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14 - Standard Bank

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  • 1. Africa – Where to from here? 2008 Mark Cohen Resource Banking Africa Standard Bank’s Corporate and Investment Banking Division
  • 2. Standard Bank is a global organisation with expertise in all aspects of banking and financial advisory services
    • South African head quartered financial services company. With over 50,000 employees globally
    • Global presence operating from 17 African countries and 22 other countries globally
    • Largest African banking group by assets, market capitalization and earnings
    • Total assets of USD150 bn*, Market capitalisation of USD17 bn* Headline earnings of USD1.7 bn**
    * At 31 December 2007 ** For the year ended 31 December 2007 Source: Standard Bank analysis
    • Corporate and Investment Banking
    • Provides corporate and investment banking and related services to large corporates
    • Services offered across our African and international bank networks
    • Personal and Business Banking
    • Provides banking, investment, insurance and other financial services to individuals and small to medium-sized enterprises
    • Products offered throughout South Africa and in certain African countries
    • Investment Management and Life Insurance
    • Subsidiary, Liberty Life, provides a range of life cover and investment products to individual and corporate clients
    • African achievements and awards
    • 2007/8 Bank of the Year for Emerging Markets – The Banker Magazine
    • 2007/8 Ranked best sub-Saharan bank – The Banker Magazine
    • 2007 Ranked 106th in the Top 1 000 World Banks Awards – The Banker Magazine
    • 2007 Best Project Finance House in Africa – Euromoney Magazine
    • 2007 Best Debt house in Africa – Euromoney Magazine
    African roots with a global reach, and 145 years experience on the African continent
  • 3. Standard Bank has a focused and dedicated Global Mining and Metals Capability Capabilities
    • The Mining & Metals’ team provides financing, advisory, trading and hedging services exclusively to the mining, metals and minerals industries
    • The Mining & Metals’ team of professionals is based in Johannesburg, London, New York, Sydney and Shanghai and is supplemented by staff in Moscow
    • Advisory Services
    • Mergers and acquisitions
    • Corporate finance and strategic advice
    • Divestitures and asset sales
    • Valuations and fairness opinions
    • Project finance and debt-related advisory
    • Privatisations
    Products & Services
    • Comprehensive industry knowledge and relationships
    • Global coverage including cross border capability and emerging market expertise
    • Extensive mining and metals financing and advisory experience
    • Ability to lever off other Resource Banking products
    Key strengths
    • Financing Services
    • Arranger and agent for:
    • Recourse and non-recourse project finance
    • Structured hedging and trading programs
    • Asset-backed finance
    • Corporate credit facilities
    Deals of the year awards Africa’s largest copper mine financing US$583.8 million senior and subordinated project finance Equinox’s Lumwana Copper Project Finland’s first nickel mine US$320 million senior project finance Talvivaara Nickel Project
  • 4. African Footprint
    • Standard Bank Group trades under the name Standard Bank in Angola, Lesotho, Mauritius, Malawi, Mozambique, Namibia, South Africa and Swaziland;
    • Stanbic Bank in Botswana, Democratic Republic of Congo, Ghana, Madagascar, Tanzania, Uganda, Zambia and Zimbabwe;
    • Stanbic IBTC in Nigeria
    • CfC Stanbic Holdings in Kenya
    ✔ ✔ Zimbabwe ✔ ✔ Zambia ✔ ✔ Uganda ✔ ✔ Tanzania ✔ ✔ Swaziland ✔ Nigeria ✔ ✔ Namibia ✔ ✔ Mozambique ✔ Mauritius ✔ ✔ Malawi ✔ ✔ Lesotho ✔ ✔ Kenya ✔ ✔ Ghana ✔ Congo ✔ ✔ Botswana ✔ Angola ✔ ✔ South Africa Personal & Business Banking Corporate & Investment Banking Country
  • 5. African production and Chinese consumption – a Balancing Act Source: CRU
    • The following scenarios were presented at last years Mine Africa and the potential impacts on price
    • The scenarios have fundamentally changed in the space of 3 months
    • Apparent Global Demand has fallen dramatically and whilst Africa has under-delivered and looks to continue this way for some time
    “ Africa delivers” “ African projects hit bottlenecks” “ China marches on” “ China slows” ‘ Slow China’: China growth 8.5%, ‘ Fast China’: China growth 16% BRI 9.5%
  • 6. Copper price: High-price period or short-lived spike? ? Previous ‘spikes’ are long-lived BUT so are the lows
    • The historical high and low spikes have been pronounced
    • The historical periods of high prices and low prices have been lengthy
    • Last year the question was: Is a USD 1.20-1.50/lb a realistic long term price forecast for copper? Projects have been using 1.80 – 2.20/lb, the question now begs are we returning to a protracted stay at old long-term prices
    Source: CRU ?
