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Africa: SA commercials take a shine to their neighbours

First Rand in Nigeria acquisition talks; Absa, Barclays Africa in new integration push

In the wake of the financial crisis, and as the domestic retail loans sector struggles to recover, South Africa’s commercial banks are paying ever more attention to countries elsewhere on the continent where economic growth is accelerating.

In Nigeria, First Rand announced last month that it was in talks to buy a controlling stake in Sterling Bank, which is valued at about $180 million. Sterling has 99 branches in Nigeria and is not among the nine banks whose management the local central bank removed after a 2009 sector audit. Sterling’s capital adequacy of 13% is relatively low compared with its peers. However, it made a profit of N5 billion ($33 million) in 2010 with a return on equity of about 20%.

Sizwe Nxasana, First Rand’s chief executive, tells Euromoney: "We are looking at an acquisition [rather than organic growth] in Nigeria, mainly because the central bank is trying to drive consolidation and it’s unlikely we will get a new licence. What we want is a platform that is scalable, that we can grow."

Universal licences

First Rand received a universal banking licence for Tanzania in March. Nxasana says the bank will steer clear of retail banking in Kenya but wants a universal banking presence in Angola and Ghana.

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