The CEO of corporate and investment banking at Standard Bank Group talks to Danielle Myles about its transformation into an Africa-focused universal bank, the corporates pushing beyond the commodity rout, and why a savings culture is key to the future of banking in the continent. 

David Munro embedded

For some banks, the motto emblazoned across their logo is a brand strategy. For Standard Bank, its ‘Africa is our home, we drive her growth’ mantra is more akin to a mission statement, and one it is pursuing wholeheartedly. 

The most tangible evidence is the Johannesburg-headquartered lender’s transformation from a global emerging markets investment bank into an Africa-focused universal bank. The sale in 2015 of 60% of its global markets business to Industrial and Commercial Bank of China (ICBC) made headlines for making ICBC the first Chinese state-owned bank to own significant trading operations in London. But it also marked the culmination of a five-year reengineering by Standard Bank during which it sold most of its non-African emerging market businesses. The coverage operations it has maintained in each region’s major financial centre are mandated with connecting Africa to the world and the world to Africa, where Standard Bank is on the ground in 21 countries.  

A bright future 

A perhaps less visible, but equally important embodiment of the bank’s fundamental principle is its leaders – including David Munro, CEO of corporate and investment banking (CIB) at Standard Bank Group. Mr Munro is emphatic that recent years’ well-cited emerging market headwinds have not irreparably damaged the continent’s future. “There’s so much momentum and latent capacity in these economies that we feel that the growth story in Africa is not unduly interrupted by events such as China slowing down, the US rates lift-off and now Brexit,” he says. While the commodity crisis has fundamentally changed heavyweights such as Nigeria and Angola, given oil generates more than 90% of their export revenue, it should not overshadow the prospects of markets such as Kenya and Mozambique. 

Mr Munro suggests keeping a particularly close eye on the latter. “Mozambique is a very, very interesting country. Among the most exciting in our portfolio today," he says. That is largely due to the discovery of huge gas reserves off the country’s coast which could make it the world’s third biggest exporter of natural gas, after Russia and Qatar. The bank is working with one of the fields’ operators, Anadarko, which is part of the group planning to inject more than $30bn into the country, a move that could treble Mozambique’s 2016 gross domestic product.   

While landmark projects such as this have the potential to single-handedly transform countries, scratching beneath the economic surface uncovers more decisive changes; namely, the response of individual entities making up the corporate community. “You don’t bank the macro; instead, you bank clients in the economy. And their ambitions to grow their businesses, take advantage of technology, innovation and the growth in the economies in which they operate are unbelievable,” says Mr Munro. Their passion, drive, skills and experience – the latter two having drastically improved over the past decade – will create the employment and opportunities that will see Africa prosper irrespective of the commodity cycle and external pressures, he adds. 

Controlled destiny 

What would help African clients are local currency capital markets. Outside of South Africa and Nigeria, equity and debt capital markets in sub-Saharan Africa are so nascent that investment banking in the region is, by and large, limited to long-term lending kept on banks’ balance sheets. A company needing to raise a relatively large amount of funds typically cannot do so on its local exchange. It must issue a Eurobond (and take on currency risk) or look to its banks. 

That said, equity, bond and commercial paper-type markets are advancing in Kenya and Nigeria, and even in the likes of Namibia and Botswana. “I’ve been involved in this business for 20 years, and if I look at the development in capital markets over the past five years, the acceleration is incredible,” says Mr Munro. “But while it makes a vast difference to the development of the markets themselves, and is indeed proving to be transformative in some instances, it is small relative to global capital markets. It is also not yet meeting the needs of each market – and so the potential is quite significant.” 

In line with its mission statement, part of Standard Bank’s game plan is to bring these markets closer to reaching that potential. “Our perspective and role in building local currency capital markets is driven by our view that it’s the secret to unlocking the real growth dynamic in these countries,” says Mr Munro. “If they remain tied to and dependent on foreign capital, they are not in control of their own destiny. So for us, the question of local currency capital markets is a vital piece of delivering on our purpose.” 

This is encouraged by moves to build a local buy-side community. The financialisation of sub-Saharan Africa, largely driven by the growing middle class’s need to access the formal banking sector, has made financial services one of the region’s most attractive sectors for investment. Retail and wholesale banking have received the largest levels of capital, but what is more meaningful is the attention thrust on the pension and insurance industries – both from investors and regulators that want to encourage a savings culture and build funding pools. 

“The stimulant in savings is the critical ingredient, much more so than the lending. I don’t really see banks growing significantly because of the need to lend. But the drive to save money from the client base is the real game-changer, for banks and their clients,” says Mr Munro. Long-term savings products to be created by insurance and pension firms will pave the way for more corporates to issue debt and equity on local exchanges and, in turn, diversify the role of the region’s banks. 

Suitcase banking 

Fears over an emerging market crisis coupled with stringent compliance regimes and entity-level issues have prompted some European and American banks to pull back from Africa. Meanwhile, Standard Bank’s polar opposite strategy has given it an edge over its competitors. The bulge brackets still feature prominently on big-ticket deals and those involving multinationals, but it is harder for them to compete for the mid-sized clients that will push the continent forward. What is more, no other bank has an on-the-ground presence in the handful of countries that will determine sub-Saharan Africa’s growth trajectory; that is, South Africa, Nigeria, Ghana, Kenya, Mozambique, Angola, and even Uganda and Zambia. 

“It has real scale with good diversification, but we can still get our arms around it. It is still agile enough to maintain a full grasp of it,” says Mr Munro, describing the bank. “And I think one of the big challenges for multinational banks is high geographical dispersion and I don’t feel at this point in time that that is a real challenge for us.”

What does still pose challenges in some markets are questions over governance and political decision making. Many of these countries have witnessed significant improvements in rule of law and democratic processes over the past decade, but in some it is still difficult to do suitcase banking – and often equally difficult to establish or buy locally licensed operations. Yet with a 153-year history in the continent, Standard Bank has proved itself capable of navigating such complex environments. 

For Mr Munro, who celebrated his 20th anniversary at Standard Bank earlier in 2016, there are some are parallels between his situation today and when he joined the bank in 1996. Back then, he worked in its small risk trading division in London. As a chartered accountant by training, he had a unique perspective on what happened in a dealing room, which no doubt helped make him an invaluable part of the bank. Today, he again finds himself in a rare position. At a pivotal point in Africa’s development, he is at the helm of the continent’s biggest investment bank, which he had a key role in creating. After witnessing its expansion into Russia, Latin America and south-east Asia – using London as a launchpad – he joined the bank’s leadership just as the global financial crisis began to unfold, and became part of the team that fundamentally changed the bank’s business strategy. 

It is something he views as an incredible opportunity, and one that the bank clearly made the most of. In revenue terms, Standard Bank’s business outside of South Africa is bigger than that of its home country. “We had the courage to make big decisions to change our game. And looking at it today, having had this footprint and invested so much in our bank and its purpose over the past five years, it is very rewarding and continues to excite me,” says Mr Munro.

“That is a rarity. In financial services and banking, not many people around the world can say we have an incredible opportunity to deliver something remarkable that has a real and lasting impact on the local capital markets and beyond.”

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