SA’s major banks have strong corporate and investment banking (CIB) franchises, with most international players struggling for scale in the competitive and profitable segment, according to professional services firm BDO.
According to data from the SA Reserve Bank, the largest international banks in SA by total assets and in order from largest to smallest are JPMorgan Chase Bank, Citibank, HSBC, Bank of China, Standard Chartered and China Construction Bank.
HSBC is in the process of selling its loan book to FirstRand. BNP Paribas, the eurozone’s biggest bank, has wound down its corporate and investment banking services in SA, 12 years after launching its local foray.
This comes as the banking giant ramps up its 2025 strategic plan announced in 2022 that made the most of its noncore Africa operation with a focus on consolidating its European and Asian business.
BDO partner Kevin Hoff said in many cases the international banking branches in SA represented insignificant contributors to their respective group head office business and balance sheets and were increasingly being regarded as noncore to those groups.
“With global banking group reorganisations and restructurings, noncore operations are being reduced globally to contain costs and risk management for global banks, and some international bank branches have exited SA on the back of this,” Hoff said.
“There are still other international banks operating successfully in SA, with large balance sheets and profit contributions, such as JPMorgan and Citibank. They are operating in specific investment banking sector niches and provide the SA banks (like Standard Bank) with international alliance partners and syndication opportunities to expand the footprints of both local and international banks in SA.”
Ratings agency Fitch said last year that it expects further divestments by European banks from Africa in the next 12-24 months, saying the lenders are refocusing on more mature retail banking markets in Europe and on activities such as insurance, leasing, and corporate and investment banking, where they can realise higher synergies.
Hoff said Standard Bank dominated the CIB space across the African continent as a whole.
“The specialisation and focus on their own core areas appears to be what makes them successful in their chosen areas of focus. Across the four banks — FirstRand, Nedbank, Absa and Standard Bank — the CIB divisions generally contribute 40%-55% of the total performance of each of them, depending on the different performance measures used (headline earnings, revenue, total asset contributions).”
Standard Bank’s CIB business is headed by Luvuyo Masinda, who took over the reins in September and replaced Kenny Fihla.
Masinda has said Standard Bank expects R700bn in public-private investment over the next three years in SA, with rail and water infrastructure set for a huge windfall in what could be a rare win for President Cyril Ramaphosa’s grand plan to revive the economy via a private sector-led recovery.
Hoff said the large SA banks had all been active in the past year and shown strong appetite to support deal finance and risk management hedging in the previous rounds of infrastructure and renewable energy funding raises.
“This has driven the growth in the corporate lending books noted for the 2024 reporting period, and as detailed further in our BDO SA Banking Peer report.”
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