Zambia’s digital drive to boost South Africa’s Standard Bank

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Stanbic Zambia, Standard Bank’s Zambian business, announced that it has invested 660 million kwacha (about 667 million rand) to digitise its operations with the hope of tapping into the unbanked population.

Analysts reveal that investing in digital platforms could be the key ingredient Standard Bank needs to start increasing contributions from operations elsewhere on the continent.

Increasing contribution from other geographies has become critical for South Africa’s traditional banks. Local operations are grappling with a sluggish economy and intensifying competition for transactional banking revenues since new entrants such as TymeBank are disrupting the sector with no fee accounts.

The rest of Africa’s contribution to Standard Bank’s headline earnings has grown from 25 percent in 2016 to 31 percent at the end of 2018.

In 2008, the rest of Africa contributed just 13 percent to the group’s 14.1 billion rand headline earnings at the time.

With just over 150,000 customers and a net profit that is roughly 1.4 percent of the Standard Bank Group’s 27.9 billion rand headline earnings in 2018, this is a huge investment for Stanbic Zambia. It is almost double the bank’s annual net profit which amounted to 359 million Kwacha in 2018.

Banking analyst at 36ONE Asset Management, Wessel Badenhorst said investment in digital platforms was essential for Standard Bank to reduce the cost of doing business in African regions, especially those with limited scale like Zambia.

According to Badenhorst, “it remains costly to do business in African markets, as can be seen from the substantially higher cost-to-income ratios in these operations which is close to 80% for Standard Bank compared to below 60% in South Africa”.

He said Zambia alone would not move the needle for the Standard Bank Group, as the investment was likely a reflection of what’s to come in the rest of the continent.

Badenhorst also revealed that international operations of the big banks have been outperforming South Africa. If these can move more customers directly to digital channels, reduced cost of doing business may amplify their performance.

Africa regions grew headline earnings by 19 percent in 2018 or 22 percent on a constant currency basis, while Standard Bank’s South African operations had flat revenues and its earnings dipped 1 percent. Return on equity in the continent is also much higher at 24 percent in 2018 compared to 16 percent in South Africa.


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