StanChart retains Kenya unit in Africa exit strategy

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StanChart retains Kenya unit in Africa exit strategy


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Standard Chartered Bank branch on Kenyatta Avenue in a picture taken on January 3, 2020. PHOTO | SALATON NJAU | NMG

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Summary

  • UK banking multinational Standard Chartered Plc is exiting five African markets in a strategic review that will leave it with the Kenyan and Nigerian subsidiaries as its most important units in the continent.
  • The move follows its rival Barclays Plc, which sold most of its stake in its African operations starting in 2016 to reduce the risk and capital burden that came with majority ownership of the businesses.
  • StanChart says its decision is aimed at disposing of less profitable subsidiaries and simplifying the group business which spans Africa, the Middle East, Asia, Europe and America.

UK banking multinational Standard Chartered Plc #ticker: SCBK is exiting five African markets in a strategic review that will leave it with the Kenyan and Nigerian subsidiaries as its most important units in the continent.

The London Stock Exchange-listed firm on Thursday announced it would sell its operations in Angola, Cameroon, Zimbabwe, Gambia and Sierra Leone besides exiting Jordan and Lebanon.

“Today the group announces a set of actions to redirect resources within its Africa and the Middle East region to those areas where it can have the greatest scale and growth potential, in order to better support its clients,” StanChart said in a statement on Thursday .

The move follows its rival Barclays Plc, which sold most of its stake in its African operations starting in 2016 to reduce the risk and capital burden that came with majority ownership of the businesses.

StanChart says its decision is aimed at disposing of less profitable subsidiaries and simplifying the group business which spans Africa, the Middle East, Asia, Europe and America.

The markets that will be exited generated around one percent of total group income in 2021 income and a similar proportion of profit before tax. Kenya contributes about 10 percent of the group’s earnings.

The multinational’s presence in Africa will drop to 10 from the current 15 countries. It will continue operating in Kenya, Tanzania, Botswana, Mauritius, Uganda, Nigeria, Zambia, Cote d’Ivoire, Egypt and Ghana.

In Tanzania and Cote d’Ivoire, the retail banking business will be sold and only corporate and institutional banking will be retained.

“As we set out earlier in the year, we are sharpening our focus on the most significant opportunities for growth while also simplifying our business,” Stanchart’s chief executive Bill Winters said.

“We remain excited by a number of opportunities we see in Africa and the Middle East region, as illustrated by our new markets, but remain disciplined in our assessment of where we can deliver significantly improved shareholder returns.”

StanChart says it will continue to serve corporate and institutional clients and facilitate cross-border capital flows and offshore business in all the markets it is exiting using its international network.

The decisions by Barclays and Stanchart show that having an extensive African franchise has less benefit as most subsidiaries struggle and only a few generate most of the profits.

Barclays reduced its stake to 14.88 percent in South Africa’s Absa Group #ticker: ABSA into which it consolidated its previous direct interests in multiple continental subsidiaries.

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