Standard Chartered Says 16% Africa Revenue Rise Sustainable

Feb 25, 2014 4:13 am ET

(Adds analyst comment in sixth paragraph.)

Feb. 25 (Bloomberg) -- Standard Chartered Plc’s about 16 percent annual increase in revenue from its Africa business over the past five years is “sustainable” as the continent’s use of banking products rises amid surging economic growth.

The London-based bank, which has been operating in Africa for more than 150 years, has a presence in 15 sub-Saharan African nations after upgrading its representative office in Angola to a branch, Viswanathan Shankar, chief executive officer for Europe, the Middle East, Africa and the Americas said in a Feb. 20 interview in Dubai. The bank is also considering entering markets in Mozambique and Ethiopia, he said.

“There is huge interest in Africa; it is a continent of hope and of rising world interest,” Shankar said. “If you look at World Bank data 7 of the top 10 fastest-growing economies over the next 10 years are projected to be in Africa.”

Banks including Citigroup Inc. and Barclays Plc plan to expand in Africa as they seek growth opportunities amid slower- than-average economic growth in developed nations. Gross domestic product in sub-Saharan Africa will increase 6.1 percent this year up from a projected 5.6 percent in 2013, while investment will rise to 23.2 percent of GDP from 22.8 percent last year, according to the International Monetary Fund.

The bank’s 16 percent rise in Africa revenue compares with a 9.9 percent gain in income from the Asia Pacific region, 10 percent from the Middle East and other Asian countries and 11.3 percent from India, according to data compiled by Bloomberg.

Higher than Average

Standard Chartered’s revenue growth in Africa “is a bit higher than average as we have currently 14 percent growth for our Africa banks as a forecast,” Jaap Meijer, director of equity research at Arqaam Capital Ltd., said by phone from Dubai today. “They have very high real GDP growth of 5 to 7 percent in a lot of countries and, for the first time in a decade or so, inflation was actually lower than GDP growth.”

Standard Chartered was the biggest arranger of syndicated loans in sub-Saharan Africa in 2013, ahead of Standard Bank Group Ltd., Barclays and BNP Paribas SA, helping its clients borrow $1.96 billion, according to data compiled by Bloomberg.

The deals included raising $3.25 billion in a seven-year term-loan for Nigerian billionaire Aliko Dangote’s holding company Dangote Industries Ltd. and $1.99 billion in three- and five-year financing for Aspen Global Inc., a Mauritius-based company whose subsidiaries make and sell medical products.

Key Transactions

“If you look at some of the major transactions that have happened in Africa over the last several years in the infrastructure sector, or the consumer sector, gas or whatever else, Standard Chartered would have played a role,” Shankar said. “On the wholesale banking side, it is about connecting Africa to the world” for trade and investments while the bank also has a “solid” consumer-banking presence, he said.

Standard Chartered’s operating profit from Africa grew 9.8 percent in the first half of 2013 to $357 million, while revenue climbed 16 percent to $853 million, making up 8.7% percent of overall income. Growth in Africa will be led by Nigeria, Ghana, which has a history of good economic and political governance, Kenya and Angola and the increasing use of financial products like bonds, loans and mortgages, Shankar said.

The bank is investing more money in private-equity deals on the continent than in any other region in which it operates, the head of its private equity unit said Feb. 11. Since 2008, when its African buyout team was formed, the lender has invested more than $700 million across the continent and may invest another $300 million this year, Peter Baird said in an interview.

New Branches

Standard Chartered plans to open 100 new branches in Africa by 2016 to benefit from the continent’s $1 trillion of annual retail spending, it said in September. It also plans to invest in digital technology over the next four years and will focus on small- and medium-sized companies and private banking to boost growth at its consumer-banking business, it said.

Growing trade between Africa and China, which it forecasts to rise to $1.7 trillion by 2030 from $200 billion in 2012, will also benefit Standard Chartered, the bank said last year.

“If you look at the flow of trade and investments in Africa today a lot of it is coming from Asia, the Middle East and within Africa itself” and Standard Chartered is exceptionally well-positioned, Shankar said. “You can’t think of one international bank in the world that is strong in Asia, Africa and the Middle East, other than Standard Chartered.”

--Editors: Matthew Brown, Mark Sweetman