Capitec flexes its muscle
Lender is bidding for the domestic business banking unit of Caixa Geral de Depositos.
Nedbank, PIC, and Grindrod Bank are also potential buyers.
Capitec Bank is switching gears from the focus on consumer lending that made it South Africa’s fastest-growing financial institution by bidding for the domestic business banking unit of Caixa Geral de Depositos (CGD) SA.
The lender is among four acquirers shortlisted for CGD’s Mercantile Bank.
Nedbank, a group of investors consisting of Bayport Financial Services, Public Investment Corporation (PIC), as well as a rival consortium comprising of Arise and Grindrod Bank are also bidding, according to Portugal’s official gazette. Fourteen bidders weren’t selected.
A deal would “fast-track our desire to expand our focus to a broader bank strategy”, Capitec chief financial officer Andre du Plessis said in an e-mail.
“There are many opportunities in the market to serve small-to-medium enterprises and owner-managed businesses better.”
Since it started operating in 2001, Capitec Bank has expanded away from only providing unsecured loans into taking deposits and offering funeral insurance to its almost 10 million customers.
A deal with Johannesburg-based Mercantile Bank would give Capitec access to a 53-year-old company mainly plugged into small- and medium-sized enterprises (SME).
‘Beef up’
“Mercantile is reasonably profitable, has a banking licence and a good customer base,” said Harry Botha, an analyst at Avior Capital Markets. “This is an opportunity for the smaller players in South Africa to beef up their offerings.”
A takeover would help Capitec narrow the gap with its much larger rivals like Nedbank, which has 10 times its assets and is well-established in business banking.
Mercantile Bank’s parent is disposing of assets to focus on its Portuguese home market as it seeks a capital injection from the European Union.
Other bidders
Arise was started in January last year by pooling together the African assets of Norfund, Rabobank Groep, and Dutch development bank FMO.
Grindrod Bank is South Africa’s eighth-biggest bank, focusing on corporate finance and lending, investments and property.
Bayport Financial Services is an unsecured lender started in 2004, while its partner, PIC, manages over R1.9 trillion in South African government pensions.
A deal would be Capitec’s first after it invested in Cream Finance Holding, founded in 2012 in Latvia, last year to add online lending services in eight countries including Czech Republic, Denmark, Georgia, Mexico, and Poland.
Du Plessis said in September 2015 that Capitec Bank was debating how to enter the SME market.
“The benefit of an acquisition is that we would not have to reinvent and create everything from scratch,” he said. “The problem with an acquisition is that one could buy others’ problems, but we will be able to do a detailed due diligence to ensure we understand what is for sale and what the major risks in the business are.”
Old Mutual Investment Group’s Neelash Hansjee said: “It is interesting that that they are considering this as it shows sustained confidence in penetrating and growing in South African market.”
Mercantile’s business clients would also offer existing lenders an attractive deposit base “which is cash in the bank”, while supporting transaction activity”, said Hansjee. – Bloomberg