Fitch says Pan-african push to lift South African Bank growth

The Pak Banker - - 6BUSINESS -

Adding di­ver­si­fi­ca­tion by ex­pand­ing in Africa could en­hance South African banks' earn­ings prospects in the longer term, Fitch Rat­ings says. But a sig­nif­i­cant in­crease in ex­po­sures to other African mar­kets could weaken their credit pro­files.

The four ma­jor uni­ver­sal banks - Absa, FirstRand, Ned­bank and Stan­dard Bank - are all ge­o­graph­i­cally con­cen­trated in the domestic mar­ket by as­sets and earn­ings. De­vel­op­ing a panAfrican fran­chise will help com­pen­sate for more sub­dued domestic growth due to the rel­a­tively sat­u­rated lend­ing mar­ket and weak­ened growth prospects in South Africa. The fi­nan­cial cri­sis and its im­pact on eco­nomic prospects in many economies means the banks' search for growth will fo­cus on Africa rather than fur­ther abroad.

Ned­bank and FirstRand are the most likely can­di­dates look­ing for ac­qui­si­tion op­por­tu­ni­ties, as they have rel­a­tively less ex­po­sure out­side of their home mar­ket. Both banks have in­creased M&A ac­tiv­ity and or­ganic in­vest­ment in the rest of Africa.

Ned­bank's al­liance with Ecobank, the panAfrican bank­ing group, pro­vides it with ac­cess to 35 coun­tries in Africa. Ned­bank has an op­tion to con­vert a loan it has made to Ecobank into a 20% eq­uity stake. FirstRand is close to com­plet­ing its pur­chase of a 75% stake in Mer­chant Bank Ghana, opened a mer­chant bank in Nigeria last month, and is also ac­tively look­ing to ac­quire a small bank there. Stan­dard Bank (with op­er­a­tions in 16 African coun­tries) and Absa (12 coun­tries and ma­jor­ity owned by UK's Bar­clays) have a greater pres­ence on the con­ti­nent, es­pe­cially in the sub-Sa­ha­ran re­gion.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.