Stanbic Holdings #ticker:CFC is set to pay its South Africa-based parent company Standard Bank Group franchise fees of Sh733.9 million, a 14.7 percent increase from the previous payment of Sh639.7 million.
The amounts due have been disclosed by the Nairobi Securities Exchange-listed lender in its latest annual report for the year ended December.
Stanbic did not give further details on the payouts but such fees, rare among the local listed banks, are typically paid to the franchise owner for business support, use of its brand or access to its marketing muscle.
The multinational, for instance, packages products and lending opportunities across multiple markets for its subsidiaries. It also supplies Stanbic with a CEO for free.
“In line with Standard Bank Group’s transfer pricing policy, Greg Brackenridge’s function is a group oversight role and therefore the majority shareholder, Standard Bank of South Africa Limited, bears all his employment costs and benefits,” Stanbic says in the report.
“Those costs and benefits are not recharged to Stanbic Holdings Plc.”
The franchise fees are among a series of income streams that saw Standard Bank earn a total of Sh3.7 billion from its local banking subsidiary in the year ended December.
This represented a 58 percent jump from Sh2.3 billion the year before. The multinational charged Stanbic “other operating costs” running into Sh861.3 million, rising 11.1 times from Sh77.4 million.
It billed the local subsidiary information technology fees of Sh199.4 million, a 279.5 percent jump from Sh52.5 million.
Standard Bank is also set to earn total dividends of Sh1.9 billion from the local unit in which holds an estimated 69.1 percent stake. The dividend will rise from the Sh1.5 billion paid on the results for the year ended December 2018.
The multinational is buying more shares in the local subsidiary to raise its stake to 75 percent by December. Standard Bank intends to have Stanbic Holdings retain its listing on the NSE.
If Standard Bank gets all the new shares it is seeking, it will have spent more than Sh5 billion in the stake-building transactions that started in 2018.
The multinational’s move to increase its stake was seen as an expression of its confidence about the subsidiary’s prospects.