Standard Bank cuts Brazil unit

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StandardBank1111 REUTERS

Rio de Janeiro - Standard Bank, Africa’s largest lender, is scaling back operations in Brazil as it dismantles a strategy to expand in emerging markets.

The Johannesburg-based lender is cutting costs in the country and will focus on Brazil-related work with Africa and China instead of building a local banking business, spokesman Ross Linstrom said in an e-mailed response to questions.

Banco Standard de Investimentos SA, as the Brazilian unit is known, has $1.46 billion in assets in the country, according to central bank data.

The lender first established an office in Sao Paulo in 1998 and boosted its presence to over 100 staff, according to Standard’s website.

The Brazilian bank has been involved in structured finance, metals trading, commodity finance, foreign exchange transactions and derivatives trading.

“We have reduced the cost base in this entity and have simplified the business model in Brazil,” Linstrom said.

“This simplified model should consume less capital and reducing our capital utilisation over time will remain a key focus.”

In 2011, Standard began unwinding its expansion strategy in emerging markets and announced asset sales in Russia, Turkey and Argentina to raise cash for investment in Africa.

In December it completed the sale of 80 percent of its Argentine division for about $400 million to Industrial & Commercial Bank of China (ICBC), which owns 20 percent of Standard, is expanding in Latin America.

It opened in Peru in November and received authorization to open a bank in Brazil a month later.

Declined Comment

Linstrom declined to comment on which units had been reduced and how many staff are now employed in Brazil.

Closing the Brazilian operations wouldn’t be “ideal” for the lender or its investors, Greg Saffy, a Johannesburg-based banks analyst for RMB Morgan Stanley, said in an e-mailed response to questions today.

“These things are typically long- tailed and messy.”

The bank’s first-half operating expenses for the six months through June climbed to 19.2 billion rand from 16.3 billion a year earlier, outstripping the 15 percent rise in income from banking activities.

Standard said in November it may be forced to cut as many as 135 jobs in its corporate and investment bank in London to reduce costs amid “challenging” economic conditions and increased regulation.

Standard is the worst-performing stock on the six-member FTSE/JSE Africa Banks Index over the past 12 months after Absa Group Ltd. and Capitec Bank Holdings Ltd., having gained 8.4 percent compared with the average increase of 15 percent.

Today it climbed the most after Capitec, adding 0.7 percent to 118 rand as of 9:23 a.m. in Johannesburg trading. - Bloomberg News


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