A tale of two foreign banks: StanChart, Barclays


Once banks have published their financial results, comparisons can’t be helped. However, it’s always good to compare like-for-like — not apples and oranges.

Financial Sector Spotlight with Omen Muza

This is why I decided to compare the performances of Barclays Bank of Zimbabwe Limited (Barclays) and Standard Chartered Bank Zimbabwe Limited (StanChart).
Both have British parentage, both have been in Zimbabwe for over 100 years and both are (AA-) rated banks.

Given these similarities, the difference in financial performance can therefore only be down to strategic intent and focus.

The analysis below compares the banks’ key financial indicators as at June 30, 2013.

At a loan-to-deposit rate of 42% compared to StanChart’s 62%, Barclays is converting less than half of its liabilities (deposits) into assets (loans and advances).

This explains why its net interest income, at $5,77m is much lower than StanChart’s $12,0 million.

The interesting thing, however, is that Barclays has a cost-income ratio of 94%, which makes its operating model less cost-efficient because for every $1 of income made, 94 cents are gobbled by operating costs, while StanChart spends 67 cents out of every dollar to meet operating costs.

It would appear that Barclays’ strategy is to generate just enough revenue ($19million) to meet operating expenses ($18 million) but this comes back to bite it in the back because the bank’s cumulative retained earnings since 2009 amount to only $4.5 million compared to StanChart’s $36,2million.

Barclays’ weak profitability ultimately shows up in a total capital and reserves position of $41,7 million compared to StanChart’s $72,7 million, though the banks have very close capital adequacy ratios of 20% and 17% respectively.

Clearly, at the current rate of profit growth, it will be a while before Barclays can begin to meaningfully grow its capital base from retained earnings.
Interestingly, the banks have almost similar liquidity ratios of 56% (StanChart) and 57% (Barclays) against a regulatory minimum of 30%.

A modest balance sheet that is 67% of StanChart’s means Barclays cannot comparably drive the huge transaction volumes required to grow fee and commission revenue, notwithstanding the impact of the Reserve Bank of Zimbabwe/Banks Association of Zimbabwe memorandum of understanding.

Interestingly, despite the significant differences in financial performance, it would appear that strategically, not much separates the two banks. For the most part, they just say the same things, only in different words.

Operating Environment: While StanChart acknowledges a challenging operating environment; it still manages to perform well and continues to be well capitalised and highly liquid.

Barclays similarly sees a stable, but uncertain economic landscape, characterised by signs of slowdown in the performance of some sectors, which it however fails to rise above by mustering an assertive performance comparable to StanChart’s.

Lending Approach: While StanChart talks about a financial position that is “well diversified and conservative with limited exposure to problematic asset classes,” Barclays similarly refers to a lending approach consistent with a “cautious growth strategy . . . against the backdrop of market levels of non-performing loans that have been assessed by independent analysts to be higher than international benchmarks.”

StanChart tempers its conservative approach with mention of the “bank’s continued focus on meeting the needs of its customers and clients while adhering to all prudential guidelines,” and Barclays also professes that it “is firmly committed to delivering sustainable results premised on delivering improved customer experience, cost containment and optimisation.”

Where StanChart professes that — despite the several major challenges facing the economy — it “remains committed to positively contributing to the economy through continued support to key sectors such as agriculture, trade commodities and small to medium enterprises,” Barclays appears non-committal and talks about having “maintained strong liquidity ratios considering the lack of a viable money market and lender of last resort arrangement.”

Sustainability: During the period under review, StanChart launched an internship programme with an initial intake of fifteen students under the broad umbrella of “sustainability”.

Barclays on the other hand refers to it as “community development” and talks about having embarked on “a training programme run for school and college students themed Unlocking Youth Potential and designed to impart entrepreneurial skills to the youths.”

The future: Through its brand promise, StanChart says it will be “here for good” (premised on the three pillars, to be “here for people, here for progress and here for the long run”) and accordingly “reaffirms its commitment to Zimbabwe”.

Barclays also promises that “our focus remains on the long haul” and undertakes to “continue to focus on creating sustainable growth over the long term.”
My conclusion is that both StanChart and Barclays are banks of means.

The difference is that one chooses to deploy its means effectively in spite of the operating environment while the other appears — for now — to be content with being constrained by the same environment.


  1. A well presented comparative analysis. But the following issues which I am sure the main shareholders are also seized with: 1) Country Exposure Risk and 2) Reputational Risk.

    1) Country Exposure Risk: The currency in use in this country is foreign. Banks are lending foreign currency without a lender of last report which leaves the shareholder exposed to extent of all deposits. In the event of depositors calling up their funds, how will the banks repay the customers? Not from calling up on borrowing customers because these will need time to convert stock, debtors, work in progress etc to cash.

    2) Failing to pay depositors will result in Reputational Risk for the banks. A number of the depositors have taken Barclays and Standard Banks as safe havens because of their International image. However should the banks fail to pay depositors in the currency of their investments because the Zimbabwean Government has decreed that all bank balances and deposits be localised in currency, then these banks’ international image will be impacted upon.

    It therefore not surprising that the international banks are cautious about local lendings and exposure.

  2. Great article.

    However, in the printed copy you placed a picture of Standard Bank (Parent to Stanbic Bank Zimbabwe) and labled it as StanChart (Standard Chartered Bank). The two are different entities as far as I understand.

    Good analysis.

    • You right stanbic and Standard Chartered Bank are two separate banks. Stanbic is Standard Bank SA they bought themselves out of Standard Chartered Bank a long time ago. StanChart where mainly a colonial bank. Although HQed in UK and listed mainly in Singapore and London should we not treat them as a Singapore Bank since GIC and A Singapore Government sovereign wealth Fund is the biggest StanChart share holder? If takes the profits of just a few million is this what the indigenisation stooges are sreaming for. Sure considering StanChart international makes over $5billion profits. I wonder how much Zimbabwe contributes in terms earnings per share to shareholders in Singapore and London?

  3. Well researched article, however, what should the two banks do in the Zimbabwean context. May your analysis should end with an opinion that mirors the customer expectation. Secondly Barclays seems to lack strategic muscle to match Stanchart.

  4. Good thing its an opinion piece otherwise i would wonder what the opinion of our journalists on the whole is. Everyone seems to rate the quality of the publishing rather than the objective content therein.

  5. Good and well written analysis, with enough technical issues, yet simple enough for most people to understand. You seem to have met your objective of performance analysis, a follow-up artitle on outlook given the current environment (election and new government) could be useful.

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