Table of Contents
Key Points:
- Standard Bank halts plans to exit its joint venture with ICBC due to the latter’s focus on domestic business.
- The joint venture, established in 2015, has been a point of contention and misaligns with Standard Bank’s African-focused strategy.
- Despite economic challenges in Africa, Standard Bank remains optimistic and plans to expand its operations in East Africa.
Standard Bank Group, the largest lender in Africa led by Sim Tshabalala, has put on hold its plans to sell its stake in a joint venture with the Industrial and Commercial Bank of China (ICBC).
Initially started in 2022, the discussions to exit the UK-based ICBC Standard Bank plc have now stalled. ICBC is refocusing on strengthening its operations within China.
In an interview with Bloomberg Television, Sim Tshabalala, CEO of Standard Bank, discussed the reasons behind the pause. He attributed the delay to the current geopolitical uncertainties. “They’re focusing on driving their business,” he explained. Tshabalala suggested that a more stable global political landscape might allow the discussions to advance.
Joint venture background and financial impact
Standard Bank and ICBC formed the joint venture in 2015. This came when Standard Bank sold a 60 percent stake in its London-based markets division to ICBC, aiming to cater to the increasing demands of Chinese clients for commodities and fixed income products. However, this venture has sometimes frustrated investors because it diverges from Standard Bank’s focus on its African operations.
This misalignment showed in the recent financial results, with the venture contributing to a two-percent decline in Standard Bank’s first-half profit of the year, despite growth in the bank’s operations across Africa.
“That part of the business is not core to our strategy — we are an African institution,” Tshabalala emphasized, highlighting the bank’s commitment to expanding its operations within Africa. He acknowledged the challenges in repatriating profits from the joint venture, given ICBC’s plans priorities.
The bank also faced economic challenges in other African regions, with headline earnings dropping by two percent due to currency volatility in Angola, Malawi, Nigeria, and Zambia. Despite these challenges, Standard Bank remains optimistic, especially regarding the expected stabilization of the Nigerian Naira.
Standard bank move to East Africa
Facing rising interest rates and low consumer and business confidence in South Africa, Standard Bank is now turning its attention to East Africa. “East Africa is closely linked to some of the most dynamic economies in the world, including India, the Gulf, the United States, the EU, and, indeed, China,” Tshabalala stated during an investor presentation. He emphasized the importance of East Africa for the bank’s growth.
The bank has declared an interim dividend of R7.44 per share, an increase of 8 percent from the previous year. This announcement led to a six-percent rise in the bank’s stock in Johannesburg, marking its highest close on record.
