Standard Bank bids farewell to its London operations
I've noticed over the years that corporate strategies tend to come and go – financial fashions, as it were, change. Consider, for example, the expansionary appetites of South Africa's banks. Standard Bank has just divested itself of the bulk of its London business, selling a 60% stake in its London-based global markets business to Chinese bank ICBC. This marks the end of the blue bank's solo London adventure, which has underperformed over the years despite offering the group important synergies. It also marks the end of a period in which South African banks were feeling adventurous and heading out into the world. As interest rates rise and domestic banks feel some tightness in their domestic revenues thanks to an uptick in bad debts, banks are feeling a little more cautious and stay-at-home. It's likely that Standard Bank's 60/40 deal with ICBC is a model of the kind of deals we'll be seeing in the immediate future, until domestic credit markets stabilise and growth picks up. – FD
ALEC HOGG: Well, Standard Bank held a meeting of general shareholders this morning to approve the R8bn sale of 60 percent of its London operation. It got the thumbs-up on all counts. Atlantic Leaf is a Mauritius-based property firm, which expects to list on the JSE. We'll cover those two stories and more with Izan de Bruin, who is Chief Executive of Xenium Financial Managers. Izan, it's nice to have you in the studio. Let's just kick off with that Standard Bank story because it's been going on for quite some time, not surprisingly. It's selling off the last of its major international operations, the London office – R8bn or 60 percent of it – to a big shareholder, ICBC. That's gone ahead. I guess it's quite a big deal for this going into the long term, even though relative to Standard Bank's 220bn market cap, R8bn is really not that big.
IZAN DE BRUIN: Yes, it's not a very big deal from that point of view, but I think it's good from the perspective that the London operation of Standard Bank has not performed to what it should have for Standard Bank in some time. To sell it, or get rid of it is a good thing. It improves the cash balance on this side, and their senior shareholder/big shareholder probably has better abilities to run that, and from quite a different angle as the probably approach the operation there.
ALEC HOGG: It's the first Chinese bank to get a full banking license in the U.K., so it's probably not going to happen overnight. You can be sure that the British authorities are going to make sure everything has been put in place for the next Chinese bank that might want to come.
IZAN DE BRUIN: Yes, I'm pretty sure of that, but I think it's a good thing. We also know that London wants to open a clearing house, so this falls into place quite nicely for them and I think that could have also – right at the end – pushed the last bit of strategic decision to take that over.
ALEC HOGG: It's a nice story for Standard Bank. The other one we mentioned in the introduction…this Mauritius-based property company listing on the JSE. That's interesting to see that other African countries are now starting to provide listings for the JSE.
IZAN DE BRUIN: Yes, I think it's really great. I think we've been hoping for a lot more of that for a long time and it hasn't come. Now, it's starting to happen, which is really great because there is still huge capital available in South Africa. It's quite interesting how we see some of our larger investors from the PIC's to the Eskom Pension Funds. They're all talking about how they're starting to invest into Africa, so it's the cross-pollination, which is really good, I believe, for the longer term.
GUGULETHU MFUPHI: Izan, turning our attention to the resources space, Kumba Iron Ore today mentioning that they're looking to change their strategy and enhance it perhaps. Is that a good move, given the activity in that particular sector?
IZAN DE BRUIN: It is a good move. Whenever any company can enhance and improve, that is always a good thing. They have been lagging for a little while on the market – you can see it in the share price for the last couple of month or so – something is not optimal. I think that's why they're addressing that…to get the optimal performance back.
ALEC HOGG: This story of Impala, which Tshepiso was reading, that they're going to be looking to mechanise aggressively now, I suppose it's no surprise. If you want to have an eight-week or a nine-week strike, the companies are going to react.
IZAN DE BRUIN: I think the important factor is that in the very long term, we're going to see much more of that in mining throughout the world, and in many other things in the world. In the short term, it's negative. 'Where are all these great workers going? What are they going to do? Putting the strike aside for a moment: in the long term, that is the right thing. Human capital can be used for much better things in the longer term, than be mired down in a mine, so the strategic long term is great. The short term…the workers have to see this and see the negativity from their point of view, and I think we see that.
GUGULETHU MFUPHI: AMCU's also planning to extend the strike to other sectors around the industry, for example gold and coal in particular.
IZAN DE BRUIN: I was really hoping that AMCU was going to take a slightly different road at this stage. I think they've been recognised. I think it's okay if an agreement is reached now – shortly. It would be the right thing for the country, for Rustenburg, for the people, for the workers, and for everybody. I think it really is time to get that strike to an end. It should end now and I hope it does.
