Standard Chartered has acquired the South African custody and trustee business of Absa Bank.
The terms of the deal, including the acquisition price, were not disclosed. The acquisition expands Standard Chartered’s footprint in Africa’s largest economy, which was described by the bank’s Africa CEO Diana Layfield as an “important strategic opportunity for the bank” and “offering excellent economic growth.” The acquisition also facilitates full coverage and development of Standard Chartered’s business across Africa.
In addition to organic investment, Standard Chartered acquired African M&A advisory business First Africa in 2009 and Barclays’ Africa custody business in 2010. Last week, the bank announced the opening of two new wholesale banking corporate offices in South Africa, in Cape Town and Durban.
The acquisition positions Standard Chartered as a leading South Africa custodian since over the last two years, the group has developed a custody substantial custody footprint across 21 sub-Saharan African countries, launching custody operations in South Africa earlier this year.
The acquisition is subject to regulatory approval being reached, upon which the expected date of completion is the fourth quarter of 2013. Business and operations personnel in Absa’s Johannesburg head office will transfer to Standard Chartered in Johannesburg.
Absa is one of the big four banks in South Africa, majority owned by Barclays. It was founded in 1991 through the merger of various financial service providers such as the United, Allied, the Volkskas Groups as well as the Sage Group. Absa’s custody arm has assets under custody of $100 billion of which just under 40% is invested in South African Unit Trust funds. The business also acts as a trustee for those funds.
“In terms of local market presence, the acquisition will place us as the number four in the South African market for custody and number two for trustee services, said Alan Naughton, managing director, global product head, Investors and Intermediaries, Standard Chartered, based in Singapore.
“The Barclays acquisition boosted our business on the African continent. This latest acquisition accelerates our strategic ambitions here. We expect growth and continued investment in future, with South Africa accounting for 80% of the continent’s capital markets activity.
“It is an excellent strategic and cultural fit for both organizations and will provide the Absa clients access to our international securities services capabilities. It will also add to our securities services operations started there last Spring and there is no overlap between our existing custody business and the business being acquired.”
Karen Fawcett, group head of Transaction Banking at Standard Chartered, said: “The successful acquisition of Absa Bank’s South African Custody and Trustee business will enable Standard Chartered to rapidly build on its custody capabilities across Africa. I am confident that today’s announcement will strengthen our proposition, and establish us as a core bank to our clients in and investing into Africa.”
Standard Chartered’s Africa business has delivered average annual growth of 15% for the past 5 years. In 2012, the region generated income of $1.6 billion, up 15%, with the Wholesale Bank generating $1.1 billion, up 16%. Eight markets delivered over $100 million of income for the year, with Kenya and Ghana joining Nigeria in delivering over $200 million. Ten markets delivered double-digit income growth, including the group’s largest markets (Kenya up 34%, South Africa up 28%, Ghana up 20%, Nigeria up 13%).
The group intends to maintain this overall rate of growth for the region, aiming to double revenues from Africa over the next four to five years on a constant currency basis. To achieve this, the group will invest more than $100 million in new branches over the next three years, accelerate its investment in mobile payments technology, and hire new staff. It will also invest in new areas such as Islamic banking and mortgages.