March 5, 2020 / 6:21 AM / a month ago

UPDATE 2-Standard Bank posts flat profit as problem ICBCS venture drags

(Adds shares, details)

JOHANNESBURG, March 5 (Reuters) - Standard Bank, Africa’s largest lender by assets, posted flat full-year profit on Thursday, as losses deepened to $248 million at its struggling London-based joint venture with Industrial and Commercial Bank of China (ICBC).

The South African-based lender’s stake in the venture is one of the last remaining relics of its failed bid to become a global emerging markets lender - a strategy it has been trying to unwind in recent years to refocus on its home continent.

Standard Bank reported a 1% rise in headline earnings per share - the main profit measure in South Africa - to 1,766.7 cents ($1.16) in the year to Dec. 31, compared with 1,748.4 cents a year earlier.

The business unit housing its 40% stake in the venture, ICBC Standard Bank (ICBCS), was a drag, the lender said in a statement. Standard Bank’s share of losses in ICBCS was 1.4 billion rand.

“ICBC and the group, as shareholders, have had robust conversations and made meaningful progress with ICBCS management with regards to how best to put the business on a path to sustainable profitability,” Standard Bank said, adding this had already resulted in headcount reductions and cuts in business lines and locations.

The majority of ICBCS’ losses stemmed from problems at a single client, worth $198 million. Reuters reported earlier this week that a bet on a U.S.-based oil refinery went bad after a critical part of the refinery exploded, prompting heavy losses for ICBCS.

Standard Bank seeks to exit the venture, but cannot exercise an option to sell a 20% stake back to ICBC until the Chinese bank exercises its own option to buy the other half from the South African lender. ICBC owns the other 60% of ICBCS.

All of Standard Bank’s other business units posted higher earnings, including 5% growth at its corporate and investment bank and 2% growth in its South African retail business - an improvement on 2018 despite a further deterioration in the economy, which tipped into recession in the fourth quarter.

Going forward, it said conditions could to be tough in all of its markets.

“The macro-economic outlook in the countries in which we operate is uncertain and the operating environment is expected to remain challenging,” it said.

The bank’s shares rose 1.3% at market open.

($1 = 15.2736 rand)

$1 = 15.2860 rand Reporting by Emma Rumney; Editing by Subhranshu Sahu and Mark Potter

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