Companies

Why StanChart is optimistic about its Kenya business

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Standard Chartered PLC chief executive Bill Winters. BD GRAPHIX

Standard Chartered PLC chief executive Bill Winters was recently in Nairobi, where he met President Uhuru Kenyatta and shared the London-based bank’s business strategy for Kenya.

Mr Winters, an American banker, took over the leadership of the multinational bank in June last year, making Nairobi his first foreign trip.

Mr Winters talked to the Business Daily about the bank’s plans for Kenya and Africa, an emerging frontier in which StanChart is keen to grow market share. Here are the excerpts.

What brings you to Kenya?

Part of my purpose here with Lamin (Standard Chartered CEO for Kenya) and the team, is that we have agreed that Lamin will drive the Kenyan business locally, without taking, or waiting for instructions from London.

He will make decisions, in accordance with the local climate as part of our strategy to enhance flexibility in management. But he’ll get help from London, if need arises, especially on the rollout of new banking technologies we want to ride on to improve efficiency in our systems.

Any new growth strategies for StanChart’s operations in Kenya?

We are pretty broad-based in Kenya already. We have a very good banking business for corporate, commercial, retail and government segments. (StanChart was one of the lenders of a Sh60 billion syndicated loan to the Treasury last October).

Kenya, as a subset of the African market, has consistently posted strong growth for us, as dozens of commodity-dependent markets on the continent experience a slowdown due to the recent commodity price crash. This makes the country strategic for StanChart.

Kenya is part of the African market in which we are investing about $1 billion (Sh101 billion) in the next two to three years, or double our past spend on the same market. (StanChart has a presence in 16 African nations).

The bank has made clear its intention to downsize its workforce by 15,000 by 2018 riding on system digitisation and restructuring of its management. The Kenyan unit let go more than 100 employees last year. Is Kenya part of this fresh downsizing initiative?

The bulk of our efficiency is going to come from digitising our processes, which means some people will be displaced globally.

But we don’t see any further job cuts in Kenya, given we expect a stronger performance in coming years as we seek to grow our operations, which may require a growth in our local workforce.

This is partly hinged on the fact that the Kenyan economy is expected to grow by over six per cent this year going forward, meaning faster activity and transactions.

How many people have been laid off globally?

Our cost cutting is not focused on cutting jobs but on becoming more efficient. That said, we have already let go of 6,000 people. We took a pretty significant reduction in management ranks, so we started at the top, going down.

The critical thing about this is that it is going to be gradual, over the next two or three years. But as we digitise our systems, new opportunities are going to spring up, meaning those displaced currently will get the chance to be redeployed to other jobs in the bank.

Technology, as is the case with other sectors, is sweeping across the banking sector, prompting strategy rethink. In any case the banking sector has recently been hit by high staff attrition rates.

In our case we have about 12,000 people, based on a 20 per cent attrition per year, that’s about 2,400 naturally going, leaving on their own volition, which provides opportunity for displaced workers to be redeployed. So I don’t think we will fire many people from here.

StanChart’s Kenyan unit booked a 39 per cent drop in full-year profits for 2015. Does that concern you and what’s the way forward?

Sure, I am concerned. The Kenyan market has had challenges, including volatility in the financial market while economic activity has been a bit slow. The country is emerging from a background of terrorism-induced shocks, which affected mainstay tourism and related industries.

But things are looking up, and that gives us a sense of renewed optimism in our lending business. These short-term and medium-term transitional issues are not unique to Kenya.

The global market has been battling low commodity prices, amid a slowdown in major economies like China. We understand the difficulty of the economic situation presently and are well prepared as a bank to forge through.

Besides, the recent shocks to the financial system that brought about closures of several banks have been handled pretty well in efforts to restore stability.

What gives StanChart that competitive edge in Kenyan and African markets?

We have been in Kenya and indeed Africa for over 100 years. We are deeply local and at the same time global in terms of cross-border capabilities. We have people on the ground, branches and deep knowledge of the local economies.

We are best in class at bringing capital to Africa, moving capital around Africa and out of the continent.

We have the international connections through our transaction banking business, financial market business and our capital market business. Most importantly, we have good relationships with governments.

Africa accounts for a tiny share of StanChart’s market at 10 per cent despite the bank being around for over 100 years. What’s your roadmap for growth as new CEO?

We were a bit slow in the past with the African market and most often treated it last because each individual market in Africa is relatively small. We have, however, recognised that we have key strengths in Africa, hence the change of priority.

We have now put Africa in front of the queue for our key investment rollouts. This includes key digital and account opening systems, which we are putting in Africa first rather than last.

Besides doubling our investment in the continent, we have strengthened and will keep improving our mobile money operations to boost financial inclusion.

We have also fashioned our regional and country management structure on local needs, giving management freedom to make prudent decisions without seeking instructions from London.

Again, the slowdown in other markets like China has naturally shifted our focus to Africa, which is posting better performance despite being hit by low commodity prices and money market volatility.

What are your growth targets in Africa?

Based on our strategies, we look at growing Africa’s market share from 10 per cent to 20 per cent in the next three to four years. We believe in the African story with the attendant opportunities and as such have differentiated products for the market.

Standard Chartered’s share price has plummeted over the past two years. Doesn’t this say something about investor confidence?

I agree. Shareholders have been uncertain about the quality of our assets, as well as our franchise in the new emerging world, like China.

The thing is, our asset quality is actually good, we are also investing in things that in the next three or four years should make us much stronger and put us on a solid operational path.

We have a valuable and unique franchise built on our network with strong relationships that have enabled us to get better by the day. We have also introduced tighter risk measures as we continually improve our risk profile.

How much in paper losses have you suffered from the dip in StanChart’s share price, given you are a shareholder?

I transferred shares of the company I was before I moved to Standard Chartered. I took StanChart shares in exchange. That was £7.5 million (Sh1 billion).

I have also been given shares as part of my salary. I have made money and I have lost some money. But I have every confidence of a rebound.