Shaun Harris
TAKING STOCK
Well, it seems the niceties are over. Despite what Nedcor says about a “friendly” merger, its bid for control of Standard Bank Investment Corporation (Stanbic) has effectively turned hostile.
Up to now, this has been the stuff of boardroom drama, a clash of banking titans that makes good copy in the financial press.
But with Nedcor’s takeover of Stanbic looking pretty inevitable, the largest “merger”, rather takeover, in the history of corporate South Africa starts to affect people like you and me.
Together, Nedcor and Stanbic employ about 50 000 people. Over the next few years 10 000 of them are going to lose their jobs, if the merger goes ahead.
Richard Laubscher, Nedcor’s chief executive, says many of these job losses will be through attrition rather than retrenchment. Maybe so, but you can bet he’s being conservative on both counts – jobs lost to attrition and the initial estimate of 10 000.
In social, personal terms, that’s the really hard part of the takeover.
It’s probably a safe guess that more than half the people who read this column have an account at Nedcor or Stanbic. What does the takeover mean to them?
In an industry where “banking service” is becoming an oxymoron comparable in scale to “military intelligence”, there will be individuals who left Stanbic for Nedcor due to bad service, and vice versa.
What do they do now?
The best hope is that the branch and manager at Stanbic or Nedcor remains the same after the merger and that banking life continues as before.
Of course, service levels in the combined operation might, miraculously, improve – but don’t bet the farm on that. With at least 10 000 staff being taken out in the course of the merger and cost- cutting always being a major incentive in combining two businesses, improved service seems unlikely.
Those staff confident enough to leave voluntarily are usually the best staff, so service levels will naturally decline. And service is one of the few things that distinguishes the retail banks today.
Pricing is virtually identical, as are products. Only service can really make a difference. More often than not, this is a lucky-packet factor, dependent on finding a decent bank manager who actually stays in the same branch for more than six months.
Service is no better at the other major banks, though if Absa, First National Bank and perhaps BoE (through its retail bank NBS) want to capitalise on the merger of Nedcor and Stanbic, jacking up their service could probably grow market share considerably.
There are also the interests of minority shareholders, traditionally a neglected class in South Africa, to consider. The only group probably more neglected is policyholders, and this is where Nedcor controlling shareholder Old Mutual must surely find itself in a difficult position.
Since demutualisation of Old Mutual, tens of thousands of people are both shareholders in Old Mutual and policyholders.
Most people will be aware that much of the argument between Nedcor and Stanbic has been haggling over the price of the takeover. Nedcor at first insisted on a market related price. Stanbic’s Conrad Strauss dismissed this with contempt and insisted on a share exchange ratio of at least one Nedcor share for 4,75 Stanbic shares. Nedcor came back with a slightly better, but still market-related partial offer of one Nedcor for 5,5 Stanbics, to be upped to 5,25 Stanbics if that board rallied the support of shareholders for a full merger.
Which is all good and fine for Old Mutual shareholders: the better the price they get for Stanbic, the better for shareholders. But many of those minority shareholders are also policyholders, and it is in policyholders’ funds that Old Mutual holds the vast majority of its 22% stake in Stanbic, the key to forcing the merger.
Old Mutual director Eric Anstee in London has been roundly downgrading the value of Stanbic shares over the past few weeks, seemingly oblivious (or just not caring) that this affects the value of policyholder funds. Old Mutual has set up a separate committee to look after the interests of policyholders, but precious little has been heard from this body. So it looks like policyholder interests are taking second place to shareholder interests yet again, something that must surely upset the tens of thousands of Old Mutual policyholders in South Africa, and which could yet backfire on the assurer.
But the fundamental question is whether South Africa, and more importantly the country’s consumers, need a mega-bank. Both Nedcor and Stanbic have advanced lists of reasons in favour of and opposing the merger, and both contain spurious elements.
For instance, does Strauss really believe Stanbic customers care a hoot about the threat to the bank’s adventures in the rest of Africa and London, or its relationship with Liberty Life? All they want is decent and efficient service at home.
Nedcor chair Chris Liebenberg goes on about the potential for the extended group to spread banking services to the unbanked population and the opportunities for black economic empowerment. He doesn’t explain why this will be more feasible after the merger, or why both banks’ track record in these areas has been so dismal to date.
It seems the old-fashioned building societies did far more for the “unbanked populations”, and the only meaningful empowerment initiatives so far have come from the small banks.
Many of the reasons, pro and con, for the merger ring of political expediency and misplaced patriotism, like Nedcor’s claim that the merger will give South Africa a bank of international standing. We already have one, Investec, and it didn’t get there through being big, but through being clever.
The merger of two large retail banks further removes choice for consumers – about the last sanction they have against the dismal service currently provided by the large retail banks.