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Banks: no foreign free-for-all

Aug 29 2010 08:28 Andile Ntingi

Company Data

Oldmutual [JSE : OML]

Last traded R19.23
Change R0.32
% Change 1.69%
Cumulative volume 6.05m
Market cap R106.96bn

Last Updated: 13/02/2012 at 17:42. Prices are delayed by 15 minutes. Source: McGregor BFA

 

Nedbank [JSE : NED]

Last traded R158.90
Change R1.50
% Change 0.95%
Cumulative volume 410,042
Market cap R80.63bn

Last Updated: 13/02/2012 at 17:42. Prices are delayed by 15 minutes. Source: McGregor BFA

 

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Johannesburg - The Reserve Bank has not abandoned its traditional four-pillar policy, which favours ownership of the country’s Big Four banks remaining in the hands of South Africans.

This was reiterated by Banking Regulator Errol Kruger in the wake of news this week that British bank HSBC had entered into exclusive talks with Nedbank Group [JSE:NED] parent, the London-listed Old Mutual [JSE:OML], that could result in it acquiring a controlling stake in the lender, the smallest of South Africa’s four large banks.

“Our preference is not for the majority of the banking sector to be foreign owned, but this proposed transaction is merely the substitution of one foreign shareholder with another,” Kruger said.

It was speculated this week that HSBC might purchase 70% of Nedbank for an estimated $7bn (about R51bn).

If the deal materialises, Nedbank will be the second foreign-controlled Big Four lender, following the takeover of Absa by British bank Barclays in 2005 for $5.5bn.

Standard Bank is 20% owned by Industrial & Commercial Bank of China, while FirstRand Bank, the parent of retail lender First National Bank and asset financier Wesbank, is yet to get hitched to a foreign partner.

In 2004, when the Absa-Barclays deal was being negotiated, former Reserve Bank governor Tito Mboweni, who is a proponent of the four-pillar policy, expressed his dislike of local banks falling into the hands of foreigners. However, he relented and supported the acquisition, only to criticise it in 2007 when he told British financial publication Financial Times that Barclays was interested in repatriating dividends out of South Africa and he had yet to see Absa rolling out new products as a result of its relationship with the British lender.

The four-pillar policy is premised on having South Africa’s banking sector dominated by four well-capitalised banks, preferably owned by locals who reinvest their dividends inside the country.

This policy found more favour with its supporters in the aftermath of the Argentinian 2001-2002 debt crisis, in which foreign banks were accused by authorities of worsening the crisis in Argentina by illegally repatriating more than $30bn.

HSBC and US banking giant Citigroup were among seven foreign banks raided by Argentinian police in connection with the large-scale capital flight which contributed to the country defaulting on debt of nearly $100bn. 

 
 
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