Foreign troops invade SA banking sector
A survey says foreign banks will have 12 full branches in the country within a year, writes DON ROBERTSON
The 31 banks canvassed include those with branches, representative offices, subsidiaries or joint ventures. They are from the US, Germany, the Netherlands , Japan, the UK, France and Switzerland. There are also banks from Korea and Canada and joint ventures with a broking firm and a merchant bank.
The survey was conducted by Brian Metcalfe, associate professor at the Business School at Brock University in Ontario, Canada.
The report says that with considerable opportunities in the local market, it is likely many of the banks will soon change their status to be more representative.
anks questiond in the survey,
Three banks with representative offices plan to convert to branches within a year and four more will convert within three years.
Other participants in the survey asked that their intentions remain confidential for strategic reasons.
"Several banks mentioned the possible acquisition of one of the large domestic banks by a foreign bank. The most frequently cited examples were the acquisition of FNB by Hong Kong Shanghai Banking Corporation and a possible re-establishment and realignment of ownership in Standard Bank by Standard Chartered Bank," says the report.
All the banks believe that their market share will eventually level off, with 23 suggesting that market share of the total banking sector will be between 10% and 50%, although most suggest a more modest 15% to 25%.
But while most are happy with their performance, many feel there are too many foreign groups in SA. In total, 26 banks say they believe the market is "overbanked", while 27 say the number of finance houses operating in five years will be unchanged from the current 70.
Banks participating in the survey include the Bank of America, Chase Manhattan, Citibank, JP Morgan, Deutsche Bank, Dresdner Bank, Commerzbank, Sumitomo Bank, Barclays, Hambros, Standard Chartered, Credit Lyonnais, Societe Generale, Credit Suisse, Swiss Bank and Union Bank of Switzerland.
The participants say they expect to raise employment of 1 100 at present to 1 900 in four years. Of the 31 banks, 28 said profit expectations met forecasts or were better, with only two expressing disappointment with results.
Fourteen of the banks expect their assets to increase by 52% from $5.1-billion this year to $13.4-billion by 2001, while 12 of the banks forecast an increase in their profits f to $147.5-million from R37.25-million. The banks that provided data expect their loan portfolios to grow from $5.45-billion to $8.9-billion, with most loans in the $5-million to $25-million bracket.
The major problems facing foreign banks are finding suitable staff, followed by competition among themselves, merchant banks and domestic banks and the regulatory environment in the sector. They all call for the further lifting of exchange controls.
"What is clear is that a year from now we will have a dozen or more branches in the SA market. If the flow of new players entering the market continues, it seems likely that a shake-out will occur. This will lead to polarisation with many small foreign banks focusing on narrow niches and larger foreign banks operating across a broad range of market segments," says the survey.