Renaissance Capital, Russia’s largest investment bank, will have banking operations in 21 African countries by the end of the year and will ramp up its balance sheet to the region over the next two years, its chief executive officer has said.
“We are moving to Africa”, Stephen Jennings told Emerging Markets in an interview. “We are working to intermediate capital flows and will play a big role in financing assets in the continent in the coming years.”
Renaissance is bidding to become the first pan-African investment banking franchise and will announce an equity investment in a leading east African bank within the next three weeks, pending regulatory approval, said market sources.
Jennings revealed that Renaissance Partners, the parent holding company of the investment bank, will over the next two years increase its balance sheet exposure to Africa to 25%, from 15%.
RenCap started its African business in 2007 and has operations in Nigeria, Ghana, Zambia, Kenya, Zimbabwe – though it does not have a brokerage license there. It will have a presence in South Africa from July, following its acquisition of Barnard Jacobs Mellet Holding’s securities business.
Andy Lowe, chief executive for Africa at RenCap, said that the bank will hold majority stakes in most of the new banking units, either via joint ventures with local banks or direct acquisitions.
RenCap, a private bank, does not publicly reveal a breakdown of its earnings. But Lowe predicts that profitability of its African business will double this year and revenues from regional business, currently 25%, will increase “significantly” in the next two years.
RenCap’s biggest competitor in Africa is Standard Bank which provides a platform, following its partnership with Industrial and Commercial Bank of China, for the South African lender to service Chinese state and corporate clients active in the region.
Lowe said Standard Bank’s Chinese partnership would not derail RenCap’s expansion in Africa, as the Russian institution has a competitive edge in investment banking, stronger deal flow and better global debt distribution capabilities.
Last year, RenCap was the most active investment bank in the region, conducting 18 transactions across 10 countries, including the $955 million sale of Central African Mining and Exploration company to Kazakhstan’s Eurasian Natural Resources Corp. RenCap appears to be capitalizing on reduced Western bank appetite for African banking operations.
The lender is seeking acquistions in Tanzania, Mozambique, Angola, Botswana, and Uganda. Indian and Chinese corporate activity in the continent will trigger mergers and acquisition-related deals, and Lowe said there is a strong pipeline for equity financing and for iron ore, copper, coal and gas deals.
The bank is not looking to build a consumer finance business and so will not actively court a local deposit base, Jennings said.
Renaissance is owned by Stephen Jennings and other managers (50.1%), and the Oneksim investment group headed by metals billionaire Mikhail Prokhorov (49.9%). Prokhorov bought into the company in September 2008.