British and French withdrawal could be a boon for African banks

There has been a big changing of the guard in terms of Western banking operations in Africa in recent years. Some of the traditional British and French heavyweights have withdrawn since the Covid-19 pandemic but at least one US counterpart has begun to move in. 

There is often a retreat from frontier markets during periods of intense global instability but this two-way movement suggests that there has not been a specific crisis of confidence in either Africa in general or the continent’s banking sector in particular.

Many European banks are seeking to focus on their core markets, in line with the wider commercial trend of companies in many sectors minimising their risks. High operating costs, high rates of non-performing loans (NPLs), regulatory constraints and low profits have all also been blamed for the divestments – with many metrics less attractive in Africa as a whole than in other emerging market regions. 

McKinsey & Co calculated that profitability in Africa’s five biggest banking markets – Egypt, Kenya, Morocco, Nigeria and South Africa – fell by 2% between 2016 and 2022.

Basel III regulations have forced banks to strengthen their capital bases, while anti-money laundering and terrorism legislation has forced them to increase oversight of their operations in small markets. International banks seem to have been particularly wary since French bank BNP Paribas was fined a massive $8.9bn by US prosecutors in 2014 for breaking sanctions on Sudan, Cuba and Iran. 

Retail banking is still generally not particularly profitable in many African markets, while local knowledge tends to be crucial. At the same time, mobile banking has quickly increased the levof competition while more African banks now offer foreign currency accounts.

The process of European divestment began as long ago as 2016, when Barclays began selling off its African assets. It sold its Egyptian subsidiary to Morocco’s Attijariwafa Bank in 2016 and its Zimbabwean offshoot to Malawi’s First Merchant Bank the following year. It also began reducing its 62.3% stake in one of South Africa’s big four banks, Absa, in 2017, a sale that it completed in 2022, losing access to Absa’s operations in a dozen other African markets in the process.

Also in 2022, the previously Asia and Africa-focused British bank Standard Chartered announced that it would leave five African countries. It quickly moved to sell its subsidiaries in Angola, Cameroon, The Gambia and Sierra Leone to Nigeria’s Access Bank and most recently, in June 2025, it was reported to have completed the sale of its retail and wealth operations in Tanzania, again to Access. However, it is retaining its corporate and investment banking businesses in Tanzania, Botswana, Uganda and Zambia.

In November 2024, it also announced that it was exploring the sales of its wealth and retail banking (WRB) businesses in Botswana, Uganda and Zambia “to fund incremental investment in its leading wealth management business” in alignment with its new strategic priorities plan. 

Standard Chartered’s divestment programme is not limited to Africa and also includes Jordan and Lebanon, but it remains committed to much of the rest of Asia. In terms of Africa, it appears to be concentrating on those African operations that have performed best over the past few years, with its assets under management in Kenya increasing by a quarter in 2023 to KSh185.5bn ($1.4bn).

Group Chief Executive Bill Winters commented: “We continually assess the efficacy of our global business model and regularly take action to concentrate resources where we have the most distinctive client proposition. We have invested heavily in recent years in Africa, where we have operated for 170 years, and which remains core to our global network.” The bank has more than doubled its wealth assets under management in sub-Saharan Africa since 2021, in large part because of strong growth in Kenya and Nigeria.

HSBC expects to complete the sale of its South African business to the country’s own FirstRand Bank by this October. It has no retail banking operations in the country but has offered investment and business banking services since the end of the apartheid regime three decades ago. The British bank has always focused more on Asia than Africa but has agreed to provide its equities and securities clients with access to the South African market via a new deal with Absa Bank. 

The divestment process is perhaps most surprising when international banks pull out of the very biggest African banking markets. BNP Paribas and Crédit Agricole have both closed operations in South Africa, with the latter also selling its Moroccan offshoot in 2022. 

One of France’s biggest banks, Société Générale, has sold off or is in the process of divesting its operations in a dozen countries in North, West and Central francophone Africa. It has also closed down its much-heralded mobile wallet, YUP. There is huge competition in the mobile money sector and also between mobile banking and mobile money, so it is no surprise that not all products have been a success.

African banks step into the breach

The negative effects of the sales for individual African banking sectors include less access to foreign exchange, reduced competition and loss of correspondent banking relationships. 

