What happened next?
Phase one was to say: ‘Let’s collaborate, let’s refer each other’s clients’. Phase two would involve also looking at potential joint investments in some countries; and then phase three was really about shareholding at the top holding-company level, which would really cement the alliance.
This would benefit not only the clients but would also specifically give Nedbank shareholders the opportunity to also enjoy very diversified earnings, including the prospect of faster-growing markets than South Africa.
So we formulated our discussions around those three phases. We actually drew up the Lagos Principles, as we called it, to define the guiding principles of this relationship.
Everything was on a reciprocal basis in terms of each other’s contribution to the relationship itself. So overnight we were able to announce that we had a network, which took us from having a presence in five countries to over 30 countries jointly with Ecobank.
However, with no equity investment, the big challenge at that point in time was to what extent could you integrate and provide this ‘one bank’ customer experience as we called it? Both parties really invested into this relationship.
What was is in it for Ecobank? You moved fairly swiftly and securely from five to 33 banks and having a good footprint in Africa. What did Ecobank expect to get out of it?
At that time Ecobank had applied for a rep office licence in South Africa. There were a lot of multinationals and also South African companies, who used South Africa as a base to expand into the jurisdiction where Ecobank operates in middle Africa.
Ecobank realised that Nedbank was extremely strong in terms of our corporate clients. We introduced them to all our corporate clients. Very quickly they were servicing more than 50 of our top corporate clients and opening up hundreds of bank accounts.
These were large, key multinational companies who moved accounts from big international banks in West Africa completely to Ecobank. So from a revenue perspective, Ecobank certainly was a major beneficiary.
What was the reaction from your some of your people?
They were asking, “So what are the numbers? How much money are we going to make of this alliance?”. I said the number is 33. Overnight we had moved from five to 33 and who cares who makes the most money. We were establishing a relationship. It is that attitude and spirit which paid off.
The relationship them moved to the next level, phase two?
That call came when Ecobank was looking to acquire Oceanic Bank in Nigeria. Arnold phoned us and asked for our advice and help on the transaction. We discussed jointly with Ecobank and we provided a loan of $285m to help Ecobank make the acquisition. I felt that was the day they felt comfortable with us and solid trust had been established.
And was that a specific aim?
Yes, that was for Oceanic Bank. Then we’ve been holding hands for quite some time now, we need to go to the next level.
Hence we structured the $285m loan in a convertible debenture that would give Nedbank the option to subscribe for shares that would give us a 20% stake in the organisation at a point in time.