/ 11 September 2008

Rand Merchant Bank seeks growth in Nigeria

South African investment banking and asset management group Rand Merchant Bank will seek to grow into East and West Africa and is in exploratory talks with a Nigerian party, its CEO said on Thursday.

Newly appointed chief executive officer Alan Pullinger told Reuters in an interview that his focus for RMB will be on growth opportunities, and singled out Kenya and Nigeria as areas where the company could seek to expand its investment banking business.

”I think ultimately the issue that would face RMB is one of growth and that’s where I think my focus would be, on sustainable and profitable growth opportunities,” he said.

”We’re interested in opportunities in West Africa and we’re interested in opportunities in East Africa. Our strategy may be to try target one or two countries in each region. Kenya and Nigeria are probably good examples.”

Pullinger said RMB was in exploratory talks with a party in Nigeria, but would not give further details. He said RMB would like to go into private equity in the West African country.

He also cited Zimbabwe as an interesting market, although he was cautious about expanding in the Southern Africa country even if a power-sharing deal between the ruling Zanu-PF and opposition MDC parties is reached.

”I do think some of these issues are getting close to the end now and I think change is inevitable in Zimbabwe,” Pullinger said. ”You don’t want to risk going in too early, but I think it is a very interesting market.”

But he added that RMB was not seeking to rapidly expand on the continent, which has benefited from investment fund flows thanks to high global commodity prices, perceived greater political stability and better communications infrastructure.

”We would be cautious around rapid expansion into Africa … We are definitely not in the mode of trying to plant flags,” he said.

Pullinger also said he believed South Africa’s interest-rate cycle had peaked, but warned that the bad-debt cycle, which has hit the financial sector, had not yet turned.

Absa, Nedbank and Standard Bank all recently warned of mounting bad debts at their retail banking units, which have been hit by a slowdown in consumer demand due to rising borrowing costs.

South Africa’s central bank has raised interest rates by 500 basis points since June 2006, but its decision last month to keep rates steady spurred hopes that Africa’s biggest economy had seen the peak of its interest rates cycle.

RMB is a unit of banking group FirstRand. Pullinger took over the reins at RMB from Michael Pfaff on September 1. – Reuters