Standard Bank chief executive Sim Tshabalala says that customer needs and competitive pressures has forced the group to rapidly digitise its business – resulting in job losses and branch closures.
In its latest annual report for the year ended December 2019, Standard Bank reported 44,996 permanent employees, down from 47,419 in the previous year – a loss of 2,423 employees.
The vast majority of these losses were in South Africa, where permanent employees dropped by 2,060 to 30,102 people.
While the bank does not specify under what conditions these job losses were driven (In its 2019 financial results, the group said it only formally retrenched fewer than 100 people), it is in line with the group’s digital strategy to downscale branches and physical banking points of presence.
The group closed 91 branches over the year, to 1,114 branches by its end – while the number of Standard Bank ATMs also declined by 254, to 8,970 across all operations.
Tshabalala said the group has had no choice but to downscale its physical presence as technology has shifted client expectations when it comes to banking services – and competitors are hungry for its business.
“Standard Bank Group has no choice but to become a digital company. An overwhelming majority of our clients prefer to do almost all of their transactions online,” he said.
“Our competition is increasingly digital and often does not bear the costs of a large and long-established incumbent. If we fail to digitise urgently, efficiently and successfully, our clients will leave us, and our shareholders will shift their investments to more competitive alternatives. Both clients and shareholders would be quite right to do so.”
Speaking to the impact this has on employees, Tshabalala said that the group is trying to ensure that losses are minimised.
“We remain mindful that digitisation is not an end in itself. It is a tool we use to serve our clients and our communities better, to make more efficient and profitable use of the capital entrusted to us by our investors, and to fulfil our purpose.
“We will continue to do everything we can to ensure that our employees have the skills they need as our industry digitises,” he said.
“We work very hard to ensure that changes are made with empathy, as well as efficiency, that the minimum number of jobs are lost, and that people who leave the group are well-equipped to find new jobs or start their own businesses.”
Standard Bank has acknowledging several instances of prolonged system downtime and other technical glitches along the way.
“As with all major changes, there were some missteps and unintended consequences arising from our branch reconfiguration in South Africa, which we have since done everything we can to rectify,” the chief executive said.
“We had a number of system outages that took too long to repair. We recognise that prolonged system outages severely inconvenienced our clients, undermined their trust in us and damaged our reputation.
“I am pleased to report that we made encouraging progress in restoring system stability and reducing recovery time in the second half of the year.”
However, Tshabalala stressed that the bank is not ‘declaring victory’, adding that the group’s systems are complex and are likely to experience downtime again in the future.
“However, ensuring that we recover much more quickly – and that the impact is contained when the system does go down – is one of my highest priorities for 2020 and beyond,” he said.
In March, the group’s financial performance reflected positively on the strategy to cut jobs and close branches.
It reported a 5% jump in revenue to R110.5 billion for the full year ended December 2019, aided by cost-cutting in a struggling South African economy.
Banking operations saw headline earnings up 5% on the prior year (FY18) to R27.2 billion and a return on equity (ROE) of 18.1%.
This result was driven by quality top-line growth and continued positive operating leverage, it said.
Group headline earnings were R28.2 billion, an increase of 1% on FY18, and ROE was 16.8%. The group’s capital position remained strong, with a common equity tier 1 capital adequacy (CET1) ratio of 14%.
Standard Bank said it was able to contain cost growth and expenditure in 2019, supported by a reduction in headcount. Costs increased 4% year on year.
“Cost growth was well contained, resulting in continued positive operating leverage. A decline in headcount supported slower growth in staff costs,” the bank said.