Africa: Standard Chartered's Layfield makes her case, in a new era
Emerging market lender's regional CEO targets Nigeria, Angola; Sets hopes on electronic channels
Diana Layfield’s move within Standard Chartered, two years ago, when she became CEO for Africa, looks more favourable than ever for the banker. Today, particularly as Asian markets become more lethargic, African markets stand out, offering relatively untapped growth.
Layfield benefits from a franchise dating back to colonial times in 13 African countries. But compared with some rivals both in and outside Africa, her firm has made less headline-grabbing moves on the continent over the past five to 10 years.
With some markets in Asia – another core region for the emerging markets-focused lender – looking vulnerable to financial outflows amid the prospect of rising US rates, will she be able to argue for greater dedication of group resources to Africa?
"Africa is going to outperform other emerging markets in terms of growth opportunities for banks over coming years," she says. Thanks to better macroeconomic policies, even a change in the commodities price cycle is not as bad for Africa as it would have been in previous decades, she argues.
|Diana Layfield, CEO for Africa, Standard Chartered|
Despite what Layfield sees as good markets in Asia, competing for attention, she says her ability to capture what she calls "a healthy part of group investment" has already demonstrated, to an extent, how Standard Chartered recognizes the opportunity on the continent.
One example she gives is the entry to Portuguese-speaking countries. The bank hopes to launch a wholesale business in Mozambique in 2014 after applying for a licence. In March, it announced a banking joint venture with a local insurer in Angola.
Layfield says Standard Chartered has built a competition-beating franchise in Africa’s financial markets in recent years, and is still hiring Africa-focused staff in such areas as derivatives trading, in sovereign debt capital markets, project finance, and sector-focused corporate finance.
Overall, the target, announced last year, is to more than double profit and revenues in Africa between 2012 and 2017, and to post a higher return on assets than group average – things Layfield says she is on track to do. She also cites branch-building: 100 new branches in Africa by 2017.
Yet Layfield admits she and her colleagues often wonder if a bolder approach, perhaps via acquisitions, might be more appropriate. "We ask ourselves that question daily," she says – although she adds that it is too early to tell which bank has followed the best strategy.
One purchase the bank has not snapped up is South Africa’s fourth-largest lender, Nedbank. HSBC did due diligence on Nedbank in 2010. Although it pulled out of an acquisition, Standard Chartered was also mentioned as a potential buyer at the time.
Standard Chartered’s build-out on the continent can look tame compared with such lenders as Togo-based Ecobank, which was present in a similar number of African countries to Standard Chartered in 2007 and is now in more than twice as many.
Nigeria’s second-biggest bank, UBA, has increased the number of African countries in which it operates from two to 19 since 2008. Although that expansion has proved costly, other Nigerian banks are now expanding on the continent, including outside west Africa.
Among the South African firms, Standard Bank has bolstered regional operations since the middle of the last decade, for example via mergers with local players, in Nigeria and Kenya. It is a step ahead in a core and difficult market – Angola – having launched full banking operations in Luanda in 2008.
Meanwhile, Barclays – the other London-based group whose Africa franchise dates to colonial times – acquired South Africa’s third-biggest bank, Absa, in a $4.5 billion deal in 2005. Barclays merged its operations in the rest of Africa with Absa this year, after increasing its stake in Absa from 55.5% to 62.3%.
"It is hard to compete in retail in South Africa if you’re not one of the big-four banks, but we can compete very strongly in wholesale, particularly given the international expansion of South African corporates, including into the rest of Africa," says Layfield.
Of the 100 branches Layfield is building in Africa, 37 will be in Nigeria. Ecobank, on the other hand, gained 400-odd branches in Nigeria from its 2011 purchase of Oceanic Bank. Standard Bank has also built more than 150 branches in Nigeria since 2007.
Layfield reckons her bank’s strategy in Africa has outperformed from a profitability perspective. Indeed, Standard Bank’s retail franchise in the rest of Africa has lost money during its build-out. Moreover, Barclays’ merger with Absa has been protracted, and Ecobank’s expansion has not been without glitches.
In retail, Layfield says electronic and mobile banking are a key investment area. She says cheaper smart phones might change retail-banking dynamics further, in a continent that has taken eagerly to technology such as mobile money-transfer service M-Pesa.
"It’s about building multiple channels, not just throwing up branches," says Layfield. She gives the example of electronic branches the bank has started opening in Kenya, with the first in a shopping mall: services such as deposits and transfers, without staff costs.
"I think it’s extremely unlikely that in 20 years’ time we’ll regret not having built thousands of new branches across Africa," she says.