It is the smallest
of South Africa’s Big Four banks and the weakest in terms of retail
market share, but Nedbank is set to be snapped up by HSBC.
Nedbank is also the least
profitable of the country’s market-leading banks and its retail
unit remains loss-making.
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In the cards loans and advances
sector, for example, Nedbank has a market share of only 13%; First
National Bank (FNB) has 20% while market leaders Standard Bank and
Absa have 33% and 26% respectively.
By its own admission, Nedbank’s
share of the “financial services economic profit pool in Africa is
only around 12% to 14% [but] shows the potential for growth”.
Nor is HSBC fazed by Nedbank’s
widely perceived legacy of weak management and the smallest retail
branch network of the Big Four.
Nedbank has a branch network of
around 440 units. By contrast, Absa has 927 branches, while
Standard and FNB have over 1,000 and 680 sales outlets
respectively.
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By GlobalDataHSBC has been keen to expand its
African footprint for some time, but the Nedbank deal would not
come cheap, with analysts valuing Nedbank at around $7.2bn; HSBC is
said to be eyeing up a 70% stake.
Given the growth in trade between
South Africa and Asia, a deal with Nedbank would benefit HSBC’s
Asian unit, already contributing around one half of group profits,
and provide a platform for further African growth.
First-half retail
banking losses at Nedbank increased to ZAR115m ($15.8m) in 2010
from ZAR69m in the year-ago period.
Bank-wide, Nedbank posted
first-half net income of ZAR2.15bn, down 16% from the first half of
fiscal 2009.
Analysts at Citigroup estimate an
11.9% return on equity for Nedbank in 2010, 13.3% for Standard,
15.1% for Absa and 18.4% for FNB.
Nedbank’s retail deposits grew by
only 1.4% from the first half of fiscal 2009 to ZAR83.9bn while
advances were 2.7% ahead at ZAR139.9bn.
“Retail deposit growth remains
challenging given the environment of low interest rates and a
highly competitive market,” said Nedbank in a statement. Nedbank’s
retail net interest margin declined by 40 basis points to 4.8%.
HSBC’s interest in Nedbank was,
however, given a positive spin by the South African Treasury.
“It is a vote of confidence in the
country’s political and economic progress over the past 16 years,”
the Treasury said in a statement.
But GDP growth in South Africa for 2010 and 2011 is estimated at
only around 3%, a far cry from the 8% expected in emerging markets
such as India and China.
