Picture: FINANCIAL MAIL
Picture: FINANCIAL MAIL

Standard Bank, SA’s largest bank by assets, has written down the value of its stake in associate ICBC Standard Bank Plc (ICBCS) due to lower-than-anticipated client flows.

Standard Bank impaired its 40% stake in ICBCS by a further R2.4bn for the three months ending September according to a regulatory filing published for the benefit of Standard’s largest shareholder, the Industrial and Commercial Bank of China (ICBC).

ICBC holds the remaining 60% interest in ICBCS, a global markets and trading services business.

The decision to impair ICBCS follows a poor trading result for the six months ending June in which the entity reported a loss of $129.5m (R1.9bn). Poor client flows were also weighing on ICBCS, which was hampering its ability to deliver appropriate returns, the group said. 

Standard Bank CEO Sim Tshabalala has previously expressed his intention of disposing of the group’s stake in the business, as it can easily redeploy the capital into other businesses in its portfolio that earn much higher returns on capital. 

But to dispose of the stake would first require ICBC exercising a call option to acquire half of Standard Bank’s stake, following which Tshabalala could exercise a put option to sell Standard’s remaining interest in the group.

Standard Bank now carries its 40% stake at $220m (R3.1bn).

In 2015, ICBC spent about $690m taking a 60% stake in London-based Standard Bank Plc, which was then renamed ICBC Standard Bank.

The joint venture has operations in London, New York, Singapore, Dubai, Tokyo, Hong Kong and Shanghai, and provides trading services in commodities, foreign exchange, interest rates, credit and equities to clients.

Standard Bank said on Tuesday that without the impairment, group earnings attributable to ordinary shareholders were 2% higher in the nine months to end-September from the prior comparative period.

During the period, net interest income grew faster than non-interest revenue, with net interest income supported by higher average loan and deposit balances relative to the prior comparative period.

Income growth remained above operating expense growth, although credit impairment charges increased period-on-period on the back of loan book growth and charges in East Africa and SA, the statement read.

gernetzkyk@businesslive.co.za