Standard Bank’s share price dropped R1.45 in early trade yesterday following the announcement of details of the sale of its controlling stake in Standard Bank Argentina (SBA) to Industrial and Commercial Bank of China (ICBC).
ICBC is the single largest shareholder in Standard Bank with a 20 percent stake. The share price recovered to close 0.47 percent firmer at R108.52.
Standard Bank, which will retain a 20 percent stake in SBA, is expecting to make a profit of R1.6 billion on the transaction.
The final amount involved in the transaction will be determined based on the November 30 balance sheet of SBA.
“It is anticipated that there will be a minor upwards adjustment of the original expected net proceeds attributable to the group of $400 million (R3.5bn) as published in August 2011, as the benefit of the strong profit performance of SBA is expected to have countervailed the effect of the devaluation of the Argentine peso and the transaction costs,” Standard Bank’s announcement said.
The proceeds from the sale will largely be deployed in Standard Bank South Africa to support the group’s growth ambitions there.
Standard Bank said that conditions in its international operations “remain very challenging” and that it was currently taking action to effect a sustainable reduction of approximately $100m annually from its cost base.
“This process is proceeding according to plan and it is estimated that the once-off costs relating to this rationalisation exercise will be approximately $80m.”
These costs include estimated retrenchment costs, office lease termination costs and software asset write-offs.
In November Standard Bank announced that in order to achieve the $100m a year cost reduction it would have to retrench about 900 employees in its London office.
At the time, the bank said that the cost-cutting measures were necessitated by the “challenging global economic climate and evolving regulatory regime for banks”.
Standard Bank has been one of the poorest performing banks on the JSE over the past 12 months.
A lacklustre management team has overseen a period of disappointing operational performance and share price weakness.
The situation is not expected to improve in the absence of significant changes at top management.