It’s 19th May 2018 and millions of people across the globe are witnessing the royal wedding of Prince Harry and Meghan Markle. It was a historical occasion that happened at Windsor castle. A week later after this momentous occasion, financial observers around the world were treated to some more exciting news that filtered through on the markets.
Barclays Bank, the fifth largest bank in Europe with assets totaling over $1.496 trillion was considering a possible merger with Standard Chartered Bank. Standard Chartered bank is the 20th largest bank in Europe with total assets of $663.5 billion and is a star darling in the emerging markets of Asia, Middle East and Africa. It all seems like the United Kingdom is not yet done giving the world spectacular weddings and we might just have a sky blue wedding on the cards in the near future.
Although representatives from both banks were quick to rule out the possibility of a merger between the two banks and thereafter quashing the story as nothing more than a rumor, the idea itself was intriguing. However, even though their comments managed to put out a big fire that had been ignited on both sides of the Atlantic markets, it did not quite manage to put it out completely as there are still some flickering flames around the story. The story dared us to dream. To dream of possibilities, bigger possibilities for both banks. Here is my short simple story of why I think a Barclays-Standard Chartered merger would be the biggest corporate wedding in recent history.
Barclays bank is currently being headed by Jes Staley, a Wall Street banking veteran who had spent nearly three decades at JP Morgan Chase and was tipped for the top job there. He took up the Barclays top job in 2015 with a very big reputation and he knew it all too well such that he was able to muscle through his ambitious strategy of making Barclays the biggest transatlantic bank. He put into overdrive a restructuring plan to dispose of non-core assets that in his words were a “costly distraction” to the strategic vision of the bank. It was during his time when Barclays cut ties with its African operations after an illustrious century on the continent much to the displeasure of some financial observers who had always seen the African continent as a region with high growth potential in the long term.
A review of the 2017 financials in which Barclays made a pretax profit of $4.92 billion shows the man they simply call “Jes” is making considerable headways in turning around the fortunes of an institution that was once called the “English patient” due to the scandal ridden years which coincided with stagnated growth. Mr. Staley hailed 2017 as the year of “considerable strategic progress”. As of June 2018, Barclays had cleared a number of outstanding items.
This includes the fine from US authorities over the selling of risky mortgage backed securities, the whistle-blowing incident involving the CEO himself and the separation of retail and investment banking as required by the new ring-fencing UK rules. All this has made the bank leaner, scandal free and more focused on its strategy.
However, some financial observers including myself can’t help but spot an Achilles heel in the Barclays strategy; their absence in the emerging markets of Africa and Asia. For now, Jes Staley can stake his claim that his high stakes strategy is paying off due to the sluggish growth emerging economies have experienced mostly driven by a slump in commodities. However, in the medium to long term, there is just an instinctive feeling that emerging economies will shake off their problems and be centers of global growth. This might work against Barclay’s ambition of competing with some of the biggest banks in the world who have a global footprint. Surprisingly enough, Barclays Achilles heel happens to be the strongest point for Standard Chartered which is renowned for being an emerging markets darling.
Standard Chartered has had its own fair share of problems which culminated in a first ever full year loss in 2015 in over two decades. However, the bank has undergone restructuring under the leadership of Bill Winters and has returned on the growth trajectory. Many observers have sang praises for the Standard Chartered model in emerging markets which they consider second to none.
However, the Standard Chartered model has evolved slightly over the last few years, with the bank making massive investments in its investment banking division. The returns of the investment banking division however, even though reasonable to contribute to its bottom-line, have been below those of the industry top dogs and there is just a feeling investment banking simply isn’t its forte even though it’s trying really hard. Ironically, remember whose trying to build the biggest investment bank across both sides of the Atlantic? Yes, it’s none other than Jes Staley at Barclays.
Surprisingly, Jes and Bill Winters are former colleagues at JP Morgan Chase, makes it easier for them to meet over coffee and do the deal many of us want to see.
This is a short story of two British banks that are so different yet complement one another to near perfection. A corporate wedding between the two would create a behemoth global bank that would compete on all fronts with the best of the best in international banking. Every supporter of this merger must now look to John McFarlane, the current chairman of Barclays whose tenure runs out next year to engineer what could be his biggest deal of an illustrious career. Coincidentally, Mr. McFarlane worked for Standard Chartered for half a decade during his heydays.
Everything points to the deal. But then again, I must also admit I could be getting way ahead of myself. Maybe the two banks are just simply that; very different to one another! This could make the merger possibility nothing more than a fairy tale.
Needless to say, many financial observers are licking their lips at the prospect of seeing a sky blue wedding down the streets of London, but if that does not happen, then at least we dared to dream.
The author is an Economist, Writer and a Corporate Executive. All views expressed in this article are solely mine and do not represent the views of my employer, church and any other organization am affiliated to.
