Standard Bank Takes on Deutsche’s Model in Naming Joint CEOsRenee Bonorchis
Standard Bank Group Ltd. is adopting the model used by Germany’s Deutsche Bank AG in appointing joint-chief executive officers as Jacko Maree stepped down after 13 years as head of Africa’s biggest lender.
Sim Tshabalala, 45, and Ben Kruger, 53, named as deputy CEOs four years ago, are taking over as the company retreats from Latin America, Russia and Turkey. The third former deputy CEO, Peter Wharton-Hood, will become chief operating officer. Maree, 57, will resign from the boards of Standard Bank and insurance unit, Liberty Holdings Ltd., remaining as a “senior banker focusing on key client relationships,” the lender said.
“We do not endorse a joint CEO management structure,” Greg Saffy, Johannesburg-based analyst for RMB Morgan Stanley, said in an e-mailed response to questions today. “Two separate reporting structures may result in two separate camps.”
Deutsche Bank has had co-CEOs since June when investment banking chief Anshu Jain, 50, and Germany head Juergen Fitschen, 64, succeeded Josef Ackermann. The lender had co-CEOs three times in the 1960s, 1970s and 1980s. Pairing the two is an attempt to balance Deutsche Bank’s dual roles of being a global trading house and a German institution with longstanding ties to the nation’s companies and political establishment.
“Some analysis says having joint CEOs hardly ever works, but every situation is unique,” Fred Phaswana, chairman of the Johannesburg-based bank, said at a presentation in the city today. There are “risks” to the decision, he said, adding that Tshabalala and Kruger have a “long history of working together.”
Standard Bank closed 0.9 percent lower at 115.51 rand in Johannesburg. The stock rose 21 percent last year, lagging the average 30 percent gain on the six-member FTSE/JSE Africa Banks Index.
“The jury is out on the joint CEO structure,” Neville Chester, who helps oversee the equivalent of $42 billion at Coronation Fund Managers Ltd. in Cape Town including Standard Bank stock, said in an e-mailed response to questions. “The group is big and complex and sharing responsibility can be a benefit, but obviously how they handle points of difference will be critical and whether this slows decision-making.”
Tshabalala remains CEO of the South African operations and will oversee the business in the rest of Africa while also taking responsibility for Liberty, the bank said. Kruger, in addition to his roles heading up personal and business banking and the investment-banking unit, will be responsible for group risk and oversee technology operations.
“We are surprised at the dual CEO function -- it can only be an interim arrangement with Sim Tshabalala to become sole CEO in the longer term,” Johann Scholtz, banks analyst and head of research at Afrifocus Securities, said in an e-mailed response to questions.
Maree, who has been with the bank for more than 32 years, helped Standard Bank fend off a hostile bid from Nedbank Group Ltd. after becoming CEO in 1999 and led an expansion into other emerging markets. Since he took over, the lender’s share price has climbed more than fivefold.
While the lender’s return on equity declined to 14.2 percent in 2012, profit rose 22 percent after it sold an 80 percent stake in its Argentine operations for $400 million.
Net income climbed to 16.15 billion rand ($1.77 billion) from 13.2 billion rand in 2011, the bank said. Earnings per share, excluding one-time items, rose to 9.41 rand, in line with the 9.37-rand median estimate of 17 analysts surveyed by Bloomberg.
Africa and “the growth areas aligned to our strategic focus did very well, and the areas that we are in the process of scaling down have performed worse than expected,” the lender said. The bank proposed boosting its 2012 dividend by 7 percent to 4.55 rand.
Standard Bank’s cost-to-income ratio was 58.7 percent for 2012 compared with 55.2 percent at Absa Group Ltd. and 55.5 percent at Nedbank Group Ltd.
In Africa outside of its home market, the company’s personal and business banking unit posted a loss of 258 million rand and London-based Standard Bank Plc swung from a profit in 2011 to a loss equivalent to 2.48 billion rand.
“Investors will be concerned about the fact that personal and business banking in the rest of Africa and the London business remain loss making,” Scholtz said. “Having the highest cost-to-income ratio in the sector is another issue that will come under scrutiny.”
Standard Bank has focused on offering services to low-income customers in South Africa to gain market share and in the past year became the biggest provider of home loans.
“Results were very strong, given the impairments that were necessary to sort out the international operations,” Chester said. “The South African personal banking business and pleasingly the African business were very strong.”
The bank took a decision last year not to make further acquisitions in Africa and instead invest in existing operations in countries including Nigeria, Kenya, Uganda and Tanzania.