British multinational bank HSBC has become the latest offshore banking giant to decide to exit SA as international players battle to establish a significant presence in a market local lenders dominate.
HSBC announced on Thursday that it decided to withdraw. This will see it transfer its clients and banking assets and liabilities to FirstRand and smaller rival Absa. Its SA branch employees will transfer to FirstRand.
The London-based lender, which has had a presence in SA since 1995, said the deal was expected to be concluded in the last quarter of 2025.
HSBC and HSBC Europe CEO Colin Bell said the group’s existing international wholesale banking clients would continue to have connectivity through HSBC channels for their accounts in SA once they had transferred to FirstRand.
Bell said the lender agreed with Absa Group and Absa Capital Securities to provide HSBC Bank’s global equities and securities finance clients with continued access to the SA market.
“Following a strategic review, we are pleased to have signed agreements with FirstRand and Absa. They both have extensive networks and are leading corporate and investment banks in the region. They will continue to provide clients with a broad offering in terms of service and products,” said Bell. “HSBC’s legal entities in the country will be wound down, while ensuring all regulatory and customer obligations are met.”
HSBC Group established a presence in Sub-Saharan Africa in 1981, before entering the SA market the year after the country’s transformation to a democracy. It comprises HSBC Bank’s Johannesburg branch, HSBC Securities and a representative office for the private bank.
The bank’s principal activity in SA was providing banking services to its corporate and wholesale clients, it said.
HSBC is the second international lender to exit SA in six months. French multinational BNP Paribas wound down its corporate and investment banking services in March after a 12-year presence.
The Reserve Bank granted BNP, the eurozone’s biggest bank, permission in 2012 to set up a branch in SA. As a result, the lender upgraded its representative office into a fully fledged commercial branch, offering corporate and investment banking services. BNP had bought a controlling stake in the stockbroking arm of Cadiz Holdings a year earlier.
BNP holds leading positions in Europe with its corporate and investment banking (CIB) and investment solutions activities. It also has a strong presence in the Americas and rapidly expanding operations in Asia.
At the time, BNP, which has €2.6-trillion (R44.7-trillion) in assets, said the move would help it develop new clients in SA and the Southern African Development Community.
In 2020, HSBC considered acquiring Nedbank, but the transaction fell through.
The group is one of the world’s leading international banks, with $3-trillion assets and a presence in 60 countries.
Its assets transferred to FirstRand will be housed in the group’s corporate and investment banking franchise, Rand Merchant Bank (RMB). This is because HSBC’s SA clientele comprises multinational and domestic corporates.
Emrie Brown, CEO of RMB, said the transaction would help the group build scale.
“This transaction delivers further scale to RMB’s corporate client franchise, bringing high-quality assets and liabilities with the opportunity to service a valuable client base of domestic corporates and multinationals operating in SA and across the continent, which is a key part of RMB’s growth strategy,” said Brown.
“The transfer also includes the employees of HSBC SA which bring strong skills into our business and ensures continued service excellence.
“We are pleased that RMB’s track record of client-focused innovation and attracting and retaining the best talent has been recognised by HSBC, and we are confident that RMB’s capabilities and offerings will meet the needs of these clients.
“The agreement is an endorsement of our strategy, which emphasises providing our clients with best-in-class equities product and equity market access,” said Quintus Kilbourn, head of equities at Absa Corporate and Investment Banking. “It is also recognition of the depth of Absa’s client base and equities product.”
Fitch in a report released in March said it expected European banks, particularly French banks, to ramp up divestments from Africa in the next 12 to 24 months.
It said French and other multinational banks operating in Africa, particularly in retail and CIB, had to contend with established SA, Nigerian and Moroccan pan-African banking groups, with Standard Bank particularly dominating corporate and investment banking.
Updated: September 26 2024
This article has been updated throughout with additional information.
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