china our china mandate become the go-to bank and preferred advisor for all china to africa, latam,...
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China
Standard Bank China and partnering with ICBC
• It has been two years since ICBC’s 20% acquisition of SBG was finalised , whatprogress have we made and what have we achieved to date?
• Having crossed all the Chinese regulatory hurdles and hired a small core team ofHaving crossed all the Chinese regulatory hurdles and hired a small core team of10 bankers, we opened shop as Standard Advisory (China) Limited in Beijing inFebruary 2009.
• In our first full year of operations, we have ;- hired a primarily Chinese team of over 40 Beijing-based corporate and
investment bankers- Built strong working relationships and trust across ICBC’s Executive ranks ,head
office di isions and ke b siness nitsoffice divisions and key business units- Developed close working ties and signed a number of cooperation MOU’s with
China’s Top 50 corporates / SOE’s, its developmental financial institutions andsovereign wealth funds.g
- Developed strong formalised linkages into our SA, Rest of Africa, LATAM, Turkey and Troika business units including seconding Beijing team members to key markets ( to date SA , Nigeria and Brazil)
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Standard Bank China and partnering with ICBC
• In our first full year of operations, we have (cont…..)- Paid school fees , made mistakes and are now beginning to understand and
i t Chi b i d i l lt th l f t li inavigate Chinese business and social culture, the role of government policy in all decisions and processes in China and it’s the effect of policy driven dollar liquidity on cross border appetite – something which would have been impossible were we not on the ground and in the Chinese trenches for the past p g pyear
- Moved from being asked if we were part of Standard Chartered at each meeting to a point where we are now known and greeted as the “Africa and Mining Bank”
- Closed a number of landmark deals across South Africa, Botswana, Zambia, Ghana, Venezuela, Mongolia, etc and generated new revenues of USD78 million for SBG from primarily advisory fees and successfully lead our first
it l i i i Chi (USD1 billi ) d T icapital raising in China (USD1 billion) and Taiwan- Developed a strong cross border deal pipeline of over 100 live transactions
across geographies, products and sectors – most originated by our Beijing team but opportunities increasingly being originated or referred by ICBC
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but opportunities increasingly being originated or referred by ICBC
Our China mandate
Become the go-to bank and preferred advisor for all China to Africa, LATAM, Russia, Turkey and other emerging markets transactions and flows and become a leading commodities and resource trading
entity in China
• Phase 1: Focus on China top 50 SOE’s and corporates and select Mining and commodity clients• Phase 2: Focus on the 500 ‘next’ tier Chinese SOE’s and corporates investing in emerging markets• Beijing 北京
Standard Advisory (China) Limited (established in February 2009)- Standard Advisory (China) Limited (established in February 2009)• Develop Client relationships and trust • Business origination, deal brokering and M&A, project finance, structured trade, transactional banking
and global markets advisory team Work ith all le els of the gro p to facilitate cross border deas• Work with all levels of the group to facilitate cross border deas
• Formally drive the ICBC strategic cooperation relationship• Shanghai 上海
- Standard Resources (China) Limited (established in November 2003)• Focus on growing physical and SFE commodity trading and corporate advisory services in the
resources sector in China.• Develop commodity trading opportunities between domestic and international markets and deliver
significant revenue growth to the group.P id th t ith l dd d i i i k t d bt d it l
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• Provide the resource customers with value added services in risk management, debt and capital solutions.
Doing business in China
• In ICBC we have a great partner with a vested interest in our success and our skills, clients, businesses and footprint are extremely complementary. However, succeeding in China requires an open mind an understanding of historical contextsucceeding in China requires an open mind, an understanding of historical context , patience and significant investment in building trust / “guanxi” at all levels
• Lessons learnt by us include:Significant on the ground presence in the seat of power Beijing is crucial- Significant on the ground presence in the seat of power Beijing is crucial
- The team must be staffed by a mix of competent expats and Chinese nationals with international experienceThere are fe bad meetings in China be are a good meeting does not- There are few bad meetings in China – beware a good meeting does not necessarily mean there will be a good outcome. Meals and off-line sessions are where the real issues are raised and decisions are made
- Look for hidden messages and develop relationships at all levels within an- Look for hidden messages and develop relationships at all levels within an organization to learn to understand what is really being communicated
- Protocol, hierarchy, respect and ‘form’ is all important – offence is easily taken , so, time and energy in dealing with this level of detail is a business imperative
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so, time and energy in dealing with this level of detail is a business imperative
Doing business in China
• Lessons learnt include (cont….):- Never underestimate your audience , senior Chinese executives are generally
ll t d t l ll d t tireally smart and come extremely well prepared to meetings- Decision making processes in China are multi-layered ,complex and can often
frustrate Western norms. A small investment in an emerging market may require policy (MOFCOM SASAC and NDRC) government (MOF etc) bank creditpolicy (MOFCOM , SASAC and NDRC), government (MOF etc), bank credit, Sinosure and many other approvals.
