Standard Bank update

Standard Bank, the biggest bank on this continent with loads of potential, had two announcements yesterday. Firstly they were going to receive less, 75 million Dollars less than they indicated for the sale of 60 percent of the London Based global markets business to 20 percent (of Standard Bank) shareholder ICBC. 690 million Dollars for the stake, the lower price is due to a Chinese metals trader having pledged metal inventories many times over as collateral for loans. What? Exactly, this does little for credibility and does more to reinforce the notion of dodgy dealings in mainland China being more prevalent. I am sure, like most things in life, that a few rotten apples spoil the bunch. At the same time, including discontinued operations (this one), the company reported that they expected earnings for the full year to be between 5 percent lower or higher. In the middle of the range that is flat.

My only positive spin on this metals trading debacle is that whilst the exit from London may have been poorly timed, it is far better to now be out of Argentina and Russia, territories that they (Standard Bank) used to have assets. They sold the Russian assets (a 36.4 percent stake in TDMP) in the first quarter of 2011 to Sberbank, their stake was worth 372 million Dollars at the time, plus a two year 8 percent of profits earn out. Standard sold their Argentinian assets to ICBC in the same year, 2011, for 600 million Dollars. ICBC paid 5.5 billion Dollars in October of 2007 to buy 20 percent of Standard Bank, last evening, at 153.15 Rand, Standard Bank had a market cap of 247.852 billion Rand. At the end of 2013 (the last annual report) ICBC held 325 million shares, or 20.1 percent of the business. That equals 49.82 billion Rand, rounded up. At an exchange rate of 11.50 Rand to the US Dollar = 4.33 billion Dollars. That is worth 1.17 billion Dollars less than what they paid for it! I am reminded that Chinese investors have long timeframes, surely however the ICBC shareholders must be getting a little antsy. The stock price of ICBC in Hong Kong, since the beginning of October 2007 is completely flat. It has been better to have owned Standard Bank in Rands it turns out, it is important to see the perspective from the other side.