South Africa: HSBC Climbdown Opens Way For Standard Chartered


By Nick Kochan


Johannesburg: Setback after HSBC pull-out

HSBC’s decision to walk away from its proposed $8 billion acquisition of a controlling stake in South African bank Nedbank is little short of dramatic. Having announced in August that it was in talks with Nedbank’s primary shareholder, Old Mutual, about buying a controlling stake in Nedbank, HSBC was clearly optimistic about the prospects in Africa. South Africa’s central bank and Nedbank itself were likewise rooting for HSBC. Benefits of the deal—and the reasons local regulators backed it—included the prospect of a massive inflow of funds into South Africa, a transfer of technology to Nedbank, and the arrival of a new global player in Johannesburg that could march up into the rest of the continent.

HSBC’s abrupt change of heart poses a plethora of questions. Why did HSBC do it, what happens to Nedbank, and what does it say about the attractiveness of South African banks to global players? HSBC’s recent regime change offers one possible explanation for its change of tack. With a new chief executive and chairman, the bank may be reconsidering some of its planned moves. Either way, the road is now open for Standard Chartered Bank to have a tilt. The bank has made no secret of its interest in Nedbank and is rumored to have talked privately to Old Mutual before HSBC came on the scene.

Peter Sands, Standard Chartered’s chief executive, enters the fray flush with the $5.2 billion of funds from a rights issue. With Nedbank on the ropes, Sands has the chance to push the price down. Investors should like the prospect as many believe Nedbank will be a better fit with Standard Chartered, which has a much stronger position throughout Africa than HSBC.

But HSBC’s move has dented confidence in South Africa’s banking sector. South African banks have been significant players in global markets for less than 10 years, and their role in the global banking system is still ill-defined. Questions will now be asked if South Africa, and indeed Africa generally, is ready to play on anything but a very narrow regional stage.