- The combination of good advisory & relationship skills on the ground in Beijing coupled with good on the ground presence and government/corporatecoupled with good on the ground presence and government/corporate relationships in emerging markets, is the key to success – briefcase banking out of HK, London and NY just doesn’t cut it here anymore
- In order to keep an eye on the ball, one has to focus on a core selection of p yclients and sectors – cannot be everything to everyone
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SAC – Business StrategyChinese Client
Coverage
Advisory
• Originating and managing core clients in core sectors (mining & minerals, oil & gas, power & infrastructure, financial institutions, telecoms)
• Cross border M&A in core sectors• Local coverage and execution teams in HK and BeijingAdvisory
Project Finance
Local coverage and execution teams in HK and Beijing• Outbound investment focus – sourcing of opportunities by in-country teams key to success
• Arranging / structuring role with along with the rest of the Group• Sourcing of Chinese funds and structuring skills• Local team in place mainly interfacing with ICBC
Transactional B ki
Structured Trade
• Primary focus on selling of cash management products in African franchise to Chinese clients going international
• Looking to grow the structured trade opportunity from within Beijing for China, Asia between emerging markets
Banking
Global Markets
going international • Building host-to-host technology to link Standard Bank and ICBC platforms
• Primary aim to identify and advise on global markets opportunities on the back of deals, with new clients and other Chinese financial institutions
Strategic Partnerships
Operations
• Identify and build relationships with key institutions in China. • Broaden relationship with ICBC• Work with other institutions to help deliver on mandate – i.e. Sinosure, CAD Fund, CDB, etc
• Build an operations team aligned with Asia Ops Team to professionally operate within the business mandate
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p mandate
Our Beijing Team
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Global LinkagesE EEastern Europe
ResourcesPower
Infrastructure
AsiaResourcesTelecoms
Power
South AmericaResourcesOil & Gas
AfricaResourcesOil & Gas
Power
Infrastructure
Oil & GasPower & Infrastructure
Sovereign
PowerInfrastructure
Rail
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Host to Host – Linkage between China and Africa
• Consolidation of subsidiary accounts
Opportunities
• ICBC banks the Hold Co and Standard
Value Proposition
• Consolidation of subsidiary accounts across Africa with Standard Bank
• African footprint enables ICBC to compete with global banks for Hold Co. business
• ICBC banks the Hold Co. and Standard Bank the African subsidiary
• Chinese Hold Co. use ICBC’s Global Cash Management System to access African subsidiary accounts:
• Access to transaction flows an introduction to clients
• Foreign Exchange• Trade
y• Improved visibility of cash positions• Initiate payments from head office
• ICBC and Standard Bank share a sales pipeline and make joint calls to clients in
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• Investment Bankingp p jChina and Africa
Deal Pipeline
• Over 100 live transactions are been driven by Beijing team, including:
Equity investment in South American B k i f i i b- Equity investment in South American power supplier by Chinese entity
- Equity investment by Chinese sovereign in South African investment company
- Brokering of equity investments by Chinese SOE oil companies in Africa
- Raising of sovereign funds for governments in South America and West y
- Equity investment by Chinese SOE in resource company in Turkey
- Pre-IPO private placement project for a
go e e s Sou e ca a d esAfrica
- Facilitating discussions on power opportunities in Southern Africa
Russian resources company
- Technical advisory for iron ore project in Eastern Europe
T h i l d i f i f t t d l
