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Johannesburg - A R7bn bad debt provision has not been enough to deter analysts from the investment case for Standard Bank, which has bucked industry trends by looking at expansion opportunities in emerging markets such as China, Africa, Russia and Argentina.
Tracey Brodziak, a portfolio manager at Old Mutual Investment Group South Africa (Omigsa), said it believed Standard Bank's emerging market strategy was the "right one", adding that the bank has managed capital prudently.
Standard announced its interim results to end-June on Thursday, stating it had derived profits of about R128m from its relationship with the Industrial and Commercial Bank of China (ICBC), which owes a 20% stake of the group.
Standard also said it was "on track" to take a 33% stake in Troika Dialog Group, the largest independent investment bank in Russia.
Stephen Meintjes, head of research at stockbrokerage Imara SP Reid, said the relationship with ICBC was starting to "ramp up steadily". He added Standard Bank had made a lot of investments in technology in Africa, which he expected to pay off in a couple of years.
"They need to be up to scratch on technology because one of their competitors, Nedbank's partner Ecobank, is said to have state-of-the-art technology," said Meintjes.
Patrice Rassou, an analyst with Sanlam Investment Managers (SIM), cautioned: "Overall it looks like offshore diversification may not be paying off," adding that Standard Bank had failed to reach some of its targets.
"I think ICBC will become a key differentiator for them to unlock value in Africa," concluded Rassou.
Asked about the R7bn bad debt provision, Brodziak said: "Actual write-offs [R2.3bn] are still way below the income statement charge [R7bn]."
Brodziak added that all three of the big banking groups which have reported in the last two weeks (Absa, Nedbank and Standard) said they had seen an improvement in their arrears.
Standard Banks shares closed 0.2% lower at 9 551c on Thursday.
*The writer holds ordinary and preference shares in Standard Bank.