The Reserve Bank is likely to shut the door on foreign ownership after two of the Big Four retail banks acquire a foreign partner, an analyst suggested this week.
“The question is, when does the Reserve Bank close the door on foreign ownership of local banks? Maybe after two of the Big Four are in foreign hands, maybe three? In the end it may be more of a political [and regulatory control] decision than a commercial one,” Leon Claasen, a director and banking specialist at CA Ratings told the Mail & Guardian.
Claasen spoke as fresh speculation that FirstRand was in discussions with Standard Chartered surfaced. Standard Chartered has denied this.
Last year Reserve Bank Governor Tito Mboweni indicated that several foreign banks were interested in buying local banks, adding that each bid would be evaluated on its merits. The Reserve Bank’s “four pillar” policy is aimed at preventing mergers between the Big Four commercial banks — Standard, Absa, Nedcor and First National Bank (FNB).
This does not necessarily preclude foreign ownership, provided foreign-owned banks comply with international and local banking regulations.
Mboweni welcomed foreign competition, saying it would strengthen the banking sector and benefit banking customers. But with Absa and possibly FNB likely to end up under foreign control, there is a fear that the Reserve Bank will shut the door on further foreign acquisitions in the retail banking sector.
“Barclays’ proposed bid for Absa increases the scarcity value of the remaining three commercial banks,” says Ed D’Almedia, head of the financial sector at Sanlam Investment Managers Absa is already spoken for, with Barclays expected to make an offer to buy 50,1% of Absa later this quarter.
That leaves just three of the Big Four as potential targets for foreign buyers. Standard Bank might be too large a morsel for any foreign bank, and a somewhat shop-soiled Nedcor, owned by Old Mutual, is reportedly not up for sale, though Coronation banking analyst Neville Chester says “at the right price, anything is for sale”.
That makes FNB, part of First Rand, the most likely acquisition target. HSBC and Citibank, which came close to buying BoE three years ago before being beaten to the punch by Nedcor, are also keen to expand their South African presence.
John Kivits, CEO of Standard Chartered South Africa, said the bank does not comment on market speculation, but it has made no secret of its intention to grab a bigger slice of the South African market after snapping up online bank 20twenty from Saambou nearly two years ago.
“Last year our group CEO Mervyn Davies made it clear that South Africa was an attractive market for us, but our number-one priority is to grow organically,” says Kivits.