Troika Back to Haunt Standard Bank Long After Lender's Exit

(Bloomberg) -- Standard Bank Group Ltd. said there’s no reason to believe any of its businesses were linked to alleged money laundering involving Troika Dialog even though it owned a stake in the Moscow-based lender until 2012.

None of the entities that the Johannesburg-based company was involved in at the time have been mentioned in reports about the scandal, Alan Bedford-Shaw, the head of corporate development, said on a conference call Thursday. Africa’s largest lender bought 36 percent of Troika -- at the time Russia’s largest independent investment bank -- in September 2009, combining the business with its existing operations in the country.

Africa’s biggest bank is being dragged into the fray as almost daily revelations from the Organized Crime and Corruption Reporting Project and its partner news organizations widen the group of lenders involved in the scheme. The so-called Troika Laundromat was a financial network set up to help clients move money out of Russia and hide it.

Standard Bank agreed to sell Troika to Sberbank PJSC in 2011 in a $1 billion deal as part of a strategy switch to focus only on Africa and exit emerging markets from Turkey to Brazil.

The rejigged focus on Africa has paid off for Standard Bank, with a jump in earnings from its 20 operations outside of its home market helping to compensate for almost zero revenue growth and rising costs in South Africa. The pan-African businesses contributed 30 percent of revenue and posted a 19 percent increase in adjusted earnings through December.

Standard Bank’s African footprint “adds diversification and enhances growth opportunities,” Philip Richards, a banking analyst at Bloomberg Intelligence, said in a note. While it’s beholden to South Africa, modest improvements to the economy can be expected in 2019, and a return on equity ratio of 18 percent and strong capital levels afford “a buffer against short-term earnings pressure.”

A Lot to Do

The stock fell 3.6 percent, the most since Oct. 23, as revenue missed average analyst estimates. It was the biggest decliner in the six-member FTSE/JSE Africa Banks Index, which was hit by weakness in the rand and rising bond yields after South Africa’s current-account gap widened.

Standard Bank knows “that we need to do a lot more to improve” its cost-to-income ratio, Chief Executive Officer Sim Tshabalala said on a conference call. “For instance, we will continue the process of reconfiguring our distribution capabilities in South Africa” while reducing the number of branches and the floor space of its outlets and pushing customers toward digital channels.

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