As African companies gain prominence, they need the services of committed and sophisticated pan-regional banks. In Africa, this year, Citi fulfilled that role better and more consistently than its rivals, despite other regional banks often having more assets in individual countries. Whether it was copper mines and breweries in Zambia, power companies in Kenya and Algeria, airlines in Ethiopia, consumer and energy firms in Nigeria, or the maintenance of facilities for platinum producers in South Africa, Citi has been there, often with innovative solutions. Nigerian examples include Citi’s $150 million remittances-backed loan in May for Skye Bank. Or its loan for small and medium-sized-enterprises financing, backed by a partial guarantee from the US Overseas Private Investment Corporation (Opic), for First City Monument Bank. In countries such as Nigeria – where Citi has branches from Kano in the north to Bonny Island and Port Harcourt in the south – the bank is the main training ground for some of the most talented and sought-after commercial bankers in the industry. The new CEO and CFO at Lagos-based Union Bank, for example, are both Citi alumni. For the past two years, Euromoney has recognized the efforts and success of Togo-based Ecobank. It remains the most advanced of the universal, purely home-grown banks in its continental strategy. But Ecobank’s acquisition in late 2011 of Oceanic, one of the two biggest banks to fall victim to Nigeria’s 2009 crash, was a big weight on group costs in the period under review. Nigeria’s share of Ecobank’s group assets is far from being matched in profits yet, which has left questions about the wisdom of the purchase. Ecobank’s provisions spiked in 2012, with Nigeria playing a big part. Despite good gains elsewhere, its east and southern Africa divisions, as well as its domestic division, which covers for retail and local businesses, all made losses in 2012. Compared with Ecobank, Nigerian lenders, although perhaps likely to be contenders for the best bank award in the future, are only beginning in their efforts to build a share of profits across Africa. And Africa’s most effective, truly mass-market retail bank – Equity Bank, in Kenya – is if anything even less advanced in its regional expansion. Although Citi lacks a retail presence in Africa, other international banks with retail businesses tend to focus on corporate and high-end retail. Also, French and Moroccan banks remain focused on francophone Africa, and British and Portuguese banks on anglophone and lusophone countries respectively. In this context, Citi has perhaps the most successful and entrenched, truly pan-African network of any bank. It has exceptionally well-run on-the-ground operations from Nigeria, Kenya and South Africa, to francophone countries such as Algeria, Senegal, Democratic Republic of Congo and beyond. Standard Chartered Bank had a good year in Africa, with operating profits up 23%. But although it is taking steps to build a bank in Angola, the overall verdict is that the bank – with some exceptions – has yet to do much in Africa to write home about. It could do a lot more, especially given this is supposedly a core region for the bank. South Africa’s Standard Bank has operations in 18 countries. After retreat elsewhere, it is increasingly regarded as an African bank. But in 2012, its retail division posted a loss in Africa outside South Africa, adding to the view that its Africa strategy has yet to deliver in terms of its additions to group profitability. As a commercial bank, Barclays has struggled to an even greater extent to make good use of its long-held Africa presence, losing market shares in key areas and having another difficult year in South Africa. The integration of its South African bank, Absa, with the rest of Barclays Africa, will perhaps help. However, in investment banking, Standard Bank has benefited from its expansion in Africa, pushing it ahead of the competition. It has a clear advantage in South Africa, where it is the biggest bank by assets. And it already transacts an extraordinary quantity and quality of deals farther north too. In South Africa, for example, Standard Bank advised on the $400 million sales of two units of First Uranium to AngloGoldAshanti and Gold One. It also advised on the $190 million acquisition of a majority stake in retailer JD Group by furniture firm Steinhof. These were two of the year’s most important M&A deals. Also in South Africa, the bank can point to its work advising, structuring and arranging the financing for the takeover by a consortium led by Ethos Private Equity of South Africa-based construction-services firm Waco. In Nigeria, Standard Bank advised on the $210 million investment in telecoms firm Starcomms by the Capcom consortium and on the $190 million acquisition of Dangote Flour Mills by Johannesburg-listed consumer-goods firm Tiger Brands. Standard Bank also advised on various energy divestments from Nigeria by Shell, as well as the acquisition by Johannesburg-based private equity firm Pembani of a 30% stake in Afrisam, a South African cement group with a growing regional franchise. Standard Bank’s African capital markets franchise posts an outstanding mix of both South Africa and non-South Africa deals: particularly in equity, as explained below. In debt, in South Africa, its deals included the $1 billion Eurobond for state freight firm Transnet, among other transactions. Standard Bank further remains perhaps the most prominent international bookrunner on local-currency bonds across Africa, for firms such as Mercedes-Benz and Macquarie in South Africa, and in such markets as Mauritius, Mozambique and, above all, Nigeria. The South African group was bookrunner on two of the biggest naira bond deals of the year, including the N80 billion ($500 million) seven-year bond for Lagos State, which was the largest issuance ever by a Nigerian state or sub-national. But in debt capital markets alone – including international deals – Barclays is top. This is true in terms of Barclays’ position in the league tables as well as of its involvement in the greatest number of the most interesting and important deals. Perhaps the best examples are the sovereign bonds Barclays led from Morocco and Zambia. The Zambia deal was the state’s first in the international bond markets: a crucial step in terms of establishing a benchmark for corporate issuance. The Morocco deal, the sovereign’s debut in the dollar market, was one of Euromoney’s deals of the year for 2012. Gaining a 30-year tranche for debut issuers in the dollar markets is a big achievement, and Barclays deserves credit for it. Barclays can also boast corporate deals in South Africa, whether in local or foreign currency, for issuers such as Sasol, which debuted in the dollar bond market; AngloGoldAshanti; packaging and paper firm Sappi; and cement firm PPC, which debuted in the rand market, partly thanks to Barclays. Among Barclays’ other deals worthy of mention is the SFr150 million ($162.7 million) deal from unsecured lender African Bank: a repeat mandate and debut in the Swiss market. It can also boast having been bookrunner on the Namibian sovereign’s debut rand bond, a year after bookrunning the state’s Eurobond debut in dollars.
