Standard Chartered Bank's exit from retail business and the future

As the new CEO of Standard Chartered Bank Tanzania, what are your top priorities, and how will they impact Tanzania’s financial sector?

As a global bank, strategic priority number one is to leverage our network in Tanzania. With our strengths being in Africa, Middle East and Asia, while also being listed in the UK and Hong Kong, what we do very well is to deliver that network to our clients, mainly the corporate banking clients.

The next strategic priority is about digitizing our operations. We want to make sure that we invest a lot more in digital and get all of our operations and transactions to online channels. Right now, close to about 95 percent to 96 percent of our transactions are actually done digitally.

Another strategic area is about sustainability and climate change. As an institution we’ve taken steps to accelerate our operations to net zero.

I’m happy to note that our key regulator – Bank of Tanzania (BoT), is actually committed and aligned with the ambitions for sustainability.

We’re also working with the Ministry of Finance to come up with a sustainable finance framework which will enable the country to take advantage of some better priced financing which is available in the debt and capital markets.

Standard Chartered Bank Tanzania is set to exit consumer, private and business banking in Tanzania. What does this mean for your clients and your operations in the country?

We are committed and we believe in the prospects for Tanzania in terms of growth. When you look at East Africa, one of the best performing markets is actually Tanzania in fundamental areas: GDP growth, inflation, stability of exchange rates and interest rates.

However, what we did was to rebalance our portfolio by assessing our priority areas and where we can make the most impact. We will only do business where we believe there is scale and scope. I have no doubt that there are enough banks active to support the retail business in Tanzania.

How would exiting retail banking impact your revenue?

When it comes to contribution of the topline and bottom-line, the commercial, corporate and institutional banking (CCIB) contributes about 86 percent of the topline of the revenues of the bank, and the balance is contributed by the retail.

When it comes to the bottom-line, the CCIB contributes even a bigger share, close to 97 percent. It’s not that the retail business loses us money, but we decided that we can do a lot more by concentrating on what we do very well.

Now, there’s a lot of talk about this exit, but the underlying principle in terms of who we will choose to partner with or to sell the retail portfolio, our objective is to ensure that we’ve got the best outcomes for our clients.

This includes; what kind of proposition and capabilities does the bidder have for our people? Will they be taking the retail staff and what kind of packages will they be given? Those are the top considerations. But also, whoever we want to sell the portfolio to has got to be approved by the Central Bank.

So, there’s not going to be any job losses in this transition?

No. Our record in the market is that we always deliver more than what the law requires us to in terms of the treatment of our people. Even when we have to exit staff, we treat them with dignity. We train our people in order to make them ready to take up opportunities that may be available in the market in the future.

How long will this transition take until it is wrapped up?

I cannot give dates at this point in time. The progress is very good on our side, internally. But remember, we have a key stakeholder that we work with, and that is the BoT. They’ve communicated with us in terms of imperatives, and there are certain boxes that we have to tick.

Are there any banks that have shown interest in taking up your retail business?

There are bidders. There are people who have shown interest. But I think it’s still early in the day, so we should give it time, and at the appropriate stage we will go to the market.

Standard Chartered Bank was listed as the third most profitable bank in Tanzania in the half-year results for 2022. What are the projections for the remainder of the year?

We have done exceptionally well on a year-to-date and year-on-year basis. We’ve managed to achieve this through the people we work with and the innovation.

When you look at the details, there’s a lot of work that was done in the financial markets department, transaction banking – cash management, and risk management.

Our strength in Africa, Middle East and Asia has also helped. BoT has helped with price stability and stability in foreign exchange. We also credit the good performance to the government in general.

It has created an environment that gives hope and confidence to foreign investors to actually invest or lend money to our clients in Tanzania.

Government monetary incentives have enabled banks to slash lending rates while increasing liquidity. How has your bank utilised this financial facility?

The central bank came up with a fund which banks can access for onward lending to impacted clients, but also to boost investment in agriculture. Now, specifically for Standard Chartered Bank, our participation was very limited. We still have pools of liquidity within the bank which we think can be utilized for funding.

One of the biggest advantages we have in this market, or one of the strengths that we have, is actually mobilising dollar deposits. Not only do we have to use our balance sheet in Tanzania to lend to our clients in foreign currency, but we also have offshore booking locations.

But in addition to that, we initiate/originate business, and sell down to other international financial institutions which have good appetite for Tanzania.

So, there are a lot of other pools that we can tap into. But specifically for what we call the stimulus package or the recovery fund for Tanzania, Standard Chartered Bank did not play a major role. We are able to assist our clients with the restructuring of the loans, longer tenants where required.

How do NPLs look like at the moment?

They are in the low single digits thanks to our risk management framework.

Banks tend to be risk averse when issuing loans, this leaves startups and small businesses on the losing end.

What percentage of Standard Chartered Bank loans are channeled to rising businesses? What are the rates in terms of loans and how are they strategised?

I think youth employment and lifting the participation of women is a lot more critical if you are going to get a lot more people out of poverty. Standard Chartered Bank might not participate directly in funding some youth groups, women groups or fintechs, but what we do is provide funding to some other players, like MFIs, that have got a better scope to support such segments.

You can call them intermediaries. We work with some very big microfinance institutions who give lines of credit to women and youth, and their stats are looking pretty good.

The latest mortgage finance report for the first half of 2022 shows dismal growth in the sector. How can private and public investors (lenders included) boost the real estate industry? Is a review of regulations the major way out?

The dynamics in Tanzania, I think, need to be reexamined. And there are lots of stakeholders who need to sit down and talk about the dynamics, the fundamental structural issues to do with mortgage.

When you look at the market, the limited information I have is that the mortgage contributes quite a small portion of the lending book or portfolio in Tanzania.

If someone is going to come and invest $200,000 or $300,000 as a project, these, in my understanding, will only be accessible by a few people.

Now, you probably need to be talking about houses in the range of around $60,000 which is equivalent to about Sh130 million. But why is it that we’ve not been able to attract people to invest in such houses? I think there are a lot more issues in there.

The issue of cost can be addressed, but I think it comes at the tail-end; after sorting out the structural issues. Why aren’t the investors coming in to put money? Not everybody can borrow money to build their own house.

For us, our job is to intermediate, to lend money to the population. But we can only lend it when we know of performance prospects, because it’s not our money, it’s the client’s money. We have to be sure that that money will be brought back.

So, I think we need to sort out the fundamental issues.

Give us a quick assessment of the impact of the electronic transaction levies on your business.

I have to say, we are a law abiding institution. We follow the laws of the land..

From where I sit, and also under the umbrella of the Tanzania Bankers Association, I think our role is to provide information to the authorities, to give feedback when we are consulted – whether during the process, before or after, our role is to provide feedback coming from our clients in terms of what they think about this.

At the end of the day, we are all working towards financial inclusion. I think the goal should be to pull more people into the formal sector, then us as banks can play a bigger role to intermediate.