In many African countries, Standard Bank is not as large as it would like to be. But it has a physical presence in 20 African countries and is already by far the biggest pan-African group in terms of its scale in the main sub-Saharan markets, the size of its balance sheet and its absolute profit.
The result was evident in 2022, with record group headline earnings of R34.2 billion ($1.85 billion), up 37% on 2021, and a similar year-on-year increase reported for the first quarter of 2023.
The group’s lead by balance-sheet size reflects its home in South Africa, the continent’s most developed banking market. Nevertheless, in Nigeria, for example, no other international lender comes close to its scale in the country.
Although Standard Bank’s share of Nigerian retail banking is in the low single digits, local subsidiary Stanbic IBTC’s 2022 return on equity of 20.4% beat the largest incumbent Nigerian banks. That is thanks to a big position in Nigeria in corporate and investment banking, as well as in asset management and pensions – the latter being businesses that some of those big Nigerian banking groups have recently started to focus on.
Today, Standard Bank is building on earlier moves to expand across Africa and it is benefiting from sticking to a strategy that sees the rest of Africa as its most promising longer-term growth opportunity, despite ups and downs.
As the banking environment gets tougher due to higher global interest rates, Standard Bank will be on the lookout for new opportunities, particularly in overbanked markets outside South Africa. It has a chance to take advantage of its relatively strong balance sheet; much like JPMorgan has done in the US.
“Fortune favours the big battalions, as you’re seeing now around the world,” says Standard Bank group chief executive Sim Tshabalala.
Nevertheless, he is adamant that any acquisition must not push the group away from its medium-term profitability targets.
“Our tolerance for risk and for overpaying is not high,” he says.
He adds that the group’s 16.4% return on equity last year means it is on the way to reach its 2025 targets of between 17% and 20%.
Our competitive advantage is our ability to service people throughout the continent, as they move goods, services, products, ideas, capital and money between the rest of the world and intra-Africa
Sim Tshabalala
Strong net income growth recently has come despite a big hit to its income statement in Ghana, due to that country’s sovereign debt restructuring. With further sovereign risks ahead, notably in Kenya, the bank is not complacent, although it should be better able to digest events like the Ghana restructuring than its smaller and less diversified competitors.
There remains much to do, whether it is building up scale in bigger African countries or pushing forward with its IT transformation. But it is also clear that the rest of Africa will continue to be Standard Bank’s fastest growing business contributor.
“Our competitive advantage is our ability to service people throughout the continent, as they move goods, services, products, ideas, capital and money between the rest of the world and intra-Africa,” says Tshabalala. “There’s no one else that can do that to the extent that we can because of our size on the continent and the installations we’ve got.”
