Absa weighs Angola return, targets Nigeria banking license

Absa, the Johannesburg-based financial services company, led by South African banker Kenny Fihla, is considering a return to Angola and weighing whether to seek a merchant banking license in Nigeria as the South African lender looks to reduce its reliance on its three biggest African markets. 

The lender plans to establish a representative office in Angola, almost two decades after selling its stake in Banco Comercial Angolano. In Nigeria, where Absa already has a representative office, the group is assessing whether to move into merchant banking, giving it access to corporate finance, capital markets and advisory opportunities in Africa’s largest economy.

Absa seeks broader earnings base 

Chief Executive Officer Kenny Fihla said the push reflects a need to spread the group’s earnings across more countries, customers and products. South Africa accounted for 72% of Absa’s earnings in the six months through June, while its broader Africa operations were hurt by weaker results, particularly in corporate and investment banking and business banking.

“We are looking at opening a representative office in Angola, which will be critical for the CIB business,” Fihla said. He added that even without a full banking license, a local presence would allow Absa to identify trade opportunities and pursue global market activity. 

Nigeria presents a different question. Absa is deciding whether its existing representative office is enough or whether a merchant banking license would give the group a stronger position. 

“We think we understand Nigeria well enough to be able to take the next step,” Fihla said. Nigerian merchant banks focus on wholesale services such as corporate finance, asset management, debt structuring and trade finance. They cannot take retail deposits or offer retail savings and current accounts. 

Absa exited Angola in 2009 after selling its 50% stake in Banco Comercial Angolano when it failed to secure full control of the lender.

Expanding across Africa 

The latest plans come as Absa reshapes its African operations. The group recently agreed to spend R4 billion ($246.1 million) to raise its stake in Absa Bank Kenya to 85% from 68.5%. It also recently agreed to acquire Standard Chartered’s wealth and retail banking business in Uganda, where Absa already operates. 

The group has banking operations in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles, Tanzania, Uganda and Zambia. It also maintains representative, securities, advisory and technology operations in several other markets. 

In Tanzania, Absa plans to combine its two businesses into one operation and provide it with additional capital to support growth. The group also opened a branch in Dubai’s International Financial Centre in April. 

Absa’s Africa operations remain smaller than its South African business, accounting for 19% of total customer deposits and equity. However, the region represents almost 60% of the group’s interest-rate sensitivity, making it more exposed to changes in borrowing costs. 

Fihla has reorganized the group around three pan-African businesses: personal and private banking, business banking, and corporate and investment banking. 

The bank is also expanding wealth services in Mozambique and Kenya and plans to establish a Mauritius wealth hub to serve clients with offshore and cross-border needs.

Absa posts stronger first-half earnings 

Absa reported total income of R58.8 billion ($3.62 billion) for the six months ended June 30, up 4.1% from R56.5 billion ($3.48 billion) a year earlier. The increase was supported by growth in lending and deposits across its main markets. 

Basic earnings per share rose 12.1% to R15.18 ($0.93), while headline earnings per share increased 7.9% to R15.45 ($0.95). Return on equity improved to 15% from 14.8%. 

The board declared an interim dividend of R8.50 ($0.52)  per share, an 8.3% increase from a year earlier. 

Absa operates in 17 countries, with 1,043 outlets and 6,212 ATMs. It serves more than 13.4 million customers, while digitally active customers increased 14% during the period as more clients shifted to its online and mobile banking platforms.