Awards for Excellence 2020
|
|
At a time of global economic retrenchment, dollar volatility, slowing trade flows and border closures, Africa needs deeper localization of markets and financing. Standard Bank’s expertise in these fields makes it the clear choice for best investment bank in Africa this year.
Answering growing demand for local currency financing, the bank launched a multicurrency facility (MCF) in 2019; it is the bank’s fastest growing product and the first product of its kind in Africa.
“We’re seeing a growing desire for local-currency financing,” says head of investment banking in the Africa region, Anne Aliker. “The old reservation about interest-rate differentials between dollars and local currency is really starting to hurt clients as currencies depreciate. So concerns over convertibility and transferability have been highlighted by some clients.”
In response to these concerns at Old Mutual Emerging Markets Proprietary Ltd, Standard Bank structured an MCF that provided the client with access to local in-country liquidity in multiple currencies. This means that corporate treasurers can fund locally in one transaction instead of multiple transactions in different jurisdictions.
|
|
|
Anne Aliker |
Localization was a core theme even before the Covid-19 crisis accelerated the need to improve domestic capacity and the bank is seeing demand from local regulators to move into local currencies and increase local-market listings.
“The theme of localization is about building local capacity and talent, and importantly the scale of investment in local currency is rising significantly,” says Bill Blackie, group head of investment banking.
In 2019, Standard Bank participated in many of the largest and most transformative deals in debt and equity financing, in both local-currency and latterly dollar transactions – which historically would have been led by the bulge-bracket international banks.
Key transactions included the N1.8 billion ($5.1 billion) listing of MTN Nigeria on the premium board of the Nigerian Stock Exchange (NSE). The deal was the second largest in the history of the NSE.
It also advised on the MK27.9 billion ($37.8 million) IPO of Airtel Malawi on the Malawi Stock Exchange.
Diversification
Diversification of shareholdings will become a bigger theme as companies look to embed their businesses in the domestic markets. This is particularly true in the telecoms sector, Standard Bank says.
It has executed a South African rand debt funding solution for Telkom SA, which required long-term financing to source mobile infrastructure equipment from Huawei. Usually seven years is the maximum tenor for corporate lending, but Standard Bank worked with Sinosure to provide 10-year cover – the first long-term cover in South African rand from the export credit agency.
In addition to its local-market capabilities, the bank has maintained a strong presence in the dollarized markets. Among others, it arranged a $94 million facility for Oando Wings Development, which was one of the largest real estate transactions in west Africa.
Standard Bank has a direct presence in 20 countries across Africa and so can access funding for corporates across the continent. Many firms are actively trying to build themselves into key regional players, says Blackie.
“We’re seeing more regional need, more country to country need,” he says. “Historically trade and financing went either to South Africa or to Europe and the US, and was funded primarily in dollars or euros. Local currency funding is by far the biggest and fastest-selling need we are servicing.”
Target
Domestic African companies have been hard hit by the Covid-19 pandemic and without the level of support offered by central banks in European and US markets, the role of domestic banks in supporting the economy is even more important.
Standard Bank has run three to four credit committees each day and provided support to each corporate that needs it and is now looking at the next wave of support – equity financing and substantive business restructuring.
At the end of 2019, the group reached its target of matching its South African investment banking revenues with its ex-South Africa business, something that Blackie says was unimaginable four or five years ago.
Corporate and investment bank headline earnings rose 5% to R11.8 billion ($687 million) in the year to December 2019, with a return on equity of 18.1% and a cost-to-income ratio of 53.7%.
Global markets saw a 15% increase in headline earnings to R4.9 billion from R4.3 billion, investment banking earnings were up 12% at R3.9 billion from R3.5 billion, while transaction banking earnings were down 13% to R3 billion from R3.5 billion.
