The head of Investec business banking says the company aims to woo unlisted companies with an annual turnover of more than R30m as clients, with a target of doubling its market share in the sector over the next two years.
Over the past two years the group has been laying building blocks in its transactional business banking capabilities, said Dhiren Mansingh, head of business transactional banking. It has always felt underrepresented in the unlisted space in terms of market share, he said.
“We have the opportunity to take market share. In the next two to three years we can double this business, if not more than that. The feedback we have been getting from our clients and the new clients we have acquired gives me confidence that our offering is resonating in the market,” Mansingh said.
“We see an opportunity to do business banking differently, in a true Investec style. We are replicating what we have done in our corporate segment, private bank, and wealth and investment space. We see a new way in servicing the midmarket business segment, which has historically been underserviced.”
Business banking generally refers to the services used by small companies, while commercial or corporate banking refers to the services used by large enterprises with a high turnover.
Investec is already a big player in the commercial banking space, alongside Standard Bank, Nedbank, Absa and FirstRand. To build its business offering, it is punting its import product, which integrates logistics and trade finance into one bespoke solution.
“We are seeing a lot of activity from clients that are involved in the energy sector. The electricity crisis has created opportunities for many clients in the energy space who are importing solar panels, batteries or the like. There has been a significant uptick in that sector,” Mansingh said.
“Transnet’s inefficiencies put a strain on goods coming into the country and transporting them to where they need to go. A Transnet operating more effectively means a better trade environment for SA in general, both for the import and export market.”
The race for market share in business banking in SA is heating up. Capitec, the country’s biggest retail bank by customer size in 2019, bought Mercantile Bank from the Portuguese state-owned banking group Caixa Geral de Depósitos, in a deal worth R3.5bn.
The Stellenbosch-based bank, worth just less than R200bn on the JSE, shrugged off competition from Nedbank and a consortium of the Public Investment Corporation and Bayport Financial Services to lay its hands on Mercantile.
Capitec last week in its interim results said it is on track to rebrand Mercantile to Capitec Business in the 2024 financial year and is aiming to build personalised digital business banking in a scalable way to help entrepreneurs and small and medium-sized enterprises (SMEs) grow.
The unit’s loan book stood at R14bn, not far from Standard Bank’s R22bn SME loan book.
Very competitive
Capitec CEO Gerrie Fourie said the group’s business offering is taking shape and resources will be deployed to scale the business.
“We have said we don’t want to go into the commercial banking space and target big companies because that space is very competitive. We want to focus on the SMME space and we have been attracting our desired target audience. We haven’t marketed our business proposition. Our focus to date has been on system upgrade and scalability of systems and moving the business from old data centres to cloud,” Fourie said.
“We will certainly drive the growth of this business very hard in the new year. We are excited about this business. It has been a three-year journey, because one year was badly affected by Covid-19. The nice thing for us is that we are sitting with a retail client base of 21-million and we can direct this client base to businesses doing business with us as all businesses are looking for clients.”
African Bank, expected to list on the JSE in 2025, also recently made its re-entry into business banking with the purchase of Grindrod Bank.
The lender’s CEO, Kennedy Bungane, said in August that the acquisition of Grindrod Bank was a “game changer” for the group that allowed it to “reclaim the original mandate of our pioneering founders and support the business ambitions of underserved entrepreneurs”.
The more than R600bn business lending market has also attracted app-only bank TymeBank, which recently finalised the acquisition of Retail Capital.
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