- Driving commodities growth in China
- Providing advise on transactional banking on African continent for Chinese clients- Technical advisory of infrastructure deal
in South America
- Technical advisory on hydro power deal in East Africa
clients
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Deal Pipeline
Deal Pipeline - Geography Breakdown Deal Pipeline - Sector Breakdown
South Africa, 16
Eastern Europe, 7
Other, 11 Mining & Metals, 22
Asia, 21Power &
Oil & Gas, 5FI's, 18
LATAM, 16
Rest of Africa, 46
Power & Infrastructur
e, 37Telcos, 6
South Africa Asia LATAM
Mining & Metals Oil & GasPower & Infrastructure TelcosFI's Chinese Wealth Fund
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Rest of Africa Eastern Europe Other
Some key deals done in 2009
BPC – Morupule
B Power Deal
SBSA – 5 year
Club Term Loan
Facility
Equinox Minerals
Zambia – Corporate
R fi i
2010
ZambiaUS$400 000 000
ZAR1,6 billion
Facility
USD1 billionRefinancing
USD400 millionCorporate Refinancing
US$400,000,000
Lead Arranger and Underwriter
Ghana Cocoa
Board – Structured
Finance
CVG – Advisory
On pre-export
Finance deal
China Union
Pay – Roll out
of CUP Cards exclusively
USD200 million USD1 billion on Standard Bank ATM and POS
Networks in South Africa
Government of ICBC Precious CITIC Gold
Mongolia BondUSD1 billion
Metals TradingUSD430 million
Linked NoteUSD 200 million
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Corporate & Investment Banking strategyBanking strategyDavid Duffy
Trends shaping the global economy
1. Financial markets and the world economy are globalising
We are connecting our platforms to participate in global capital and investment flows
2. Emerging markets are growing faster than the developed world
We are connecting our platforms to participate in global capital and investment flows
3. Trade flows increasing exponentially reflecting the impact of globalisation
Our strategy incorporates faster growing emerging markets, as apposed to the more mature developed markets
We are connecting our platforms to optimise the opportunities presented by increasing trade flows
4. High population growth and per capita increase in wealth in emerging markets
Population growth as well as the per capita increase in wealth in emerging markets, provides an
opportunity for us to leverage our Wealth Management and Personal and Business Banking
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pp y g g g
business and capture the synergistic benefits between our three business units
Global emerging markets and cross border flows
Globalisation Simultaneously:Global Banks evolve
R t t & i th i l b lForeign Direct Investment
• Global capital flows become multidirectional
Global Trade Flows
• Increasing free trade flow between BRICs & other emerging economies
• Leverage FDI and cross border flows
Restructure & increase their global emerging market footprint to:
• Emerging countries & regions mobilise own capital resources
• Capital locations correlated with manufacturing, service and
emerging economies
• Emerging market companies globally competitive
• Increased trade flows between
• Service increasing emerging market multinational companies
• Service growing no. of customers in their domestic
consumer opportunities emerging markets markets
• Provide access to growing local funding bases
Global & “localised” clientNew capital and trade markets reflect BOTH:Standards of global best practice, and “Local flavour”
Global & localised client coverage, product development
& distribution
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Foundation for CIB Strategy
Africa inward FDI flows 2008
UAE
EU
$15bn
Africa
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2008Total Inward FDI Flows: $219.6bn
Data per www.fdiintelligence.com
Africa-BRIC trade 2008
$12 3bn$4.7bn
$12.3bn
$46.88bn
$47.99bnAfrica
T l ( ld) E $435 4b
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Total (world) Exports: $435.4bn Total (world) Imports: $433.2bn
Data per IMF
Connecting the emerging markets to each other…..