  • 7. Growth down – commodities down Sources: Standard CIB Global Research; Bloomberg WTI crude and previous downturns
    • Growth outlook deteriorating
    • The current Global crisis is a combination of the 4 highlighted downturns
  • 8. US monetary and credit conditions US monetary policy conditions still bearish despite rate cuts Source: Standard CIB Global Research Expansionary conditions Restrictive conditions
    • The negative factors
    Perceived default probability has increased and CDS spreads on the rise Sources: Standard CIB Global Research; Bloomberg
  • 9. Consumer confidence and spending decline Consumer confidence indices Motor vehicle sales (US, EU, Japan, China, S. Korea) Sources: Standard CIB Global Research; Bloomberg Sources: Standard CIB Global Research; Bloomberg
    • The negative factors
  • 10. 3bn people could more than double energy consumption and by inference metals and minerals Sources: Standard CIB Global Research; BP; IMF Human development vs. crude oil consumption
    • There are still positives
  • 11. Outlook – recovery on the horizon
    • Global financial risk remains elevated
    • There are substantial recovery and stimulus packages in the US, Europe and China
    • Demand and supply-side of the economy under severe pressure in developed markets
    • EM commodity demand should remain, but
      • Demand growth should be lower
      • Financial risk is spilling over into Emerging Markets real GDP growth
    • Look out for Emerging Markets Foreign Exchange
    • Should LIBOR rates decline, and policy stays expansionary, support could start filtering through. Brunt of the MP stance felt:
      • Almost immediately by gold
      • With a lag of 12 months on energy
      • With a lag of 18 months on industrial metals
  • 12. Africa snapshot – Never before has Africa been so well poised Economist, May 2000 Broad-based GDP growth Fiscal balance Average real GDP growth
  • 13. Africa snapshot – The wait has been long External Debt Current account balance GDP per capita Reserves to imports
  • 14. Cost Curves and Africa’s Mines
    • African projects are at different points of the cost curve
    • Average estimated cost of production (including depreciation) for African Copper projects is USD1.40/lb in 2006 money
    • How will these African projects as well as new greenfields and brownfields projects be affected by dropping commodity prices? From both operating and capital costs
  • 15. African opportunities/project activity going forward
    • Short to medium term “wait and see” with pockets of opportunities
    • Industry consolidation via:
      • Strategic Partnering and Investment
      • Merging of Explorers and Juniors
      • Acquisitions of green and brownfield projects
    • Strategic Partnering and Acquisitions to be done by:
      • Multinational Resource Companies
      • Chinese, Indian and Russian Resource Companies
    • Renewed focus on “quality” assets and projects
    • Africa to remain a swing producer/supplier
  • 16. Some Insights and Challenges
    • Internal bureaucracy
    • Differential legislation and governance
    • Mineral rights
    • Young democracy
    • Resurgence in violent upheaval
    • Skewed views of mining companies
    • Citizen empowerment, Indigenisation and Economic Empowerment
  • 17. Disclaimer
    • The analyst(s) who prepared this research report (denoted by an asterisk*) hereby certifies(y) that: (i) all of the views and opinions expressed in this research report accurately reflect the research analyst's(s') personal views about the subject investment(s) and issuer(s) and (ii) no part of the analyst’s(s’) compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed by the analyst(s) in this research report.
    • Conflict of Interest
    • It is the policy of The Standard Bank Group Limited and its worldwide affiliates and subsidiaries (together the “Standard Bank Group”) that research analysts may not be involved in activities in a way that suggests that he or she is representing the interests of any member of the Standard Bank Group or its clients if this is reasonably likely to appear to be inconsistent with providing independent investment research. In addition research analysts’ reporting lines are structured so as to avoid any conflict of interests. For example, research analysts cannot be subject to the supervision or control of anyone in the Standard Bank Group’s investment banking or sales and trading departments. However, such sales and trading departments may trade, as principal, on the basis of the research analyst’s published research. Therefore, the proprietary interests of those sales and trading departments may conflict with your interests
    • Legal Entities:
    • To U. S. Residents
    • Standard New York Securities, Inc. is registered with the Securities and Exchange Commission as a broker-dealer and is also a member of the FINRA and SIPC. Standard Americas, Inc is registered as a commodity trading advisor and a commodity pool operator with the CFTC and is also a member of the NFA. Both are affiliates of Standard Bank Plc and Standard Bank of South Africa. Standard New York Securities, Inc is responsible for the dissemination of this research report in the United States. Any recipient of this research in the United States wishing to effect a transaction in any security mentioned herein should do so by contacting Standard New York Securities, Inc.
    • To South African Residents
    • The Standard Bank of South Africa Limited (Reg.No.1962/000738/06) is regulated by the South African Reserve Bank and is an Authorised Financial Services Provider.
    • To U.K. Residents
    • Standard Bank Plc is authorised and regulated by the Financial Services Authority (register number 124823) and is an affiliate of Standard Bank of South Africa. The information contained herein does not apply to, and should not be relied upon by, retail customers.
    • General
    • This research report is based on information from sources that Standard Bank Group believes to be reliable. Whilst every care has been taken in preparing this document, no research analyst or member of the Standard Bank Group gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy or completeness of the information set out in this document (except with respect to any disclosures relative to members of the Standard Bank Group and the research analyst’s involvement with any issuer referred to above). All views, opinions and estimates contained in this document may be changed after publication at any time without notice. Past performance is not indicative of future results. The investments and strategies discussed here may not be suitable for all investors or any particular class of investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in price or value. Changes in rates of exchange may have an adverse effect on the value of investments. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Members of Standard Bank Group may act as placement agent, advisor or lender, make a market in, or may have been a manager or a co-manager of, the most recent public offering in respect of any investments or issuers referenced in this report. Members of the Standard Bank Group and/or their respective directors and employees may own the investments of any of the issuers discussed herein and may sell them to or buy them from customers on a principal basis. This report is intended solely for clients and prospective clients of members of the Standard Bank Group and is not intended for, and may not be relied on by, retail customers or persons to whom this report may not be provided by law. This report is for information purposes only and may not be reproduced or distributed to any other person without the prior consent of a member of the Standard Bank Group. Unauthorised use or disclosure of this document is strictly prohibited. By accepting this document, you agree to be bound by the foregoing limitations. Copyright 2008 Standard Bank Group. All rights reserved.