ALEC HOGG: I remember talking to Terence Goodlace from Impala not too long ago, and he was quite hopeful that the AMCU guys would have a more open-minded approach to and that they could work more closely together. That clearly hasn't happened, but somebody who has a very open mind, is Mark Lamberti. I don't know if you picked up that he bought some more shares today from Imperial – just under R2m worth of stock. He obviously likes the new company he's going into. The share price is up today, too.
IZAN DE BRUIN: It's quite interesting, Alec. I was looking at the share price yesterday, and thinking 'everything is starting to recover. This one has fallen dramatically. Why is this one also not starting to recover' – just off the cuff, and there it starts. I'm sure it was not because of his trade that it happened.
ALEC HOGG: Well, I'm not saying…
IZAN DE BRUIN: It could of course, assist.
ALEC HOGG: He's 63. He's a great entrepreneur. He's taken the wheel there now. He buys shares. Why shouldn't we?
IZAN DE BRUIN: Oh no, I don't think it's because of his purchase. I think him being there, assists, but his purchase is also a good indication that he puts his money where his mouth is – yes, definitely.
GUGULETHU MFUPHI: Looking at Eskom's Chief Executive who was appointed yesterday – the interim CEO – he has ties with COSATU. It's a bit unusual, wouldn't you say?
IZAN DE BRUIN: Well, that is a bit of a different thing. As far as I read the Eskom scenario, the ship is not running the way it should. It's not optimal and whether this is going to cause it to become more optimal…let's hope so. I'm not 100 percent sure, whether that's going to happen.
ALEC HOGG: It's extraordinary. You have a very complex organisation with huge challenges critical to the economy, and you take a guy who knows pretty much nothing about how it works, and stick him in as the Chairman. You have to shake your head sometimes at the decisions that are made in our country just on the basis of maybe, political expediency/cadre deployment. Is this a cadre, who actually has an electrical or engineering degree? Probably not. How many electrical engineers do we have in South Africa who are skilled and able to do a job like this, even as an interim stage? Thousands and thousands…
IZAN DE BRUIN: Yes, it's the electrical background, but of course, pure and very good management experience I think, is also critical in this scenario. One would hope that there's a bit of that, that could assist in this, but it's not the right way to do things.
ALEC HOGG: Take a bureaucrat and put him in, because if this is a bureaucrat he's [unclear 7:00]. Maybe the contract would be with Basil Reid where they couldn't find a new Chief Executive, so they went and found somebody who used to work there and who had retired, just as a short-term thing – he's given them six months, at least – and brought him in, while they find a replacement.
IZAN DE BRUIN: Yes, I think that was a very positive move there. It's better to take someone that's internal when you have an interim move, because there's not enough time to learn, get the new skills, and get to know everything in a short space of time before you leave. With a longer-term appointment of course, one can get outsiders much easier, so I think that was a great thing to do.
GUGULETHU MFUPHI: This almost reminds me of the term we learned the other day – Drift – where you subconsciously move away to a position of mediocrity.
ALEC HOGG: It doesn't matter. Let's just put anybody in there because 'so what if the lights go out…we'll then address the issue'. We're too good for this. We're South Africans. We've done so much. We even beat the Netherlands at cricket the other night. Why do we allow ourselves to continuously accept these crazy types of appointments?
IZAN DE BRUIN: I actually saw the show the other day. I was sitting in the office, watching Russell about that, and I agree. I have the same thing sometimes, when I'm trying to get here in the mornings. There are a couple of specific corners where the taxis just overtake. It takes me at least another five to ten minutes longer to get here. Those things are not right…it's wrong, and we as South Africans need to lift our game up. Our leaders should take responsibility. We should remember that we are responsible for the longer term of the country, and everybody who is going to live here. I think we're getting to a point where that is starting to become more important compared to some of the importance that was there previously. This is really becoming the important thing now, to start growing on the future and start building up stronger ethics, stronger morals all around, and from the top right to the bottom.
ALEC HOGG: I was talking to a very senior businessman this morning. We had a breakfast conversation and he said they have a big operation in Nigeria. He said the difference between the way people think in Nigeria and the way people think in South Africa, are at different ends of the spectrum. Nigerians are saying 'okay, we don't have a great government, but let's get on with it. Let's do things'. In South Africa, we say 'we don't have a great government. Let's try to make them better'. Perhaps we should just ignore these guys, make the investments, be more positive, and say 'we can do it'. As Russell was saying, 'there's not a shortage of great people in this country'. There just seems to be a shortage of ideas and implementing ideas, and the good people don't seem to be in the right places.
IZAN DE BRUIN: I agree. I would like to see our leaders taking a stance, being stronger, leading from the front, leading properly, living the right way, and doing the good thing. That is the leader, which I think everybody wants to look up to and I think that is where it has to start, for this country to go forward in a positive way. I really hope that we see that come through.