china our china mandate become the go-to bank and preferred advisor for all china to africa, latam,...

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

8

p mandate

Our Beijing Team

9

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

13

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

2

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

3

Foundation for CIB Strategy

Africa inward FDI flows 2008

UAE

EU

$15bn

Africa

4

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

5

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

7

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

10

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


Less than 1%1% - 5%5% - 10%10% - 15%15% - 20%20% - 30%

3



Less than 1%1% - 5%5% - 10%10% - 15%15% - 20%20% - 30%

4



Less than 1%1% - 5%5% - 10%10% - 15%15% - 20%20% - 30%

5


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

6

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

7

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)


11


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)


13


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)


15


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

china our china mandate become the go-to bank and preferred advisor for all china to africa, latam,...

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