Standard Bank CEO Sim Tshabalala. Picture: FREDDY MAVUNDA
Standard Bank CEO Sim Tshabalala. Picture: FREDDY MAVUNDA

Standard Bank group CEO Sim Tshabalala is bracing for the imminent launch of Discovery Bank and the potential disruption of the industry that could come from big technology.

"Discovery are going to be a fierce competitor in the wealth segment and we are worried about them," he told media on the sidelines of the group’s interim results presentation for the six months to June, which saw headline earnings rise by 5% to R12.7bn, helped by a strong performance from its operations in the rest of Africa.

To a universal financial services provider like Standard Bank, the launch of Discovery Bank will round out a formidable financial services offering that has been created by Adrian Gore in a fraction of the time Standard Bank has been in existence.

The development also coincides with Patrice Motsepe’s entry into banking, which has recently been crystallised with the purchase of Tyme Digital by African Rainbow Capital.

Tshabalala referred to competitive pressure during his presentation, saying the pedestrian growth in earnings was partly due to "rising competition" in the first half of the year.

"We are absolutely determined to compete against the incumbents. We are a universal financial services provider and we will continue improving the manufacture and distribution of financial products."

But his gaze is not just limited to his immediate competitors. Tshabalala believes that true disruption to the core activity of banks – the execution of transactions, deposit-taking and lending — will come from what he terms "the big platforms", the likes of Amazon, Tencent, Alibaba, Facebook and Google.

"These are enormous platforms that serve billions of clients. We are keeping a keen eye on them because they are very well resourced, collect enormous amounts of data from customers and have the ability to disrupt our industry.

Core banking platform

"That is part of the reason we have spent R30bn on our IT infrastructure over the last few years," says Tshabalala, referring to the massive investment the group has made in its core banking platform, which is now coming to an end.

Referring to the results, Tshabalala said he was most pleased by the contribution from the operations outside SA, which were up 32% in constant currency terms to R3.7bn and which now account for one-third of all banking profits. Most notably, the Africa region saw a decline of about R800m in its impairment charge following an improvement in the performance of its lending activity.

In the case of West Africa specifically, the impairment charge was a positive contributor to earnings following the reclassification of a loan made to a large oil company that was previously nonperforming.

Tshabalala was unhappy about the continuing decline in the bank’s jaws ratio, which measures how fast income grows relative to expenses.

The ratio declined by 180 basis points over the period as the group struggled to contain costs in line with inflation.

Cost containment will be a key focus area for the group moving into the second half of the year.