Standard Bank is making redundancies - but not in Africa

It is bad news for jobs in the City but good news for South Africa and the rest of the continent. Standard Bank, Africa’s largest bank by assets, has become the latest in a long list of foreign lenders to cut staff at its international corporate and investment banking unit in London, where competition and regulation are getting tougher and growing revenues has become harder.

The Johannesburg-based bank has announced it will retrench up to 15% of its 900-strong workforce at Standard Bank Plc, which last year made a marginal loss. “At this stage in London we envisage potentially eliminating between 10% and 15% of Standard Bank’s approximately 900 permanent roles,” said Jenny Knott, chief executive.

This is all the more significant when you consider that the London office, which will remain open to access international markets, used to have over 2,000 employees.  Elsewhere, Standard Bank has also trimmed its workforce in Hong Kong by more than 50%. And in the next few months more staff may be laid off in Brazil and other markets outside Africa.

However, in Africa the bank plans to grow branches and staff - especially in Nigeria and Angola.

The goal is achieving cost cuts of up to $100m in the international corporate and investment banking unit, says David Munro, chief executive of the CIB business: “We continue to seek ways to simplify our business, reduce our cost base and improve profitability.”

The new strategy and accompanying cost-cutting drive is being pushed by the Industrial & Commercial Bank of China. ICBC has a 20% stake in Standard Bank and is interested in developing an African presence to rival Standard Chartered, which recently announced it is investing $100m in Africa, and South Afircan competitors like Absa, Nedbank and FirstRand.

“The rest of Africa outside SA accounts for less than 10% of our earnings and our intention is to grow this to about 25% in four to five years,” says Peter Schlebusch, Standard Bank’s new head of personal and business banking. “We have competitors but we are the true African bank because we have been basically reliant on Africa for our growth.”

Cutting costs to improve profitability is the right strategy for Standard Bank, South African analysts say.

“It is a good start to pare back costs in its offshore operations,” says Patrice Rassou, head of equities at Sanlam Investment Management. "Standard’s corporate and investment banking business is right-sizing its international operations outside Africa in a responsible way," says Adrian Cloete, equity analyst at Cadiz Asset Management, adding that “a significant portion” of the capital currently in Standard Bank plc will most likely be allocated to “high-return areas like South Africa and Africa.”