29th September, 2011
Standard Bank Group Ltd., which this year reversed plans to expand internationally to focus on Africa, may buy a stake in Nigeriaâ€™s Guaranty Trust Bank Plc, the most profitable of the countryâ€™s four biggest banks.
The report by Bloomberg has been denied by GTB spokesperson, just as there are indications that Standard Bank has not kickstarted any move to buy some stake in the Nigerian bank.
â€œGuaranty is not in talks with Standard Bank,â€ Lola Odedina, a spokeswoman for GTB told Bloomberg.
According to Bloomberg, Africaâ€™s biggest lender said last month it may consider buying a consumer bank in Nigeria. Guaranty, Nigeriaâ€™s second- biggest lender, is the most likely target because of its return on equity and margins, according to Ilan Stermer, a Johannesburg-based banking analyst at Renaissance Capital.
â€œThe expansion of Standard Bankâ€™s retail business in Nigeria is critical to its success in Africa,â€ said Faizal Moolla, a banking analyst at Avior Research Ltd. in Cape Town who has a â€œbuyâ€ rating on Standard Bank. â€œNigeria has a huge population and given its growth prospects, the bank needs to have a bigger presence.â€
Nigeria is forecast to overtake South Africa as the continentâ€™s largest economy by 2025, Morgan Stanley economists said in a report in June. Rising oil prices and consumer spending are helping the expansion, according to Morgan Stanley. That growth is attracting overseas lenders from the U.K.â€™s Barclays Plc to South Africaâ€™s FirstRand Ltd.
Standard Bank is seeking to revive the profitability of its operations in Africa after aborting plans to expand in Russia and Argentina. The lender is the worst-performing stock on the six-member FTSE/JSE Africa Banks Index after dropping 11 percent this year, three times the benchmarkâ€™s 3.4 percent decline.
Johannesburg-based Standard Bank will have about $1 billion in surplus capital during 2012 after disposing of its Russian venture and selling stakes in its Argentine units.
The lender isnâ€™t in talks or conducting due diligence on any Nigerian lenders, spokeswoman Kate Johns said.
While Standard Bankâ€™s overall return on equity rose to 14.5 percent in the first half, from 13.5 percent a year earlier, its operations in 16 African nations outside South African posted a return of 7 percent, taking into account goodwill, development costs and converting earnings back into rand.
Guarantyâ€™s 19 percent return on equity surpasses that of Nigerian rivals United Bank for Africa Plc, First Bank of Nigeria Plc and Zenith Bank plc, according to data compiled by Bloomberg.
The Lagos-based lender has the widest net interest margin at 7.8 percent, the data show.
The bank may post a 23 percent return on equity this year, more than First Bankâ€™s 16.4 percent and Zenithâ€™s 15 percent, according to Renaissance estimates.
Guaranty is Nigeriaâ€™s second-best performing lender on the 10-member Bloomberg NSE Banking Index after Standard Bankâ€™s Stanbic IBTC Bank Plc. Guaranty is down 15 percent this year as compared with the average decline of 31 percent. Standard Bank combined its Nigerian branch with Lagos-based IBTC Chartered Bank Plc in September 2007 and bought control of the combined company for 2.8 billion rand ($358 million).
Buying Guaranty, which has a market value of $2.2 billion, would give Standard Bank an extra 186 branches in Africaâ€™s most populous nation, tripling the value of its local operations in a country where 70 percent of citizens donâ€™t have bank accounts.
â€œGuaranty is widely seen as the benchmark for Nigerian banks, given its efficiency, use of technology and brand strength — all off a relatively small physical network of 186 branches,â€ Stermer and Adesoji Solanke wrote in a report in August.