Inside the revival of a 163-year-old South African bank

Standard Bank has undergone a significant transformation in the past five years as part of its SBG 2025 strategy, with the bank restructuring its operations and bringing Liberty into the fold once again. 

At the end of this process, the bank is comfortably the largest in Africa by assets, with over R3.6 trillion on its balance sheet. 

It has exceeded its 2025 targets, posting record headline earnings of R49.2 billion with a return on equity of 19.3%. Crucially, its African business has proven to be highly profitable, with it contributing R19.7 billion to headline earnings. 

Standard Bank now operates across 21 markets in Africa and four global hubs in New York, London, Dubai, and Beijing. 

In recent years, the scale and steady growth of the business have come to be seen as the norm, with the bank churning out low double-digit growth for the past five years on a steadily improving return on equity. 

However, this new normal is on the back of a significant transformation in Standard Bank’s operations, with the 163-year-old lender fundamentally changing how it does business. 

This transformation was spurred by the bank’s relative stagnation prior to 2020, with its revenue growth flatlining, return on equity deteriorating, and cost-to-income rising. 

The bank also recognised that it was not serving its clients in the best way possible, CEO Sim Tshabalala told Daily Investor following the bank’s 2025 financial results presentation. 

“One of the first things we did was to take the view that to keep personal and business banking in one division was no longer fit for purpose,” Tshabalala said. 

“When it was done in the past, it made sense to create economies of scale and scope by putting them together. But, this no longer applies.”

Standard Bank split its retail business into Personal and Private Banking (PPB) and Business and Commercial Banking (BCB). 

This enabled the bank to have far greater focus on its different client propositions, with it able to service businesses more adequately and differentiate its personal banking offering to meet the demands of high-net-worth individuals and the mass market. 

“Within BCB, at the top, they are very similar to Corporate and Investment Banking (CIB) clients, but the business goes all the way down to small mom-and-pop businesses,” Tshabalala said. 

“The work necessary to create those value propositions, to create the products, the pricing, the relationships, the distribution channels, and the technology is very different from that for personal banking.” 

Tshabalala said he wished at the time he had a wand to magically separate the units, with the reality of restructuring being extremely arduous.

“You have to separate the systems and the processes. You have to rewrite performance agreements, focus people on new targets,” he said. 

“We are now laser-focused on what we need to do in these divisions. Laser-focused on what must be done in PPB, how to deal with the credit card division, how to deal with vehicle finance, for example.”

Tshabalala said most of the benefit of the additional clarity is being felt in the BCB business, particularly in the intense competition for SMEs. This is historically dominated by FNB, with Capitec and neobank challengers chipping away at established players. 

“You need to be very focused on specific offerings to different segments of the market. And we’re now reaping the benefit of that clarity.”

Liberty back in the fold

The second part of this restructuring was bringing Liberty back into the fold, with the two finance giants having a long history of separation and reintegration. 

This one appears to be permanent, with Tshabalala explaining that all of Liberty’s insurance and asset management offerings have been fully integrated into the group. 

The reintegration naturally created efficiencies within the insurance business, but it also crucially gave Liberty the ability to sell its products into the bank’s client base. 

For the bank, having a significant insurance and asset management business gives it a significant source of annuity-type income that is highly profitable. 

“What we did was to take all the insurance businesses and all the asset management businesses which were scattered throughout the group and put them under one umbrella,” Tshabalala explained. 

This enabled the bank to move its insurance business out of the PPB unit and into the Insurance and Asset Management (IAM) division. 

As a result, the insurance business could focus purely on its offering and the banking unit on servicing a client’s banking needs. 

Now, Standard Bank has the blocks for an integrated financial services provider that can serve all of a client’s needs, from lending through to retirement. 

“What we did after that was to focus IAM on two vectors. The one is the external market and the other is the Standard Bank client base,” Tshabalala said. 

The IAM business can not only sell its products into the bank’s retail client base, but can also bring new clients into the bank. 

In the bank’s latest results, this approach is beginning to pay dividends, with inter-business attribution up 11%. This measures the effective cross-selling of Standard Bank’s products. 

The IAM business has benefited greatly from being within the Standard Bank Group and its restructuring, with its headline earnings soaring and becoming highly cash-generative. 

Tshabalala noted that the business has seen its return on equity surge from 18.5% to 33.7% since Liberty’s reincorporation, and its headline earnings jumped to R4.1 billion. 

While this headline number is relatively small in comparison to Standard Bank’s other business units, the IAM division plays a crucial role in improving the quality of the bank’s earnings. 

The earnings generated by this division are largely from fees and commission, which are not sensitive to interest rate fluctuations as banking activity is and do not consume capital as intensively. 

This makes these earnings higher-quality in the eyes of investors as they are highly predictable and translate more directly into cash and, thus, returns for shareholders. 

“I mean, there’s a number of other things we’ve done, but as you know, but those two are tangible. We did them. They were difficult, and they’re paying off,” Tshabalala said.