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SocGen and Absa join forces on wholesale banking in Africa

The banks will also work together to serve Chinese firms on the continent – a lucrative market.
Image: Bloomberg

French bank Societe Generale and South Africa’s Absa joined forces in Africa on Friday, partnering on corporate and investment banking to broaden their reach across the continent.

The agreement will lead to a closer relationship between the two after Absa, one of South Africa’s biggest lenders, split from its former parent, Britain’s Barclays, in 2017.

It will see them leverage one another’s complementary geographic footprints and product sets, with Absa strong across southern and eastern Africa and SocGen well established in western and North Africa.

“We mirror each other very well,” Nothando Ndebele, head of financial institutions group at Absa’s corporate and investment bank, told Reuters by phone, adding it would be hard to find another bank with that footprint.

Absa has set itself a series of targets as it tries to make a name for itself as a pan-African, standalone bank.

It said the arrangement would give it a bigger share of its clients’ wallets, and help meet its target of doubling its share of banking revenues in Africa from 6 to 12%.

SocGen Chief Executive Officer Frederic Oudea said in a statement it made sense to join forces as firms on the continent developed increasingly sophisticated banking needs.

The banks will also work together to serve Chinese firms on the continent – a lucrative market. Absa will also purchase SocGen’s South African business offering custody, trustee and clearing services, for an undisclosed price.

Oudea is trying to boost profitability at SocGen by exiting countries and businesses where it lacks critical size and capacity for synergies.

That has seen SocGen sell banks in Albania, Belgium, Bulgaria and Serbia. The bank seeks to offload banks holding as much as 5% of its weighted assets, or close to 17.5 billion euros ($19.96 billion).

Richard Southbey, head of wholesale cash management at Absa’s corporate and investment bank, told Reuters the price of the South African purchase was not material for Absa, but filled a hole in its offering.

Cooperating with SocGen also allayed concerns Absa would not be able to serve its multinational clients well, or would struggle to compete with larger players, after its separation from Barclays, said Patrice Rassou, head of equities at Sanlam Investments, a top ten investor in Absa.

But Jan Meintjes, portfolio manager at Denker capital and another Absa investor, said the benefits might not materialise, and Absa had “bigger problems” impacting its bottom line.

“The turnaround in the retail and business banking business, just from a relative size point of view, is obviously where the bulk of the value unlock could be,” he said.

Absa’s shares were down 0.14% at 1330 GMT, while SocGen’s shares were up 0.4%. ($1 = 13.8205 rand) ($1 = 0.8769 euros) 

COMMENTS   1

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Their ‘’cherry picking’’ started years ago.

They gave specific instructions that they were only interested in ‘’fee income’’ – no balance sheet as they didn’t want to act as the ‘’World Bank’’ in Africa.

My view has always been that they conned all their staff in the early 2002 when they announced that they were closing down SocGen Johannesburg Branch, and offered its staff small voluntary retrenchment packages (they employed a Lawyer and yes, KPMG to facilitate the process).

They were ruthless and got rid of a lot of staff in their fifties and close to their pensionable ages. They knew very well that these staff would lose massively on their ‘’defined benefit’’ pension fund benefits and that it would be very hard for these ‘’pale males’’ to find employment under the new EE restrictions etc.
Moral of the story was, they lied as they continued to trade with their ‘’banking licence’’ and that they did not adhere to their undertaking that they will only be offering custody, trustee and clearing services.
SocGen got spoofed in Russia during the financial market crisis.
Absa – I hope you understand what it means when SocGen says – we will offer wholesale banking services (you take the risk etc. and they bank the fees!)
Their undertaking to ‘’service’’ Chinese companies operating in Africa must be the cherry on the cake! All these are my views – but one of my colleagues committed suicide as he just couldn’t survive anymore! This article is for you Alain!

End of comments.

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