Lloyds Banking Group plans to operate three subsidiaries in continental Europe after Britain leaves the EU, according to a source familiar with the matter, in a sign of how Brexit is fragmenting a banking industry long concentrated in London.
Lloyds, Britain's biggest mortgage lender, was widely expected to manage its continental business from one new subsidiary in Berlin. But executives now plan two further hubs to service customers across the European Union, the source told Reuters. One is likely to be in Frankfurt and the location of the second is yet to be confirmed, the person said.
The plans by Lloyds - an institution more than 250 years old that has always concentrated its operations in Britain - shows how Brexit is forcing banks to upend history and business models to guarantee they can continue selling their products in Europe. They are part of a wider trend that is seeing lenders distribute their post-Brexit resources among a number of cities on the continent rather than basing the bulk of operations in one place as they have for decades in London.
Swiss bank UBS said in March it would pursue a "decentralized" model, in line with moves by Goldman Sachs, Bank of America and JPMorgan.
Such plans will incur greater costs and complexity, as each subsidiary needs to be capitalised and licensed by regulators. They run counter to the expectations among many executives and analysts, following Britain's 2016 vote to leave the EU, that banks would each choose one main continental hub to replace London, with Frankfurt, Paris and Dublin the frontrunners.
A spokesman for Lloyds declined to comment.
Earlier this year, separate sources told Reuters that Lloyds would house its main European subsidiary in Berlin, after converting an existing Bank of Scotland branch that Lloyds inherited following the HBOS takeover a decade ago.
The plan to run three continental units has partly been prompted by new British regulations that have already forced UK banks to carve up balance sheets into individually capitalised "ringfenced" and "non-ringfenced" entities ahead of a January 2019 deadline.
The rules are aimed at insulating bank depositors from riskier trading activities and protecting taxpayers from having to backstop troubled banks once deemed "too big to fail".
To comply with the rules following Brexit, Lloyds needs a second subsidiary to support its non-ringfenced euro bond trading business, the source said.
That subsidiary is likely to be set up in Frankfurt, the source said, which is home to Europe's biggest euro bond trading market outside London and offers the bank the best chance of running a smooth service to clients following Britain's expected exit from the EU single market on March 29 next year.
The Frankfurt subsidiary will not need a full banking licence but Lloyds has applied to Germany's financial markets regulator for the requisite investment firm licence, the source added.
Lloyds is also seeking to establish a third subsidiary in an as yet unconfirmed location to support its Scottish Widows "closed-book" insurance business, which include premium-paying policies from customers based across the European Union.
All three subsidiaries will need to be capitalised individually, the source said, but the total pool of capital needed is not expected to be large compared with the size of the group's overall balance sheet.
Earlier this year, Reuters reported the ultimate size of the pool of capital carved out to capitalise the Berlin subsidiary was expected to run to the "low hundreds of millions of pounds", representing less than 1 percent of the bank's overall capital.
Lloyds already employs around 300 people in Berlin, including a full management team, finance, risk and human resources staff. It expects to shift no more than a handful of staff from Britain to complement the existing workforce, the source said.
July 2018 marks Nelson Mandela’s centenary year. Why is he still so revered across the world? The answer simply is that he is widely regarded as the personification of values which he spent much of his life fighting for. These included social justice, democracy, and freedom.
At the Rivonia Trial in 1964, he asserted that it was these values for which he hoped to live, but for which he was “prepared to die”. He would spend 27 years in prison before he could realise his dream of a South Africa freed from repressive and brutal racial segregation.
In prison, Mandela’s stature and mythology was carefully nurtured by his movement, the African National Congress ANC, and the anti-apartheid movement. This established him as the focus for the global struggle against apartheid.
Mandela’s conviction and adherence to non-racialism and democratic ideals came to symbolise the intrinsic moral nature of the struggle against white minority rule.
In the world’s current international climate of conflict and political cynicism, Mandela’s legacy continues to serve as a rare example of a principled politician who represented an indefatigable commitment to forgiveness and reconciliation.
Mandela commanded respect and moral authority at home and abroad for his strong convictions, humility, and courageous actions that ensured all South Africans could live in a democratic society. These achievements in the face of enormous challenges should not be underestimated.
As South Africa’s first democratic president there was a clear emphasis on transformation for the majority. This came about through political action under the slogan “a better life for all”, the introduction of a progressive and liberal constitution, stabilising the economy, and enshrining the ideals of democracy by stepping down from the presidency after one term in office.
Yet there is mounting disquiet and frustration about the slow pace of South Africa’s transformation in the democratic era. This is characterised by stubborn economic inequality, growing unemployment, missed opportunities and the failure to establish the form of “new” society articulated by Mandela.
