The bank’s managing director for Francophone West Africa said: “Our objective is not only to develop our operations in Côte d’Ivoire but to make it a regional hub. Our feeling is extremely positive on the West African Francophone market. The opportunities are incredible. There’s no currency problem, and the likelihood of a devaluation is quite low. To us, this is a factor when assessing the risk.”
The CFA franc is pegged to the euro, while Côte d’Ivoire itself is becoming a more attractive investment destination after 12 years of military conflict, political stalemate and economic stagnation.
In September, FirstRand announced that it intends to invest R10bn ($703m) to fund its expansion across the continent. It already operates in Nigeria, Botwana and Zambia but is expanding into the rest of Southern Africa and some other Anglophone countries. Chief executive Sizwe Nxasana said: “We’ve got a provisional licence in Ghana and should be up and running there in early 2015. In time we’ll set up operations in Kenya and Angola.”
PricewaterhouseCoopers (PwC) head of banking and capital markets for Africa, Johannes Grosskopf, says: “Expansion into the rest of Africa continues to be a key trend. Offshore expansion into Africa plays an important part in the growth strategies of the banks, with each bank taking a different approach. Channel and product innovation remains high on the agenda of the major banks, with all of them highlighting the importance of driving more customers and delivering more mobile-based banking services.”
New international banks are also being attracted into the continent. The State Bank of India (SBI) has operated in South Africa for 16 years but with a focus on the local Indian population it has only eight branches and is not a significant player in retail nationwide. However, it also has corporate banking operations and is active in Nigeria, Botswana, Mauritius and Cairo via its stake in Sterling Bank.
A. Krishna Kumar, the managing director and group executive for international banking at SBI, says: “We are now looking at expanding into the larger community in South Africa and further into the corporate market. As a result, we will be increasing our asset base from the current R4.5bn ($316m) to about R10bn ($703m) over the next few years. Local return on assets is 2-3%, which is high based on global standards.”
He adds: “In the time the bank has been in South Africa, we have never shown a loss. Profits are retained in South Africa, and never taken out. We want to build a solid institution in South Africa and are here for the long term.”
SBI intends to grow its African operations through organic growth and partnerships with existing banks, rather than through a campaign of acquisitions.
While the banking sector is becoming increasingly integrated in Africa, it is also connected to the global banking industry. Some banks were affected by the fallout from the global financial crisis.
In August, South African firm Investec sold Kensington, its UK mortgage provider, to private equity companies TPG and Blackstone for £180m ($293m). One month later, it sold its loss-making Irish mortgage business, with mortgages worth $877m, to US private equity firm Lone Star. The company was badly hit by a collapse in Irish house prices.