South Africa’s biggest bank has a hidden juggernaut

Standard Bank has undergone the extensive process of cleaning up and repositioning its business and commercial banking (BCB) unit, with it becoming a significant contributor to the bank’s earnings. 

However, it is facing increased competition from traditional challengers such as Nedbank, Absa, and Investec, which have repositioned their offerings in recent years. 

Newcomers to business banking, such as Capitec, are also becoming more competitive within the space, challenging the existing dominance of the traditional Big Four of Standard Bank, Absa, Nedbank, and FNB. 

Head of Standard Bank’s BCB unit in South Africa, Simone Cooper, explained how it has repositioned its own offering to capitalise on future growth. 

The bank’s BCB unit has become increasingly important at a group level, with its 816,000 clients contributing R9.3 billion in headline earnings. 

Crucially, this division also has the highest return on equity of all of the bank’s operating divisions, making it a highly profitable part of the business. 

In recent years, its growth has been relatively flat as it repositions itself in the market, with Cooper explaining that this process began four years ago when Standard Bank decides to split BCB out of its retail banking division. 

Since then, other banks have followed due to the growth of the sector and the need to provide clients with dedicated solutions. 

Businesses within this segment have also become increasingly large and lucrative, thus they require more services and products. 

Splitting out the division has enabled it to focus more on its enterprise banking offering that is geared towards small and medium-sized enterprises, where Standard Bank has traditionally struggled to gain traction and has lagged its peers. 

In contrast, in South Africa, the BCB unit has been dominant in the mid-corporate environment, which is highly lucrative and is a natural feeder for Standard Bank’s large Corporate and Investment Banking (CIB) division. 

“If you think about the landscape, we go right from your startup business, which can have R0 in turnover, right up to around R1.5 billion to R2 billion in turnover,” Cooper said. 

This begins with the bank’s enterprise banking offering, which covers companies with R0 to R10 million in turnover all the way up to R100 million in annual turnover.

From there, the bank’s commercial banking division typically would take on the client and work with them until they need services that can only be provided by the CIB unit, typically when turnover crosses R1.5 billion.

Traditionally, Standard Bank has dominated the upper end of htis market, with Cooper saying from R50 million in turnover upwards the bank has a strong position in the market. 

This includes large family-owned businesses, substantial SMEs, and some companies that will be handed over to the CIB division to access capital markets and potentially list on stock exchanges.

Cooper said in the past year, around 20 businesses have been passed on from BCB to the CIB division as they moved into that space. 

In this segment, the bank is aided significantly by its presence across Africa, which allows it to service clients across the continent. As businesses scale up, this ability becomes increasingly crucial. 

For example, it has seen strong demand from businesses in South Africa for its Mauritius offshore business banking offering, launched in 2024. 

It is also able to lean on Standard Bank’s historically prestigious CIB division to lend it sector-specific expertise, enable companies to access capital markets, and help them expand internationally 

Competition is heating up 

While Standard Bank is dominant in the mid-corporate segment of the market, its traditional weak point of enterprise banking is facing intense competition. 

In particular, Capitec has moved into this segment of the market aggressively, gaining 218,207 clients within the first few years of launching. 

It has specifically targeted South Africa’s SMEs and informal market, trying to replicate its retail banking success in this segment. 

Cooper said that Standard Bank has significantly overhauled its enterprise banking offering in recent years to better service these kinds of clients. 

“What we have been doing for the past three to four years is ensuring that we are creating capabilities in this environment, looking at how we create the right product and service offering,” Cooper said. 

“With the right digital capabilities, we think we will be able to effectively compete in that market. We have spent a long time retooling our business in the enterprise environment to be able to compete.” 

The key improvement in this regard has been the digitisation of the business banking offering, making it easier for clients to be onboarded and access products through an app or webpage. 

This makes it easier for smaller businesses to engage with Standard Bank’s traditional offerings and its full-suite of services. 

Cooper explained that the bank wants to lean into the competitive advantage of being able to offer clients a one-stop shop for business banking, something which competitors struggle to do. 

Despite the difference in their operating environments, Cooper said that a small business operating in a township has very similar demands and needs as a small business operating in Sandton or Rosebank. 

Ultimately, it comes down to what services the bank can provide to clients and their relationship with business owners. 

This is the core of business banking, Cooper said, and is key to how it sees competition playing out in its traditionally dominant mid-corporate or commercial banking businesses. 

Over the past few years, both Nedbank and Investec have launched offerings specifically targeting these businesses that are looking to tap into this lucrative market. 

Cooper believes Standard Bank’s offering will be able to withstand these challenges as it has established relationships with clients and a scale that is difficult to match. 

The bank has specific teams and offerings for these clients within its BCB unit and does not think it is necessary to launch a standalone offering as yet. 

“Typically, in this segment, you would have businesses that have established relationships with banks and many of them would have been with a single institution for a long time,” Cooper said. 

“As such, the most important thing for them is a strong relationship and the fact that the bank is with them through thick and thin.”

“We are not a fairweather bank. We are here for the long term, and that is something we pride ourselves on being able to do.”