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Johannesburg - After a torrid last quarter in 2010, one would not have been surprised to see Jacko Maree and the top brass at Standard Bank Group [JSE:SBK] raising a shot of vodka to the decision to award the 2018 Fifa World Cup to Russia.
The blue bank has put a great deal of emphasis on its emerging markets strategy, including a 33% stake in Russian investment banking group Troika Dialog in September 2009.
However, this strategy has come under scrutiny from analysts as it has failed to show meaningful results in the face of the global economic slowdown.
This culminated in a decision to cull nearly 2 000 jobs in South Africa and London before the end of the year, a move which was met with heavy criticism from unions and employees.
The retrenchments and an aggressive cost-cutting campaign is expected to result in a saving of R2.3bn for the full year 2011, which analysts believe will contribute to earnings growth.
This, coupled with record low interest rates, should stimulate lending as the economic recovery takes hold.
However, as leading banks analyst Kokkie Kooyman noted, of the big four banks Standard Bank is the most vulnerable to low interest rates in terms of the hedging of its lending book. The longer the rates stay low, the more pain Standard takes in the near term.
While there are signs that an economic recovery is under way, one only has to look at the troubles at R1bn construction firm AGI - which this week saw its doors closed and workers sent home - to see that it remains fragile process.
In line with the global trend, interest rates are likely to stay lower for longer until there are genuine signs that increased economic activity turns into active job creation.
Analysts are not expecting the impact of the cost-cutting and improved environment to be felt in 2011, but for the patient there should be some cheer when Standard Bank reports in 2012.
Whether the likes of Troika Dialog are natural beneficiaries of the World Cup decision remains to be seen, but a look at the performance of the Russian steel firms after the announcement and the proposed $3.2bn in infrastructure spend could provide a catalyst over the next seven years.
A leaner and meaner Standard Bank, low interest rates and signs of increased demand for credit coupled with a potential kicker from its Russian exposure may be just the tonic for an embattled Maree and co to go into 2012 feeling a bit more upbeat.
- Fin24
* The writer holds ordinary and preference shares in Standard Bank.
