|  |  | Africa |  | | |
Africa continued to align its retail and wholesale operations with its counterparts in South Africa.
Financial highlights
- Headline earnings in rand up 30%.
- Improved earnings growth despite continued rand strength and declining interest rates.
- Good local currency earnings growth achieved in Uganda, Ghana, Zambia, Kenya, and Mauritius.
- Net interest income has been impacted by declining interest rates resulting in margin pressure in the Common Monetary Area operations as well as Zambia, Malawi, Tanzania, Ghana and Zimbabwe.
- Increased fee and commission income was largely driven by retail initiatives which resulted in increased transaction volumes and account numbers, coupled with improved pricing and a reduction in revenue leakages.
- Credit provisioning benefited from recoveries in Uganda and Kenya, and lower provisioning requirements in Botswana and Namibia due to improved credit discipline. These benefits were partly offset by increased provisioning in Ghana, Nigeria, Zambia and Malawi.
- The inclusion of the acquisitions in Mozambique and Botswana for a full year boosted growth in headline earnings by 5%.
- High operating costs were incurred for branch refurbishments, IT systems rollout and increased central support functions to support the Africa growth strategy.
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How we did
| |
2004 |
2003 |
| Headline earnings (Rm) |
634 |
489 |
| ROE (%) |
30,3 |
28,3 |
| Cost-to-income ratio (%) |
60,3 |
57,2 |
| Credit loss ratio (%) |
0,37 |
1,71 |
| Net advances (Rm) |
11 805 |
10 674 |
| Headline earnings contribution (%) |
8 |
8 |
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Developments in Africa
Integration with Retail Banking and Corporate and Investment Banking
The Africa business continued to align its retail and wholesale operations with its counterparts in South Africa. The integration process has included an organisational shift towards operating in a matrix structure in which the Africa retail operation works closely with Retail Banking and the Africa wholesale banking operation reports directly to Corporate and Investment Banking from a functional perspective. The segmentation of the Africa customer base into retail and wholesale customers has been completed successfully.
This integration process is resulting in improvements in all core areas of banking, such as governance, risk management, product development and support, technology and human resources development. Africa is thus benefiting from the extensive knowledge and experience of the South African operations.
Integration of new acquisitions
The acquisitions made in Botswana and Mozambique in 2003 have been successfully integrated. The phased process of converting branches in Uganda and Malawi to comply with Standard Bank corporate identity was also completed during the year.
The business continues to seek strategic acquisitions, particularly in markets where the group has an established presence that is small relative to the overall market opportunity; most notably in Nigeria, Kenya, Ghana and Tanzania. The Africa business is also looking to enter new markets, such as Angola, where we believe significant opportunities exist.
Retail Banking in Africa
What we achieved in 2004
The business has developed service and product propositions for several retail segments, including business banking, executive banking and salaried customers.
Business development is focused primarily on implementing products and services to meet the needs of these chosen segments.
The 2004 year saw the introduction of cross-border transactability, instant card issue, credit and debit cards, asset-based finance and enhanced payment systems.
Sales and service drive
To reduce its reliance on interest income, the business has implemented several complementary initiatives to increase fee-based revenue. A strong sales and service drive enabled significant increases in the number of customer and transactional volumes. This commitment has been helped by the introduction of uniform pricing policies, philosophies and processes.
The Africa business introduced integrated sales and marketing campaigns in several countries in an effort to expand the customer base and promote product cross-selling. Sales-people and teams were incentivised to stimulate the sales drive, which led to a 35% growth in the account base to more than 1,6 million accounts. The business also introduced an independent service measurement tool, CEBS, successfully used by Retail Banking in South Africa, to measure and record customer rating of service quality.
An adapted South African bancassurance model was implemented in phases throughout the African retail banking operations. In Namibia, for example, the bank introduced the South African bancassurance model, which offers simple embedded products through a relationship with Liberty Active (previously Charter Life). In all other countries where the business offers retail banking, except Malawi, the group maintains a bancassurance joint venture with Alexander Forbes, which offers credit life products to loan customers.
The programme to expand and upgrade our distribution network continued. The business added another eight points of representation in its branch network, which totalled 234 by year end. The ATM network was increased from 211 machines in December 2003 to 314 by year end. The business implemented an instant card issuing facility at 109 branches in 12 countries. It also completed an aggressive campaign to upgrade and revamp outlets in several countries as they did not conform to minimum levels of service, process and appearance.
The Africa business has also been working to standardise all banking policies, procedures, processes and systems across its network. This work is ongoing with continued focus on creating a common operating platform across all points of representation. In addition, the business introduced routine control assessments to improve compliance with mandatory procedures.
Wholesale Banking in Africa
What we achieved in 2004
The focus on growing interest margins and effective asset and liability management continued. Interest rates in Africa have been declining steadily as a result of more prudent monetary and fiscal management by many African governments. In order to maintain the historical margins achieved, the Africa business has placed greater emphasis on lowering the cost of funds by increasing its efforts in the government and international organisation segments, and by sourcing low-cost liabilities through improving transactional service offerings (cash management, trade and electronic banking).
The Africa wholesale banking business has been building its capacity to lend, particularly in the areas of asset-based finance and trade finance. The introduction of integrated credit processes with Corporate and Investment Banking will improve credit approval efficiency. The implementation of sophisticated systems will result in more efficient balance sheet and margin management across our African operations.
The Africa wholesale banking operation increased its treasury revenues by building a more focused and better motivated treasury sales team. A similar version of the successful Corporate and Investment Banking treasury sales model was implemented. This model supports dedicated sales resources in growing customer foreign exchange flows through the group’s various African banks. This model was implemented in several countries, including Botswana, Kenya, Lesotho and Namibia.
During 2004, the collaboration between International, Corporate and Investment Banking and Africa culminated in the provision of a US$120 million loan facility and associated retail banking facilities for the development of the Kansanshi copper mine located in Solwezi, Zambia. The loan was provided in two tranches, with a US$60 million commercial tranche arranged by International and a US$60 million Export Credit Agency tranche arranged by Corporate and Investment Banking. Stanbic Bank Zambia established a branch at Solwezi to cater for the needs of the mine’s employees and other residents located in the remote Solwezi region. The mine is currently in ramp-up mode in anticipation that it will produce in excess of 110 000 tonnes of copper in 2005.
Focus areas for 2005
In the year ahead, the Africa business will focus on:
- building its customer base through aggressive sales and service campaigns;
- enhancing its wholesale banking customer service model, embedding its investment banking origination model and further building its transactional services capability;
- continuing to standardise processes and systems;
- improving process efficiency and productivity to contain costs;
- enhancing risk systems to improve risk management capabilities; and
- searching for select acquisition opportunities in key markets.
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