African Banks Scale Back Expansion As Commodity Prices Rout Bites
When British-owned bank Barclays hinted late last year that it was planning to exit its African business and would sell a majority stake in Barclays Africa Group, many analysts saw it as a sign of changing fortune for the banking sector on the continent.
Several other multinational banks on the continent have since indicated their intentions to scale back or spin off their units across Africa.
In an interview with Reuters, Ecobank’s chairman Emmanuel Ikazoboh said the bank, one of the largest multinational financial institution in Sub-Saharan Africa, may pull out of some countries on the continent and focus on its most promising markets.
The Togo-based bank that operates in 36 countries across Africa is the latest to reveal that it will scale back its expansion and cited falling global commodity prices that have hit economies in countries such as Nigeria and Ghana as the reason for its change in strategy.
The downturn in oil and mineral prices has battered many African currencies, slowed some economies and forced change in the banking sector.
Ecobank, whose major shareholders South Africa’s Nedbank and Qatar National Bank (QNB) have significant presence in southern and north Africa, said it could soon apply to sell some of its business in smaller countries on the continent.
In March, Equity Bank, Kenya’s largest by customers, said it had shelved its regional expansion plans it announced in 2015 and would reinvest in existing markets, New Times reported.
“This year we are not going to any new market but instead we want to mine existing subsidiaries to contribute at least 30 per cent of assets and hopefully 15 per cent of profits,” James Mwangi, Equity’s group chief executive, said.
Bucking The Trend
While the trend seem to be changing for many multinational lenders in Africa, others such as Standard Chartered Bank and Bob Diamond’s investment vehicle Atlas Mara are seeking to grow their presence on the continent.
Despite the grim economic situation in the continent, Standard Chart has continued to expand its presence in Africa and remains optimistic about doing business in the region.
It recently rolled out one of the most expensive mobile and online banking platform across eight African countries as it seeks to expand in Africa, Banking Technology reported.
“Africa’s populations are moving quickly to embrace mobile banking and local banks have made material investments on the digital side, so to protect and grow our market share we are investing,” Jaydeep Gupta, Standard Chartered Bank’s Regional Head for Retail Banking told Reuters.
For Atlas Mara, which aims to become one of the top banking sector players in Africa, the commodities downturn in Africa offers an opportunity to acquire more banks on the continent.
The investment firm already operates in seven sub-Saharan Africa countries including Rwanda, Nigeria, Botswana and Zimbabwe, and targets about 14 countries in Africa where it wants to establish its footprint.
It is one of the investors interested in buying Barclays unit on the continent.