What would have seemed unthinkable a few years ago is a growing and vocal criticism of Mandela’s legacy. The primary target of this frustration is the compromises and reconciliation efforts of the early 1990s, which so endeared Mandela to the world. But for many South Africans the outcomes were too accommodating to the white minority.
Is the mounting criticism of Mandela fair? I would argue not. South Africa currently faces many challenges, but it isn’t Mandela who failed people’s expectations. The blame for that must be put squarely at the door of the country’s politicians.
Is criticism of Mandela fair?
First of all its deeply unfair and highly problematic to prescribe South Africa’s current travails on one person. Part of this problem stems from the perception that Mandela single-handedly delivered freedom for South Africa and led the negotiation process.
This is simply not true. And the “single story” is a disservice to the multitude of organisations and activists that fought apartheid including the ANC, the Black Consciousness Movement, trade unions, and the United Democratic Front.
In addition it was the collective leadership of the ANC, not Mandela alone, that negotiated with the National Party during the transition process to seek a political compromise.
The ANC should certainly have pushed for more concessions. In reality the party effectively sacrificed wider economic and social change for political power.
It is the lack of substantive change enacted during the transition that has prompted the emerging reevaluation of Mandela’s legacy.
To argue that Mandela “sold out” through these compromises is a misreading of the situation and fundamentally ignores the challenges and constraints of the period. These included: escalating violence across the country; the ANC negotiating from a position of structural weakness; the National Party remaining undefeated; the impossibility of overthrowing the apartheid regime by force; and a fundamentally altered post-Cold War political and economic environment.
Most important of all, 1994 was not supposed to be the final stage for transformation. Rather, it was a platform for future efforts. But the ANC has not succeeded in doing enough to initiate wider-societal transformation since 1994 based on the unfinished business of the negotiations.
The party’s inability to implement sustained policy changes for the benefit of the majority is evident from a number of ongoing political debates. These include anger about unemployment, land expropriation without compensation, and corruption.
In addition, the ANC appears to have lost its sense of direction. The political elite has been badly mired by scandals, most notably under the former presidency of Jacob Zuma.
There is no doubt Mandela was a complex and flawed individual, but his vision still matters. What is required in this centenary year is for people from all sections of society to work together to embody Mandela’s values and convictions to keep the country moving forward to overcome the deeply ingrained legacies and injustices of the past.
The Tanzania Mining Commission (TMC) appointed recently by President John Magufuli has uncovered rampant smuggling of the tanzanite gemstone from the Merelani mines despite the construction of a protective wall around the prime mining area as directed by the government.
Briefing reporters after visiting the mines, Commission Chairman Idris Kikula said the smuggling has reduced the monthly royalty collections from USD195000 to a measly USD17000.
However, the Manyara Regional Miners Association (Marema) chairman, Mr Sadick Mnenei, attributed the decline in royalties to a decline in operating capital.
"Capital for small-scale miners has decreased significantly due to the decline in money circulation," Mr Mnenei said - adding that the decline in agricultural products prices has also adversely impacted tanzanite production.
"Since mining is a longtime investment, I turned to farming pigeon peas alongside mining. But that business has also been hit hard, this has also impacted mining operations," Mr Mneinei explained. But, Prof Kikula accused tanzanite business agents of engaging in seriously cheating the authorities.
"Some of them are implicated in the smuggling and, since inspection is done manually for lack of modern inspection equipment at the exit, they easily smuggle out tanzanite," he said. "We have proposed that a specific tanzanite auctioning facility be built (within the walled area). This will enable the government to collect all the royalty it deserves," he stated, lamenting that the commission has noted an inordinate number of vehicles and people entering and leaving the mines, which could contribute to increased smuggling.
In that regard, the commission proposes that people should use special identity cards to gain entry into the sensitive areas, instead of national IDs or voter's registration cards.
Prof Kikula - who is also the University of Dodoma vice-chancellor - said unauthorized persons could scale the wall to enter and leave the mines because the wall hasn't been mounted with security and CCTV cameras. He nonetheless commended Suma-JKT for strengthening security around the periphery wall.
A tanzanite miner, Mr Joseph Kaaya, commended the government for building the wall to control smuggling. However, modern security equipment should be installed to sort out the criminals, he said.
Sh4 billion was used to construct the wall with the intention of curbing increasing tanzanite smuggling that made the neighbourhood a gemstone traders' paradise. President John Magufuli launched the wall 24.5km-long wall on April 6, 2018, which was built in the record time of three months by some 2,000 volunteers serving with the National Service.
Thereafter, the government collected $313000 in taxes from small-scale tanzanite miners between January and March, 2018. That amount was much higher than the USD74,388 collected in 2015 - and USD31,510 collected in 2016.