ASIA LATAM
AFRICA INDIA
RUSSIA / CIS TURKEYRUSSIA / CIS TURKEY
MIDDLE EAST
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Capital FlowsTrade Flows
… and leveraging our connectivity to B R I C
Beijing / Hong
Raising Funding From:
New York London Beijing / Hong Kong / Singapore
Access bank loan, capital markets and aid / multilateral
For Clients in:
Brazil / Argentina Africa Russia / CIS Other EM
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Presence in our core countries
Corporate & I t t B ki
China Investment BankingInvestment Banking
Future Corporate & Investment Banking8
Future Investment Banking
Major financial centres
Global CIB strategic themes
1. We will be an integrated Corporate and Investment Bank
2. Our clients are central to everything we do
Key Strategic Themes 3. We will combine a relevant domestic banking franchise in selected emerging markets with our cross border capability
4. We will be the leader in connecting Africa to emerging markets and the rest of the world
5. We will leverage our connectivity to China, Russia and Brazil
Execute through ourOperating Model
1. We will deliver “one CIB” by operating a consistent interconnected model globally
2. CIB will operate as an integral component of the Standard Bank Group
Strategic Deliverables
1. We will implement our strategies for equities and TPS and develop additional product capability as required by our franchise
2. We will competitively recruit, reward and develop our people based on performance
3. We will be responsive to the developmental needs of the societies and environments inStrategic Deliverables 3. We will be responsive to the developmental needs of the societies and environments in which we operate
4. We will optimise the allocation of resources across CIB
5. We will aspire to excellence in everything we do
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Business model – an integrated corporate and investment bank
Tra
L P d t
Primary MarketAccess
StrategicAdvice
nsactional V
InvestmentBanking
Franchise Products
Core Banking & Basic Derivatives
Leverage Products & Complex Derivatives
Valu
e
Volume
Global Markets
Transactional
Client Base
Transactional Products
Franchise Products
ansa
ctio
nal V Transactional
Products & Services
Business EnablersTra
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Clients central to everything we do
Corporate Banking Coverage Investment Banking Coverage
• Services all clients in all sectors
• Focus on
– Delivering of core banking product and i
• Core sectors
– Oil and gas
– Telecoms and mediaservices
– Generate cross sell opportunities
• Core to long term client relationship
– Power and infrastructure
– Mining and metals
– Financial institutions• Substantially domestic • 250-300 core clients
• Local and cross-border activity
• Approach:pp
– Local relationships and knowledge
– Global sectoral expertise
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How do we look in 3 years?
The dominant CIB in Africa
A leading domestic operator in our chosen markets….
• With an established position in the cross border flows• With an established position in the cross border flows…
• And a competitive offering in all product areas
Globally recognised as a leading emerging market CIB
2012 SA Africa International
Globally recognised as a leading emerging market CIB
Growth
ROE
Medium
High
High
Medium / High
High
Medium
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What makes us competitive
• We are an “EM only” bank
• Our China and Africa access is unparalleled and our ability to connect China, Africa and EMs is uniqueEMs is unique
• We are focused and typically invest during down cycles in our markets
• We are experienced risk managers and have generated consistent profitability over 20We are experienced risk managers and have generated consistent profitability over 20 years despite being an “EM only” bank
• Our local knowledge is extensive and has been built through multiple economic cycles
• Our geographical footprint in chosen countries places us at the centre of EM to EM trade flows
• Our commodities franchise offer is a key point of differentiation
• Our global sector expertise and strong track record offer a competitive advantage in cross border transactions
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border transactions
Looking forward
Building blocks are in place Building blocks are in place to be globally competitive
Know what needs to be doneKnow what needs to be done
Need to move with urgency
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BRIC and AfricaBRIC and Africa
Tectonic shifts fastening their destiniesGoolam Ballim
BRIC-Africa trade (share of each country’s GDP) – 1980BRIC Africa trade (share of each country s GDP) 1980
Less than 1%1% - 5%5% - 10%10% - 15%15% - 20%20% - 30%
2
20% 30%Above 30% Source: Standard Bank Group
BRIC-Africa trade (share of each country’s GDP) – 1990BRIC Africa trade (share of each country s GDP) 1990
Less than 1%1% - 5%5% - 10%10% - 15%15% - 20%20% - 30%
3
20% 30%Above 30% Source: Standard Bank Group
BRIC-Africa trade (share of each country’s GDP) – 2000BRIC Africa trade (share of each country s GDP) 2000
Less than 1%1% - 5%5% - 10%10% - 15%15% - 20%20% - 30%
4
20% 30%Above 30% Source: Standard Bank Group
BRIC-Africa trade (share of each country’s GDP) – 2008BRIC Africa trade (share of each country s GDP) 2008
Less than 1%1% - 5%5% - 10%10% - 15%15% - 20%20% - 30%
5
20% 30%Above 30% Source: Standard Bank Group
China dominates flows but relative terms evenly poisedChina dominates flows, but relative terms evenly poised
150
180USD billion
$166bn
90
120
30
60
$8b0
1992 1995 1998 2001 2004 2007
China India Russia Brazil
$8bn
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Source: Sources: IMF, WTO, ISI Emerging Markets, Standard Bank Group
Africa’s top trading partners: BRIC a dominant forceAfrica s top trading partners: BRIC a dominant force
140160180
USD billion
RussiaBrazil
6080
100120 India
China
02040
IC US ce aly ny K ds an m SA gal
AE nd na
BR
U
Franc
Ita
German U
Netherland
Japa
Belgiu S
Portug UA
Thailan
Argentin
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Sources: IMF, WTO, ISI Emerging Markets, Standard Bank Group
Russia and Africa...Russia and Africa...
