Barclays wants to lead in Africa

2012-09-22 11:39

Absa’s parent bank uses former Standard Bank man to spearhead its drive to become continental leader

Barclays Africa is plotting to exert pressure on its competitors as it seeks to position itself as the go-to bank in Africa over the next five years.

Earlier this year, the British lender poached Kennedy Bungane from Standard Bank, its main competitor in Africa, to head its African operations as part of its strategy to expand its presence across the continent.

Bungane has wasted no time in formulating a plan to make Barclays the biggest player in Africa, a move that will make him compete directly with Standard Bank, where he spent just over 20 years plying his trade as an investment banker.

Standard Bank is the largest lender in Africa by assets and has operations in 17 countries compared with Barclays Africa’s 13.

This week, Bungane chaired a three-day meeting of country chairpersons and chief executives in Africa to map out a strategy to increase market share.

The meeting, which took place in Nairobi, Kenya, was also attended by Maria Ramos, the chief executive of bankinggroup Absa and Barclays Africa

Barclays is Absa’s parent and last year it handed Ramos the responsibility to run its African operations, over and above looking after Absa.

Bungane reports to Ramos and has been brought in to drive the African expansion strategy and operations.

While the “go-to bank” vision is foremost on Bungane’s mind, he wants to complete the integration of Absa’s African operations and Barclays Africa’s as quickly as possible.

Although Absa’s operations outside of South Africa are branded in Barclays’ blue colours, the full integration has not yet happened because of regulatory hurdles that the two lenders have not cleared in various African jurisdictions where they operate.

However, Absa’s red colours will be retained in South Africa, while everything outside it will be painted blue.

Bungane, who headed Standard Bank’s South African corporate and investment banking unit, is also planning to expand Barclays Africa’s corporate and investment banking offering, particularly to big multinationals that are investing in the booming oil, gas and mining sectors.

“I will bring that experience to bear when we expand corporate and investment banking across Africa,” said Bungane.

The investment banking offering will also be extended to African governments that are investing in infrastructure, especially in the construction of power stations, roads, bridges, ports, railways and telecommunications networks.

It is estimated sub-Saharan African countries require about $120 billion (R992 billion) to upgrade their infrastructure to enable them to support their extraction of minerals and put their economies on a peak growth path.

Bungane has spent most of his Barclays time crisscrossing the continent to get his head around the lender’s African footprint.

“Over the past 78 days in the group I have visited 13 of our presence countries and have had successful meetings with our local leadership, regulators, clients and people.

“I have met managing directors and eyeballed key staff that will be reporting to me.

“I have spent two days in each country,” said Bungane.

The meeting in Kenya by Barclays Africa and Absa’s top bosses has a symbolic significance because the East African nation is Barclays’ second-biggest market outside of South Africa.

Competition is crowded

Queensway branch in downtown Nairobi is the lender’s largest branch in Africa. Kenya is an economic powerhouse in East Africa and its banking sector is highly competitive, with 43 banks across the country.

The competition is so stiff that within a 150m radius of the Queensway branch, there are 13 rivals vying for customers, including Standard Bank, which trades there as CFC Stanbic.

In that radius, there is also Standard Chartered, which tried to acquire Nedbank; and Kenya Commercial Bank, the largest retail lender in Kenya.

Banks consolidating

The introduction of strict Basel 2 and 3 regulations is likely to trigger a serious consolidation in the banking sector across Africa, and Kenya is no exception.

In the wake of the credit crisis, Basel regulations will force banks to hold more capital reserves so they can tap into them should the need arise, instead of having to rely on government bailouts.

Habil Olaka, the chief executive of the Kenya Bankers Association, fears rapid implementation of Basel regulations could kill smaller banks because they don’t have access to large pools of capital.

“Consolidation is a possibility. For instance, in Kenya we have raised the capital requirement to 1 billion shillings (R98 million) from 250 million shillings by the end of the year. About four banks have not met the target and a number of them are in the market to raise capital,” said Olaka.

There is a fear well-capitalised big multinationals like Standard Chartered, Barclays, Standard Bank, Citi Group, Bank of India and EcoBank will fill the void left by the indigenous lenders’ pull-back.

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