Some African markets may offer lower returns and relatively high risk now, but taken as a whole, this process seems short-sighted given the fact that seven out of the world’s 10 fastest-growing economies are in Africa and the continent is increasingly driving global demographic – and therefore consumer – growth. The population of sub-Saharan Africa alone will increase from 1.3bn now to 2.2bn by 2050 and 3.3bn by 2100, according to UN figures.

In November, the Cameroon-based Nkafu Policy Institute said that the provision of financial infrastructure necessary for facilitating payments within the African Continental Free Trade Area (AfCFTA) has been “jeopardised by the recent withdrawal of European banks from Africa”. It could also “pose challenges for trade finance, correspondent banking relationships, and the availability of foreign exchange”, it said.

The situation varies from year to year but African banks as a cohort are steadily becoming stronger, so this withdrawal is creating significant opportunities for banks headquartered on the continent to expand quickly. African banks have bought many of the assets that British and French banks have sold off and will otherwise benefit from the withdrawal of competitors in terms of customers having to switch bank. 

Both established and digital-first African banks are stepping up the range of retail and SME products they offer via digital platforms – and international banks have in any case been much more reluctant to finance small African businesses and provide services to less wealthy potential retail customers. However, the loss of Western banks may be felt more keenly – initially at least – in corporate and investment banking.

Its acquisitions from Standard Chartered have also accelerated Access Bank’s expansion across the continent. Roosevelt Ogbonna, the Group Managing Director of Access Bank, said that the bank’s new subsidiaries would support its five-year growth plan by using its technological capacity to build new relationships within Africa and internationally, helping it to handle global payments and remittances efficiently.

It will be interesting to see whether the process creates new African banking powers. Guinea’s Vista Group and Coris Group of Burkina Faso have both snapped up assets from retreating French banks. Moreover, while Moroccan companies have been among the biggest beneficiaries, it has been Groupe Holmarcom and Saham Group buying former French subsidiaries rather than Morocco’s biggest traditional banks.

US interest going against the grain?

While the European banks have either withdrawn entirely from some African markets or pulled out of specific banking segments, one US giant is actually seeking to expand on the continent. JP Morgan, which already operates in Nigeria and South Africa, is in the process of entering the Kenyan and Ivorian commercial and investment banking markets as part of its plan to gradually expand in Africa, apparently by securing new banking licences.

The process has been fairly slow but it was authorised to open representative offices in both countries last year. Despite being among the world’s biggest banks, it does not appear that African financial services regulators are speeding up regulatory processes for US banks. 

Competing in already crowded marketplaces will be a big challenge, particularly in regional banking hub Kenya. The number of commercial banks in the country fluctuates but is generally above 40, making it one of the best-banked countries on the continent. JP Morgan will also face competition from Chinese banks for development and infrastructure financing in Kenya, including from Industrial and Commercial Bank of China and China Development Bank.

US banks have far more limited operations in Africa than their French and British counterparts even now. Citigroup is by far the best represented US bank on the continent, operating in 12 countries, while JP Morgan, Goldman Sachs and Bank of America will only have six between them even after JP Morgan opens its two new subsidiaries. 

Yet they are important players in the corporate sector, as the five biggest African mergers and acquisitions deals in the first half of 2024 were all advised by US banks, with Morgan Stanley leading the way. US banks are also heavily involved in project finance, such as backing the Lobito Corridor project to extend Angola’s Benguela railway into Zambia.

The fact that US banks are at least starting to increase their African interest at the same time as European banks are withdrawing suggests that the trend is not driven solely by African markets’ lack of attractiveness. There are clear obstacles in the form of low profits, regulatory concerns and high rates of non-performing loans (NPLs) by international standards, but at the same time the continent is likely to become increasingly lucrative because of growing cross-border trade volumes as a result of the AfCFTA, and the growing numbers of potential customers arising from rapid population growth. 

Yet it is easy to overlook the role of African banks in this process. They tend to know their own markets best, are quickly rolling out new technology and have been able to buy up assets from the withdrawing British and French banks. Although the divesting banks have not said so, there may be an element of being outcompeted – in the retail sector at least – by their African counterparts.