THE closest HSBC traditionally got to sub-Saharan Africa was sending its Hong Kong-bound staff round the Cape of Good Hope before the Suez Canal opened in 1869. It is a sign of the region’s vastly improved prospects and the bank’s evolving strategy that HSBC is now in talks to buy a controlling stake in Nedbank, one of South Africa’s big four banks, with a market value of $9 billion.
As Africa gets richer and does more trade with Asia, foreign banks are becoming more interested. That was the logic cited in 2007 when China Development Bank bought a stake in Barclays, which owns a big African business, and a few months later when ICBC, China’s biggest bank, bought a 20% stake in Standard Bank, South Africa’s largest, which has operations in some neighbouring countries. Citigroup and Standard Chartered, which along with Barclays have the biggest pan-African networks, now talk more about their prospects there. Portugal’s banks, which dominate in Angola and Mozambique, view their operations there as jewels.
For all the talk, this grand strategic stuff makes hardly any money yet. As it stands Nedbank is simply a diversified play on South Africa’s economy, with a biggish mortgage business and a skew towards public-sector lending. It does, however, have one characteristic that HSBC tends go for: it is underperforming. Its retail division is losing money. The hope must be that fixing this would make the deal’s short-term return on investment respectable, while in the longer term the strategic elements can be put in place, possibly through bolt-on acquisitions of other banks, for example in Nigeria.
That assumes the deal happens. The 52% stake is owned by Old Mutual, an insurance firm with South African roots but which is listed in London. That could mean less local fuss about a foreign takeover. Even so, HSBC would be expected to keep a chunk of Nedbank’s shares listed in Johannesburg, as was the case when Barclays bought ABSA in 2005 and when Vodafone took control of its South African unit in 2009. Unlike those firms, which have not integrated the rest of their African activities with these more recent acquisitions, HSBC should be able to make a plausible case to the politicians that over time Nedbank would become not a backwater but its African centre of gravity.
