Standard Bank, Africa’s largest lender by assets and market value, plans to double its commercial banking business over the next three years by using its on-the-ground presence and in-depth expertise across the 19 African markets in which it operates to boost service levels to its customers.
The lender’s 1 500 commercial banking clients, which account for about R1 billion of Standard Bank’s headline earnings, have an annual turnover of between R300 million and R1,2 billion, making them a critical part of South Africa’s economy.
The bank estimates that its market share constitutes 34% of the South African commercial banking universe, which in turn is estimated to contribute between 13% and 15% of the nation’s gross domestic product (GDP).
Putting expertise into play
“Our market share demonstrates the depth of understanding we have of the needs of our commercial banking customers,” says Craig Polkinghorne, head of commercial and business banking at Standard Bank.
“We want to use that expertise to double our commercial banking business on the continent by the end of 2016.”
Polkinghorne says that although Standard Bank’s commercial banking clients are fairly diverse in size and industry, they embody the entrepreneurial qualities of high-speed decision making and an ability to adapt to an ever-changing business environment. Many of the bank’s commercial banking customers are also involved in high-growth or specialist, niche industries.
“Although our clients are rather diverse, one common thread in most of their operations is logistics – a critical element in any business that needs to get its product from a port or production facility to its customers,” says Polkinghorne.
“As commercial bankers, we need to have a thorough understanding of our clients’ businesses as well as all the factors that influence them in order to properly cater to their financial needs.”
He says that the biggest influences on Standard Bank’s commercial banking customers include general business confidence, wage inflation, interest rates, fuel costs and other administrative price increases such as toll fees and electricity costs.
Taking advantage of under-leveraged portfolios
“Most of our clients have been around for some time and operate in fairly established industries, so they are generally quite resilient to inflationary pressures. The result is that many of them will first try to absorb cost pressures before passing them on to consumers,” says Polkinghorne.
“The majority are also in very good financial health with sizeable amounts of cash on hand. The implication is that they are fairly under-leveraged as a portfolio.”
A key aspect of Standard Bank’s strategy to grow its commercial banking business will be to use its extensive African footprint to assist clients who want to expand their operations into other parts of the continent.
Polkinghorne estimates that approximately 50% of Standard Bank’s commercial banking clients are looking for expansion opportunities and linkages into the rest of Africa.
“We are in a unique position to advise our clients on how to set up a business in other parts of the continent,” he says.
“As a result of our own expansion activities, we have a thorough understanding of the political and regulatory environments in all of the African markets in which we operate. We also have excellent relationships with local businesses and corporate associations in these markets.
"This means that we are able to offer clients relevant financial solutions, coupled with the appropriate introductions that can help mitigate the risk and difficulty of entering a new market.”