Standard Bank has a $1.35 billion war chest for international acquisitions that will initially target commercial and retail banks in Nigeria, its deputy CEO Ben Kruger said on Thursday.
The comments are a sign that South Africa’s largest lender is gearing up for regional expansion after the credit crunch slammed the brakes.
“Our biggest priority in our banking expansion plans is the hot Nigerian market,” he told Emerging Markets in a telephone interview. He said a working group has been set up to search for targets.
The banking group at headquarters level has capital of $1 billion for international expansions, including Nigeria. This would complement the $350 million of excess capital in its Nigerian unit, Stanbic IBTC Bank Plc, that could be used to fund acquisitions into the country.
A collapse in the Nigerian stock market last year triggered a margin-lending crisis and a collapse in the banking system.
The government is now leading a consolidation of the financial sector. In an interview with Emerging Markets on Wednesday, Nigerian central bank governor Lamido Sanusi said the government’s planned Asset Management Company, which will buy toxic assets, will receive legislative approval in two weeks.
Kruger revealed that he has lobbied the central bank and government for Standard to be the favoured foreign lender in the consolidation process, citing the bank’s “history, experience and risk management”.
But a final clean-up of the banking system pending success of the AMC is a precondition for the push – though Kruger was confident this would materialize.
At present, Standard Bank only has 300,000 customers in Nigeria, compared with millions each at local competitors Intercontinental and First Bank. South Africa’s First Rand could also provide Standard with a run for its money in its push into Nigeria.
Kruger said that acquisition of a retail bank would provide “crucial” access to a local customer base that is more difficult to achieve through organic growth. Separately, Standard Bank, which has 100 branches in Nigeria, plans organically to double its branch network to penetrate all 36 of Nigeria’s states over the next 18 months.
As Emerging Markets reported this week, Renaissance Capital, Russia’s largest investment bank, plans to ramp up its balance sheet in Africa: it plans to be active in 21 countries in the region by the end of the year.
Kruger said RenCap’s avowed push poses a threat to its investment banking operations. But the South African lender’s balance sheet strength and full-service corporate franchise would provide “risk mitigants to clients such as trade financing and hedging products will provide a competitive edge”.
He added that Standard’s partnership with Industrial and Commercial Bank of China would service Chinese corporate and state clients active in Africa. This year, the partnership has generated three transactions worth $5 billion.
He said there are up to 70 potential commodity-focused deals in the pipeline, and that Standard Bank’s 33% acquisition of Russia’s Troika Dialog in 2009 had created a business stream that is now connecting Chinese clients active in Russia and Africa.
South Africa contributed 75% of Standard Bank’s profits in 2009 but Kruger said the profitability of regional units could comprise 50% of the total in the coming years.