Absa rekindles continental ambitions

Absa is not prepared just to wait on its local subsidiaries to deliver growth following a preliminary announcement that will see it partner with French banking conglomerate Société Générale in courting multinational companies active in Africa.

The two banks announced on Friday they had signed a memorandum of understanding to launch a pan-African wholesale banking offering to exploit their combined strengths on the continent. The agreement is a precursor to a more comprehensive commercial agreement they intend to conclude.

“The agreement we have entered into should go a long way to enable our clients to do business in Africa regardless of where they want to do business,” says Maria Ramos, CEO of Absa.

Société Générale CEO Frédéric Oudéa, says that large African companies and multinationals have increasingly sophisticated banking needs. “Joining our forces through this agreement makes perfect sense to accompany the economic development of the continent.”

It is another sign the wheels are turning at Absa as it mulls avenues for growth at the insistence of CEO Maria Ramos, who, in the wake of the group’s much publicised separation from Barclays, committed to implementing a number of strategic and operational changes that would enable the organisation to
better compete and grow.

In simple terms, the agreement will combine the network and infrastructure of the two banks which will allow the value offered by the sum of the parts to be greater than each bank would be able to offer on their own, says Nothando Ndebele, Absa Corporate and Investment Bank head of financial institutions groups.

“This agreement makes sense because we operate mainly in anglophone Africa whereas Société Générale operate mainly in Francophone Africa. The complementary offering can give multinationals a one-bank solution in 27 countries across the continent,” says Ndebele.

Société Générale has a presence in 19 African countries located mostly in the north and west of the continent, whereas Absa’s operations in 12 countries are mostly in the south and east. Like Absa, Société Générale is a universal bank with products and services spanning consumer, business and wholesale banking.

Absa’s presence on the continent was boosted in 2013 when it acquired the African operations of its parent, Barclays, in an all-share deal.
Like Société Générale, Absa will now roll out “China service desks” at its African operations to better attract and service Chinese multinationals active on the continent.

The commercial agreement with Société Générale is not exclusive, meaning both parties will be able to enter into other agreements with other parties if they so elect. It will only extend to a partnership in wholesale banking (also referred to as corporate banking), which caters to institutions, including multinationals.

“For these clients, the large number of bank accounts they have to deal with across different countries is a headache, so it’s a value-added service that simplifies things for them,” Ndebele says.

The two companies also announced on Friday that Absa would acquire Société Générale’s custody, trustee and derivatives clearing services in SA which will include the client portfolio, IT systems and employees dedicated to these activities. The business will be integrated into Absa’s corporate bank.

“This business enhances our suite of products as it has been a missing piece in our client offering and will grow our capabilities,” Richard Southey, head of wholesale cash management at Absa Corporate and Investment Bank, says. — Business Day.

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