Absa's Africa expansion challenges

"The next three years offer great opportunities (and) we are geared up to go and grab them‚" says Maria Ramos‚ the Absa group chief and chief executive for Barclays Africa.

She says the priority is to push for sustainable growth in chosen client segments and markets. This strategy was emphasised "with renewed clarity" at a recent meeting in Kenya that was attended by the chairmen and executives of Barclays and Absa operations in Africa.

The meeting discussed strategies to grow revenues‚ counter competition and take advantage of pockets of economic growth in the region.

Absa's expansion into Africa is being given impetus by the deal to transfer certain Barclays assets in Africa to Absa's balance sheet.

The deal‚ yet to be approved by regulators and minority shareholders‚ will result in Barclays' interests in Botswana‚ Ghana‚ Kenya‚ Tanzania‚ Uganda‚ Zambia and the Indian Ocean being combined with Absa's.

Once completed‚ probably by the second quarter of next year‚ Absa will become one of two South African banks with the largest exposure to sub-Saharan Africa‚ says Adrian Cloete‚ equity analyst at Cadiz Asset Management.

"(Absa) shareholders should be pleased if this deal enhances earnings significantly in the medium term as it will in all likelihood consume management time‚ effort and capital ‚" Cloete says.

"When the deal is consummated‚ Absa will have significant exposure to the exciting growth markets in Africa‚" he says.

Standard is the largest bank in the region based on assets and income with operations spread across 18 countries including South Africa and it is investing in existing operations in Nigeria and Angola.

FirstRand is diversifying away from southern Africa after recently announcing its first investment in West Africa‚ paying almost R750m to buy a controlling stake in Merchant Bank Ghana.

Old Mutual-owned Nedbank has an option to buy up to 20% of Togo-based Ecobank‚ giving it access to earnings from over 30 markets in addition to its existing businesses in southern Africa.

Ramos is coy about how Absa and Barclays will expand into the region even though analysts expect it will mostly be organic rather than through acquisitions.

She has not ruled out inorganic expansion and previously said the group was keeping its options open particularly in markets such as Nigeria where Absa and Barclays do not have a retail bank.

"Our priority will be to create sustainable growth over the next three years in chosen client segments and selected geographies. South Africa continues to be a springboard for growth into Africa. Our objective is to be the bank that people go to first‚" she says.

Ramos sees "considerable" opportunities in sub-Saharan Africa‚ citing last week's upbeat economic growth forecast issued by the International Monetary Fund (IMF).

"What is making Africa's growth story so durable is that it is about more than just a resource boom. Structural (economic) changes have been made which are beginning to bear fruit‚" she says.

Ramos appears unmoved by competition and says the "muscle" of Barclays and the already large footprint of Barclays Africa provides enough strength to take on rivals.

"Our focus includes growing our corporate bank across the continent‚ extending our wealth management franchise and building our market capabilities‚" Ramos says.

"On the retail side‚ we are ramping up the migration of our customers to digital channels. We are taking CashSend into Ghana and Kenya and we are speeding up the deployment of our eWallet PingIt money transfer solution across the continent‚" she says.