Why are French and British banks withdrawing from Africa?

#Morocco : Major French and British banking groups continue their withdrawal from Africa. The latest, Standard Chartered Bank, has just announced its departure from seven African countries and others are in talks to sell their branches. Why these departures?

The face of the African banking sector is constantly changing. Alongside the emergence of large Pan-African banking groups, there is also the growing disengagement of large European banking groups in Africa. Crédit Agricole, BPCE, BNP Paribas, Barclays, Standard Chartered Bank, Crédit Suisse… All these giants of the European banking sector are withdrawing from the continent. A trend that began in the late 1990s and has accelerated in recent years.

It was the big French banks that started the movement, before the British followed suit.

Crédit Agricole: a withdrawal from sub-Saharan Africa and perhaps soon from Morocco

It was at the end of the 2000s that Crédit Agricole decided to withdraw from Africa to refocus on Europe and lighten its budget. This decision led to the sale in 2008 of stakes held in several retail banks. Five countries are involved: Congo, Ivory Coast, Cameroon, Gabon and Senegal. This disengagement benefited the Moroccan banking group Attijariwafa bank, which thus acquired this network and strengthened its development in Africa.

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Crédit Agricole subsequently withdrew from South Africa, keeping only its Egyptian and Algerian branches. But the group seems to want to give up on the latter. Indeed, according to several Moroccan media outlets, Crédit Agricole is in talks with the Holmarcom group for the sale of its stake in its Moroccan subsidiary Crédit du Maroc. “These discussions are at a preliminary stage with no certainty about their outcome,” the Holmarcom group warned. If this operation is successful, the acquisition of 78.70% of the shares of Crédit du Maroc will allow Holmarcom to return to being a bank-insurance institution.

The mutual group BPCE followed

While mutual group Banque Populaire et Caisse d’Epargne (BPCE) announced in 2014 its intention to increase its presence in Central and West Africa, BPCE International, the holding company that manages the group’s international investments, announced in 2017 that was conducting “a strategic review of international retail banking” as part of a broad strategic movement to refocus its operations on the European market.

It is with this in mind that BPCE sold its subsidiaries BICEC in Cameroon, BMOI in Madagascar, BCI in Congo and BTK in Tunisia to Banque Centrale Populaire (BCP). It should be noted that he had previously sold Banque des Mascareignes (Mauritius) to the Moroccan group. BPCE holds a 4.05% stake in the BCP group.

BNP Paribas continues its withdrawal from Africa

BNP Paribas, Europe’s largest bank in terms of assets, is also withdrawing from Africa. After selling its Mauritanian branch in 2010 and its Madagascar branch in 2011, BNP Paribas accelerated its withdrawal in 2019 by selling its branches in Comoros, Gabon, Tunisia, Mali, Burkina Faso and Guinea. The group has thus reduced its African wings to appearances in Morocco, Senegal and the Ivory Coast.

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Senegal and Ivory Coast are also on the list of branches to sell. According to Africa Business +, BNP Paribas has started the sale of 54.11% of the capital of its Senegalese subsidiary BICIS. Likewise, the group is looking to sell its Ivorian subsidiary BICICI. The mandate for the sale of these holdings was given to Rothschild & Co.

However, the main French banking group maintains a solid presence in Morocco through BMCI, which continues to develop. And as it disengages from retail banking, the group says it continues to “engage with corporate and investment banking clients” in Africa.

Barclays ends nearly a century of African presence

Barclays, one of the British “big five”, sold on Thursday 21 April 63 million shares of the South African banking group Absa Bank, or the equivalent of 7.4% of the latter’s capital. The British group therefore finds itself with a 7.4% stake, which will be sold next December, ending Barclays’ 97-year presence in Africa.

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Barclays International began its African adventure in 1925, following the merger of Colonial Bank, Anglo Egyptian Bank and National Bank of South Africa. The bank was present in 12 African countries, in particular in the former British colonies (Nigeria, Kenya, Tanzania, Egypt, South Africa, etc.). Today it has withdrawn from the retail banking segment of all these countries to focus again on the North American and British markets.

Standard Chartered Bank withdraws from 7 African markets

Standard Chartered Bank announced its withdrawal from 7 African countries in a press release published on April 14. In detail, the British group is evaluating total divestments of its assets in 5 countries – Angola, Cameroon, Gambia, Sierra Leone and Zimbabwe – and partial divestments in Ivory Coast and Tanzania. For the moment, neither the timing of the sale nor the identity of the potential buyers are known.

“We are focusing on the most important growth opportunities while simplifying our business. We remain excited about a number of opportunities we see in the North Africa-Middle East region, as exemplified by our new markets, but remain disciplined in our assessment of areas where we can deliver significantly better returns for shareholders, “explained Bill Winters. CEO of the group.

Credit Suisse withdraws from wealth management in 9 countries

In another segment, that of wealth management, Crédit Suisse announced that it is preparing its exit from 9 African markets in its private banking business. These are Botswana, Ivory Coast, Ghana, Nigeria, Kenya, Tanzania, Mauritius, Seychelles and Zambia. It has signed a deal with Barclays so that the assets of its wealthy African clients are managed from London, supporting the “non-strategic” nature of these markets. Assets under management would amount to $ 2.5 billion. However, the Swiss bank keeps its business in South Africa.

Why these departures

Several factors are adduced to justify these departures of the main European banks from Africa. First, all the banks have put forward the argument to refocus their activities on the European, American and Asian markets, which meet the desired conditions in terms of development and risk management. The increase in the cost of risk resulting from the deterioration of portfolios in the wake of the slowdown in African economies has held back the expansion of European banks on the continent. Therefore, in many African countries, the operating ratios of their subsidiaries remain high, very often above 60%. This reduces their profitability.

Then there is the impact of increased competition in the African banking sector over the past 20 years thanks to the development of Pan-African banking groups: Attijariwafa bank, BCP and Bank of Africa from Morocco, Coris Bank from Burkina Faso, BGFI from Gabon, Ecobank and Oragroup from Togo, UBA, Guaranty Trust Bank and First Bank from Nigeria, Standard Bank and First Rand Group from South Africa, BSIC from Libya, Afriland First Bank from Cameroon, NSIA Banque de la Côte d’Ivoire … Many of these banks have their process of internationalization began between the end of the 1990s and the beginning of the 2000s. Some of these banks, in particular the Moroccan ones, have become real competitors of the French groups in French-speaking Africa.

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These withdrawals can also be explained by the limited room for maneuver in the management of some branches, especially when most of the capital is held by African states and influential local operators. And the strained relations between Paris and some African capitals in various capacities (income, political support, etc.) also weigh on the French banks present in Africa.

Furthermore, if the bank rate in Africa is low and has great potential, African populations seem to have found a solution with mobile banking, which reduces the attractiveness of banks.

Finally, it should be noted that French and British banks are losing ground with the arrival on the continent of new Chinese, Turkish, Russian, etc. partners, whose companies are gaining more and more market share, to the detriment of European groups, and they are often accompanied by their financial partners in African countries.

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