Standard Bank re-focuses on trade

In mid-2007 Standard Bank revamped its approach to its trade finance, aiming to better consolidate the various strands of the business line. Armin Eckermann, global head of structured trade finance and services, talks to GTR about the new structure and the bank's prospects for 2008.

Standard Bank has long-established itself as a major player in the emerging markets, particularly in Africa, and the financing of natural resources.

However, given the increasing level of African trade business and the trade flows between the continent and other emerging markets, it was decided that the bank needed to reorganise its approach to managing its global trade finance business.

"To play a part in trade finance, you have to look at it globally," explains Eckermann.

"After a period of stagnation, Africa has started to grow economically for the last couple of years with impressive growth rates and the import-export business in China and India will continue to expand for the foreseeable future. As these trends develop, the bank realised that it needed a global trade finance unit," he adds.

China's growing influence and its demand for commodities from Sub-Saharan Africa is probably the biggest driver behind the new globalised structure of the bank’s trade finance operations.

Given recent events involving the acquisition by the Industrial and Commercial Bank of China (ICBC) of a 20% stake in Standard Bank, the importance of Africa-China trade flows has never been so great. ICBC is the world’s largest bank by market capitalisation, and paid a US$5.5bn for its stake. It is still pending full regulatory approval.

"Looking towards 2008, one of the key objectives for the structured trade finance division is how we can link our business between ICBC and Standard Bank. How our team can facilitate further Africa-China trade deals," remarks Eckermann.

The aim of the revamped structure is to ensure the bank’s global trade finance business better reflects developing global trade flows. All trade-related products now fall under the one umbrella of the structured trade finance and services (STFS) division headed up by Eckermann.

Heading up the hard commodities division from London is Graham Teatherton. Maarteen van Alkemade works from Johannesburg and heads up the softs division.

Seorus Simpson, head of capital goods/equipment is based in London and looks after areas such as the financing of equipment exports, often involving close collaboration with export credit agencies.

Complementing the work of each sector head, there are regional heads in Africa, South Africa, Asia, Americas, CIS, CEE and the Middle East. The regions drive the regional angle of trade into the product unit.

For individual transactions, teams are formed which combine those closest to the client in the region with the expertise of the specific sector. Each regional group is expanding, with recruitment in the Asia-Pacific and Latin American regions expected throughout 2008.

Faith Khanyile is regional head for Africa, based in Johannesburg, Richard Noritake heads up the Americas region from his base in New York while Richard Addington is in charge of the Asia-Pacific region in Hong Kong.

Working from London is John Penn, regional head for Central and Eastern Europe, CIS region and Middle East.

Each regional division is expanding, with recruitment drives in the Asia-Pacific region expected throughout 2008.

Recent regional hires include the appointment of Anne-Marie Woolley as director and head of trade finance and services for Standard Bank Africa - heading up trade in the 17 African countries outside of South Africa. She is working from London, but reporting to Khanyile.

Woolley’s previous roles included working independently as consultant for the past year, a two-year stint at Standard Chartered and a total of 20 years at Barclays where she specialised in regional commodities.

She is working closely with the South Africa team to implement an African trade finance platform, which ultimately shall be linked into the global product unit.

Other hires include the appointment of Peter Rizzo, and a number of his former team at Rand Merchant Bank to the bank’s Sydney-based Asian Pacific agricultural commodities team. The team will be reporting to Richard Addington, the Asia Pacific head for the STFS division.

Beyond its roots in South Africa, Standard Bank has also been increasing its presence in the major African economy of Nigeria.

In August 2007 it acquired a controlling interest in IBTC Chartered Bank in Nigeria. Although Standard had already established a presence in Nigeria through Stanbic Nigeria, this acquisition will create one of the leading banks in the country with a significant asset base.

In terms of its African trade-related deal activity, the bank has an expanding pipeline of small-size deals, ranging from US$10mn or US$20mn, up to US$150mn.

The potential for structured trade finance in the African market is often seen in terms of the large-scale, often oil-related, transactions such as the annual syndicated loan facilities for the Angolan oil company Sonangol.

However, some of these larger deals have become so popular, the margins are rapidly diminishing and many banks are becoming reluctant to participate in the mega-sized deals.

The other landmark African deal is the annual pre-export financing for Ghana Cocoa Board (Cocobod), but with margins falling to as little as 15 basis points, many institutions including Standard are not seeing the deal as a particularly attractive proposition and only opting to participate at a low ticket level, preferring to focus its attention on other African opportunities.

Eckermann notes that the African softs market, beyond Cocobod, has much more to offer: "Africa has the potential to develop more arable land, which could be used to partially satisfy the demand from emerging markets such as China. Increasingly, developing countries are demanding a richer and more protein driven diet. At the moment, Brazil and Argentina are the key providers of high protein agri-commodities such as soy beans, poultry and meat. But Africa also has the potential to produce these products as well."

Standard reorganised its trade finance division just as the credit crisis hit the markets in August and September. However, trade financing can often be the last thing to suffer in a difficult market, and it is often a useful tool to secure new business due to the manageable nature of the risks involved.

Eckermann does, however, highlight the general re-pricing in the market as a whole as one of the key developments of 2007, and likely to have repercussions throughout 2008. This re-pricing is due to both the liquidity/credit crisis and the introduction of Basel II regulations in Europe.