Absa has minted its first major acquisition under new group CEO Kenny Fihla with the purchase of Standard Chartered’s wealth and retail banking businesses in Uganda for an undisclosed amount, a huge leap in the group’s plan to grow its East Africa business.
The deal comes a year after British multinational banking major Standard Chartered laid out plans to exit wealth and retail operations in Botswana, Uganda and Zambia to free up capital amid a broad shake-up.
Charles Russon, CEO of Absa’s Africa regions portfolio, said the deal aligned with the group’s Pan-African growth ambitions.
“This transaction supports Absa’s strategic expansion and further strengthens our position in Uganda’s financial services landscape. It will enable Absa Uganda to broaden its retail and wealth management offerings and deliver increased convenience and value to our customers.”
Russon, whose most recent role in Absa was that of acting CEO before Fihla took over the reins in July, was appointed in September as CEO for Absa’s Africa regions, a crucial role as the group looks to leverage its African assets.
In the new role, Russon is accountable for leading and overseeing the performance of the group’s operations across the Africa regions and providing advisory support to the business units.
Fihla has implemented changes in the group’s operating model in its businesses to take a pan-African approach.
To tap into growth opportunities in the fastest-growing East African region, Fihla in August told Business Day that the group aimed to consolidate its Tanzanian business to build scale in the country, whose economy is growing at about 5%.
Absa has two banks in Tanzania and is engaging with the country’s government with to merge the two institutions.
Absa has a presence in Kenya, Uganda and Tanzania in East Africa.
“Uganda is also a very important market for us. We are the third-biggest bank in the country. We have a massive opportunity to increase our market share quite significantly and become the number one bank in Uganda,” Fihla said in August.
The Uganda transaction, which is subject to regulatory approval, will see Standard Chartered transfer its wealth and retail clients to Absa, with its employees.
David Wandera, MD of Absa Uganda, said: “This acquisition is a significant milestone in our journey to become a market leader in providing innovative, customer-centric financial solutions. It represents an opportunity to welcome new customers and colleagues into the Absa family, while reaffirming our long-term commitment to Uganda’s economic development.”
A report by ratings agency Moody’s released in September finds that Western banks doing business in Africa are battling to crack the retail banking segment as domestic players and fintech groups have solidified their positions, forcing their retreat from the continent.
Banking majors such as Barclays, BNP Paribas, Credit Agricole, Groupe BPCE, HSBC, Societe Generale and Standard Chartered have either exited Africa or are scaling down their exposure to the continent.
Absa is also present in Botswana, Ghana, Mauritius, Mozambique, Seychelles and Zambia.
Fihla’s former employer, Standard Bank, derives more than 40% of its earnings from the rest of Africa portfolio, which spans 20 countries and is headed by Lungisa Fuzile.
Bloomberg reported this month that Standard Bank is in hot pursuit of one of Kenya’s largest banks, NCBA, whose main shareholders include the Kenyatta family and the family of erstwhile governor of the Central Bank of Kenya Philip Ndegwa.
FirstRand’s earnings remain tilted towards SA, mainly generated by FirstRand Bank’s large lending, transactional and deposit franchise.
However, Africa’s most valuable bank has large exposure to the rest of Africa, with a presence in eight countries, including Namibia, Botswana, Mozambique, Lesotho, Nigeria and Ghana.
Nedbank has also identified East Africa for growth, particularly with its corporate and investment banking business, with group CEO Jason Quinn closing the door on the retail foray.
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