Russia has entered a catch-up phaseRussia has entered a catch up phase
African exports to Russia (USD mn) African imports from Russia (USD mn)
Less than 1mn1 – 100mn101 – 250mn251 – 500mn501 – 1000mn1001 – 1500mn1501 – 3000mn3001 – 10 000mnMore than 10 000mn
9
Source: Standard Bank Group
Brazil and Africa...Brazil and Africa...
Brazil-Africa trade concentrated and substantialBrazil Africa trade concentrated and substantial
African exports to Brazil (USD mn) African imports from Brazil (USD mn)
Less than 1mn1 – 100mn101 – 250mn251 – 500mn501 – 1000mn1001 – 1500mn1501 – 3000mn3001 – 10 000mnMore than 10 000mn
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Source: Standard Bank Group
India and Africa...India and Africa...
Energy security and consumer markets draw India to AfricaEnergy security and consumer markets draw India to Africa
African exports to India (USD mn) African imports from India (USD mn)
Less than 1mn1 – 100mn101 – 250mn251 – 500mn501 – 1000mn1001 – 1500mn1501 – 3000mn3001 – 10 000mnMore than 10 000mn
13
Source: Standard Bank Group
China and Africa...China and Africa...
China footprint is deep and broadChina footprint is deep and broad
African exports to China (USD mn) African imports from China (USD mn)
Less than 1mn1 – 100mn101 – 250mn251 – 500mn501 – 1000mn1001 – 1500mn1501 – 3000mn3001 – 10 000mnMore than 10 000mn
15
Source: Standard Bank Group
China’s aggregate consumption is lowChina s aggregate consumption is low…
10
7
8
9
10
4
5
6
7
USD
tr
2
3
4U
0
1
US Euro-zone Japan China India
16
Source: Bloomberg
but may become world’s largest consumer body by 2020… but may become world s largest consumer body by 2020
100t)
70
80
90
100
ption (percent
40
50
60
rivate con
sum
10
20
30
tributionof pr
02010 2015 2020
US Japan Germany China UK FranceItaly Spain Canada India Other
Dist
17
Source: Credit Suisse
China’s rising food challengeChina s rising food challenge
400014000
2500
3000
3500
10000
12000
1000
1500
2000
4000
6000
8000
CNY
CNY
0
500
1000
0
2000
0 5 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Urban per capita income (LHS) Rural per capita income(LHS)
Rural per capita food expenditure (LHS) Urban per capita food expenditure (LHS)
18
Sources: Bloomberg, China National Statistics Bureau, US Department of Agriculture
Changing urban consumption patternsChanging urban consumption patterns
20
140
160
14
16
18
mption (kg)
mption (kg)
100
120
6
8
10
12
capita con
sum
capita con
sum
60
80
0
2
4
6
Urban
per
Urban
per
600
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Beef & mutton Milk Poultry Grain (RHS) Vegetables (RHS)
19
Sources: China National Statistics Bureau, US Department of Agriculture
So what does this mean for Africa?So, what does this mean for Africa?
• The world is being remade; the BRICs and Africa are at the helm of shifts to the emerging south
• The BRICs are reversing Africa’s marginalised position in world• The BRICs are reversing Africa s marginalised position in world trade
• Africa must seize the moment to ensure it benefits proportionately from relations with the BRICsproportionately from relations with the BRICs
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18/05/2010 2113/10/2009 1