Standard Bank Puts Plans to Exit ICBC Joint Venture on Ice
Standard Bank Group Ltd. has paused its two-year-old talks with Industrial and Commercial Bank of China Ltd. to exit the two banks’ UK-based joint venture.
Africa’s largest lender began discussing offloading its stake in ICBC Standard Bank Plc to the Chinese banking behemoth in 2022 but those talks have faltered as ICBC focuses on its domestic business, Standard Bank Chief Executive Officer Sim Tshabalala said in an interview with Bloomberg Television.
“They’re focused on driving their business,” Tshabalala said. “When the geopolitics of the world settle, we may then be in a position to have more detailed and direct conversation with our partners in respect of that sale. But, in the short term, it’s not feasible to think that we’d be able to offload it.”
The joint venture was created in 2015, when Standard Bank sold a 60% stake in its London-based markets business to ICBC to serve the growing demands of Chinese clients had for commodities, fixed income and other products. Investors have, at times, grown frustrated by the venture because it doesn’t align with the Johannesburg-based bank’s focus on growing its operations on the continent of Africa.
In the first half of this year, results from the joint venture contributed to a 2% decline in the bank’s first-half profit, overshadowing growth in the bank’s African businesses. Firmwide net income declined to 21.5 billion rand ($1.2 billion) in the period, which was in line with the median estimate in a Bloomberg survey.
“That part of the business is not core to our strategy — we’re an African institution,” Tshabalala said. Still, he said, “we would want to repatriate as much of the profits from the business to Africa, but we also accept that that is probably not feasible in the medium to long term, given the way the partners — ICBC — think of the business.”
Rest of Africa Business
The bank’s so-called rest-of-Africa operations saw headline earnings climb 35%, with Angola, Ghana Kenya, Mauritius, Mozambique, Nigeria, Uganda and Zambia ranking as its top eight contributors. The lender is navigating high interest rates in all of its markets, with weak consumer and business confidence weighing on customers in its home market of South Africa.
Standard Bank is turning its attention to the East Africa as it seeks to grow its footprint across the continent in the medium term, Tshabalala said.
East Africa is “closely linked to some of the most dynamic economies in the world, including India and the Gulf, the United States, the EU and, in fact, China,” Tshabalala said at an earlier investor presentation. “We are currently pursuing all available growth opportunities in East Africa.”
The lender is also betting on improved performance from its units in Nigeria and Angola, which were impacted by currency devaluations.
“The currency weakness — especially in Nigeria — is a bit overdone and that over time we should see the Naira pulling back, which will then stabilize the performance of those businesses,” Kenny Fihla, the CEO of Standard Bank’s corporate and investment banking unit, said at the earlier presentation.
Standard Bank proposed an interim dividend of 7.44 rand a share, 8% more than a year earlier. The bank’s stock extended gains for a third day, climbing as much as 6.4% by 2:40 p.m. in Johannesburg, to touch its highest intraday level on record.
