Rodrigo Orihuela and Renee Bonorchis
STANDARD Bank is scaling back operations in Brazil as it dismantles a strategy to expand in emerging markets.
The bank was cutting costs in the country and would focus on Brazil-related work in Africa and China instead of building up a local banking business, spokesman Ross Linstrom said yesterday.
The Brazilian unit, Banco Standard de Investimentos, has $1.46 billion (R12.9bn) in assets in the country, Reserve Bank data show.
Standard Bank first established an office in São Paulo in 1998 and boosted its presence to more than 100 staff, the bank states on its 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 model should consume less capital and reducing our capital utilisation over time will remain a key focus.”
In 2011 Standard Bank began unwinding its expansion strategy in emerging markets and announced asset sales in Russia, Turkey and Argentina to raise cash for investment in Africa.
Last December it completed the sale of 80 percent of its Argentine division for about $400 million to Industrial & Commercial Bank of China (ICBC). The Chinese bank, which owns 20 percent of Standard Bank, is expanding in Latin America. ICBC opened in Peru in November and received authorisation to open a bank in Brazil a month later.
Linstrom declined to comment on which units had been reduced and how many staff were now employed in Brazil.
Closing the Brazilian operations would not be “ideal” for the bank or its investors, RMB Morgan Stanley banks analyst Greg Saffy said yesterday.
The bank’s first-half operating expenses for the six months to June rose to R19.2bn, from R16.3bn a year earlier, outstripping the 15 percent lift in income from banking activities.
Standard Bank said in November that it might 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.
“I doubt Standard Bank will be cutting headcount further as it’s more about getting the right people into the right countries and I expect the headcount in Africa will be going up,” Neville Chester at Coronation Fund Managers said. “As a bank is a trust business, it’s incredibly important [to] behave in all stakeholders’ interests in entering and exiting countries.”
The Brazilian government has cut taxes on payrolls, consumer goods and electricity, allowed the real to strengthen by 4 percent, and lowered the benchmark rate to 7.25 percent.
With global banks under pressure to boost profit and pare costs, UBS, Goldman Sachs and Credit Suisse have expanded in Brazil while banks like the National Bank of Abu Dhabi say they also want to open offices in the country.
Standard Bank is the third worst-performing stock on the six-member JSE banks index over the past 12 months, having gained 7.2 percent against the average increase of 14 percent. It fell 1.63 percent to R115.25 on the JSE yesterday. – Bloomberg