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Standard Bank Argentina Stake Sale to China’s ICBC Delayed

Standard Bank Argentina Stake Sale to China’s ICBC Delayed
Standard Bank last year reversed its expansion strategy in emerging markets, selling assets in Russia, Turkey and Argentina to raise cash for Africa investment. Photographer: Naashon Zalk/Bloomberg

Sept. 17 (Bloomberg) -- Standard Bank Group Ltd., which expected to close the sale of a stake in its Argentine unit to Industrial & Commercial Bank of China Ltd. by June, said the deal may not conclude before year-end on regulatory hurdles.

“We’re disappointed it didn’t close in the first half and we’ll do it as fast as we can,” David Munro, chief executive officer for corporate and investment banking at Standard, said in a telephone interview from Johannesburg on Sept. 14.

Standard last year reversed its expansion strategy in emerging markets, selling assets in Russia, Turkey and Argentina to raise cash for Africa investment. It agreed in 2011 to sell 80 percent of its stake in the Argentine unit to ICBC for about $400 million. The price was in part dependent on the net asset value of Standard Bank Argentina in pesos converted to dollars.

“The Argentine bank has been doing so well that it has been doing better than the peso, so we don’t expect a significantly different amount,” Finance Director Simon Ridley said in a telephone interview on Sept. 14. The peso has fallen 12 percent against the dollar since Standard Bank announced its agreement with ICBC, according to data compiled by Bloomberg.

Standard Bank gained 1.5 percent to 103.95 rand in Johannesburg trading.

Balance Sheet Capital

In the past year, to lure customers and gain market share, Standard Bank has focused on offering services to low-income customers in South Africa. It has also increased mortgage lending to become the country’s biggest provider of home loans, according to data submitted to the central bank.

The delay is not affecting Standard Bank’s ability to invest in business in Africa, Munro said, adding that ICBC and Standard Bank still agree on the terms of the transaction.

“Standard Bank will be very shy on balance sheet capital in South Africa,” if the deal doesn’t happen, said Greg Saffy, a banking analyst at RMB Morgan Stanley in Johannesburg. “Where capital is needed is where the loan growth is, and Standard Bank is aggressively writing loans in South Africa.”

The transaction requires approval from regulators including the Chinese Banking Regulatory Commission, the State Administration of Foreign Exchange of China and Argentine authorities. In Africa, Standard Bank has operations in 18 countries and is seeking to boost profit on a continent with 1 billion people where the growth rates of many countries are higher than those in developed nations.

“We would hope that in the next three years the African franchise can deliver a return on equity in excess of cost of equity,” said Neville Chester, a shareholder and fund manager at Cape Town-based Coronation Fund Managers Ltd. “As long as the strategy will still bear fruit, we are happy for them to continue investing in the big opportunity areas as this entrenches their competitive position.”

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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