Capital, said. “It appears that the way to find growth is to buy it.”

Standard Bank is moving its Corporate and Investment Banking unit to Johannesburg from London and appointed David Munro, currently the head of its investment banking business, as the division’s chief executive officer, the lender said in a statement today. Rob Leith, the London-based CEO of CIB since 2008, will take a new role as head of strategic expansion.

‘Worrying About Opportunities’

“We have to make sure there is at least a small team that is worrying about opportunities; it’s hard to do that just part time,” Maree said. “The obvious markets where we would be keen to look would be places where we are smaller than we would like to be.”

The proceeds from the $372 million sale of its 36 percent stake in Russia’s Troika Dialog were expected by the end of the year. Standard Bank paid $300 million for the Moscow-based brokerage in 2009 and it will receive a further payment from any increase in Troika’s value at the end of 2013.

In addition to the proceeds from Troika, Standard Bank has an estimated 3 billion rand ($437 million) in surplus cash in its South African operations, according to Faizal Moola, a banking analyst at Avior Research Ltd. in Cape Town. Industrial & Commercial Bank of China Ltd., which owns 20 percent of Standard Bank, agreed to buy Standard Bank Argentina for as much as $800 million, El Cronista newspaper said on June 17, citing people it didn’t identify. Maree declined to comment on the report.

No Compelling Deals

Finance Director Simon Ridley said yesterday excess capital that could not be used to grow the bank’s South Africa and rest- of-Africa franchise would be returned to shareholders once the bank’s capital requirements had been finalized under new Basel regulations.

“In general, I’m a much bigger proponent of returning money to shareholders unless you find something absolutely compelling,” Afena Capital’s Gobodo said. “It’s not easy to find compelling deals out there.”

Leith’s appointment was a sign that Standard Bank was taking its revised strategy to the next level, he said.

“If they have decided that Africa is going to be important, then scale is going to be important,” Gobodo said. “You’re going to have to buy things to build scale.”

--Editors: Vernon Wessels, Emily Bowers.

To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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