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Banks' poaching war hots up

Nov 09 2012 12:47 Bruce Whitfield

Company Data

BARCLAYS AFRICA GROUP LIMITED [JSE:BGA]

Last traded 0
Change 8,75
% Change 0
Cumulative volume 4002973
Market cap 151.63bn

Last Updated: 18-12-2014 at 04:35. Prices are delayed by 15 minutes. Source: McGregor BFA

STANDARD BANK GROUP LIMITED [JSE:SBK]

Last traded 0
Change 6,7
% Change 0
Cumulative volume 10728300
Market cap 231.63bn

Last Updated: 18-12-2014 at 04:36. Prices are delayed by 15 minutes. Source: McGregor BFA

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AS STANDARD Bank Group [JSE:SBE] announced it was bolstering its management team to take greater advantage of growth opportunities on the African continent north of its home territory, chief rival Absa Group [JSE:ASA] was preparing an announcement of its own.

It has claimed a second senior Standard Bank executive in six months to help drive the growth of its struggling combined Barclays/Absa Africa businesses.

Craig Bond is the latest Standard Bank executive committee member poached by its chief rival since Kennedy Bungane, aka KGB, made the trek across downtown Johannesburg to Absa Towers in May. (It has the makings of a 007 thriller – with Bond defecting to the Reds and figuratively at least into the arms of KGB.)

Back to reality, and Craig Bond, who is a former CEO of Stanbic Africa and most recently had headed the ICBC Strategic Partnership set up when the Chinese bank took a stake in Standard Bank, will join Absa at the start of 2013 after a short period of gardening leave.

Bond and Bungane will go head-to-head with former colleague Peter Schlebusch, who Standard Bank has promoted to a position that will make him responsible for the group’s Personal and Business banking activities across the entire continent.

The battle lines are being drawn and both teams will have a big job.

Established international players like Standard Chartered have strong footholds and while Standard Bank made its first forays into other parts of Africa under former CEO Conrad Strauss even during the apartheid era – there is no easy money to be made as evidenced in the trading update from Absa parent Barclays, which disclosed a big decline in earnings from its Personal and Business banking operations on the African continent and cited weak domestic currencies as a key reason for the underperformance.

Barclays disclosed in its third quarter trading update that its Africa Retail and Business Banking saw profit before tax plummet 41% to £330m.

This includes higher impairment charges on the group’s South African home loans book and the depreciation of a range of African currencies. The group structure means card, corporate and investment banking, which make up a little more than half the South African business, fall outside its PBB calculations.

Standard Bank, which is exiting what it hoped would become a range of SABMiller-style bridgeheads in several jurisdictions, has steadily been narrowing its focus to its home continent, exiting investments from Russia to Argentina.

Now its growth strategy depends on it being able to extract a sustainable return from its African operation.

“Africa remains at the centre of the Standard Bank Group strategy,” Schlebusch said.

The group has a presence in 18 countries and will focus on organic growth through finding synergies between its well-developed corporate and investment banking businesses and its tougher retail personal and business banking operations.

Acquisitions are tough as was evidenced by FNB’s hasty withdrawal from a Zambian bank it thought it had bought in 2011. Price tags, too, are demanding.

Asset owners are looking to capitalise on the hype of the African opportunity being sought by international investors desperate for growth now that the easy money has been made in other international jurisdictions.  There is no cookie-cutter business model.

The FirstRand Group is still looking for acquisitions, while Nedbank gone the partnership route with Ecobank, which has a presence in 32 countries in sub-Saharan Africa. Nedbank retains the option to take a 20% stake in Ecobank within the next two years, which would give it inroads into the sought-after Nigerian market.

“There is a huge amount at stake here. These guys run a huge risk of going through a mountain of capital and there is no guarantee that they are going to make a return. The problem is that they have run out of other options,” cautioned an analyst.

For more go to finweek.com or follow Finweek on Twitter.


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