Equity capital markets, on the other hand, is perhaps the area of investment banking in which Standard Bank has enjoyed the most impressive rise. It is now a clear number one, not just for league table position, but also for the most interesting deals, in South Africa and elsewhere. Over the past three years, Standard Bank has hired equity professionals from rivals such as JPMorgan and Renaissance Capital, bringing its team (including sales and trading and research) from around 20 to around 100 people. It also rose in many categories in Euromoney’s Africa research poll this year. In South Africa, Standard Bank was bookrunner on perhaps the year’s most important deal: the $817 million rights issue for Johannesburg-listed platinum firm Lonmin. It was also bookrunner on a $500 million dual-tranche dollar and rand convertible deal for South African miner Implats. Standard Bank acted on rare equity deals elsewhere: it was sole bookrunner in electricity firm Umeme’s $67 million-equivalent IPO. This ticked many Ugandan firsts, such as execution using electronically traded shares only, and a Nairobi cross-listing. Standard Bank also advised on Kenya Airways’ $175 million rights issue. Meanwhile, in African M&A, Standard Chartered continues to benefit from key post-crisis hires, its network across Africa, Asia and the Middle East, and its ability to back advisory with financing. It organized deals in the most developed market, South Africa, and in the faster-growing markets farther north. We can see this, for example, in the $335 million acquisition of a minority stake in the Nigerian division of South African telecoms firm MTN by Shanduka, the group founded by the former South African trade unionist and anti-apartheid campaigner Cyril Ramaphosa (Standard Chartered advised Shanduka). Standard Chartered also advised on the $160 million takeover of Singapore’s Kian Ann Engineering by the South African engineering firm Invicta, as well as on the $224 million acquisition of Emirates Healthcare by South Africa’s Mediclinic. In one important inter-emerging markets deal, Standard Chartered advised on the $1.9 billion sale of Cove Energy, focused on Mozambique, to Thailand’s PTT group. Finally, it acted as sole adviser to the Oppenheimer family on the family’s historic $5.1 billion sale of a 40% stake in De Beers, the world’s biggest diamond miner, to Anglo American. HSBC is the winner of the best project finance house award in Africa this year. Although the bank hasn’t been mandated on as many deals as previous winners Standard Chartered and Standard Bank, the breadth of its projects this year is impressive, with notable deals in Morocco, Côte d’Ivoire and Ghana. HSBC was the mandated lead arranger for Project Taurus in Côte d’Ivoire for a $200 million six-year amortizing senior secured lending facility to develop oil and gas discoveries offshore. It also advised the Abu Dhabi National Energy Company on the expansion of the Takoradi Independent Power Project in Ghana. In this deal, HSBC helped raise $330 million in the first IPP in Ghana developed under a project finance structure. It will be one of the first large power projects in Africa. In Morocco, HSBC acted as financial adviser for the Tarfaya wind farm. The project its the largest wind farm development in Africa and is a milestone in Morocco’s strategy to increase energy generation from renewable resources by 42% by 2020 and to achieve greater energy independence. In risk advisory, Standard Bank gets the award for the third year in a row, continuing to offer clients innovative solutions across asset classes. In fixed income, for example, it became the first to provide swaps linked to Nibor (Nigeria’s interbank offer rate). In commodities and currencies, Standard Bank’s trading desks offer 24-hour capabilities and the bank, for example, is the largest international gold trader on the Tokyo Commodities Exchange. Through its cash equities business, Standard Bank offers stockbroking and fund solutions to institutional clients and individuals, with access to 22 African equity markets, including a strong research platform. In one example, Standard Bank advised a large state-owned entity in South Africa on an efficient and cost-effective way to unwind a large derivative position while minimizing the impact on its balance sheet.
Standard Chartered stands out as the best flow house in Africa, however, with a particularly interesting business in structured products for traders and consumers of commodities such as Brent crude, corn, wheat, soya bean, cotton and raw sugar. The bank has bond traders based onshore in Nigeria, Ghana, Kenya, Uganda, Tanzania, Botswana, Zambia and South Africa that enable the bank to provide cross-border pricing using both onshore and offshore liquidity. Clients continue to benefit from its Asian franchise too. In foreign exchange, it makes markets in more than 30 African currencies in spot, forwards and non-deliverable forwards. It also developed the first dollar-shilling option in Uganda and the first currency swaps on G10 currencies in Nigeria and Ghana. This year’s award for best cash management house in Africa returns to Citi. Citi’s Africa cash management revenues grew 13.9% in 2012 to $295 million. Average liabilities grew by 13% despite occasional headwinds, and transaction volumes increased by over 19% over the same period. Citi has received mandates from international players such as Bharti Airtel, the India-based telecommunications company, which has extensive operations in Africa, and Atlas Copco, a global tools and equipment manufacturer with a big base in South Africa. One of Citi’s most interesting mandates came from MTN, the largest telecoms company in Nigeria. Citi provided MTN with a solution to accelerate collection proceeds from 17 banking relationships in Nigeria. Citi was also able to provide MTN’s head office with real-time access to liquidity positions across the various banks, which led to an improvement in MTN’s working-capital cycle and cash yields, as well as the elimination of many manual processes. |
