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CESSATION OF FOREIGN BANKS OPERATIONS : An advantage for African Operators

[abelainfo] - The gradual withdrawal of French multinational banks such as Société Générale, Crédit Agricole, and BNP Paribas from the African banking sector is opening up new opportunities for local players. This trend, confirmed by a recent note from Fitch Ratings, is fostering the development of African banks and stimulating competition on the continent.

In recent years, Africa has witnessed a wave of departures and reorganizations of major French companies’ presence in the banking sector. The latest example is Société Générale, led by Slawomir Krupa, which has divested its subsidiaries in Chad, Morocco, Congo, and Mauritania in recent months. This move is part of a broader strategic repositioning, as the bank has also announced its upcoming departure from Tunisia, Cameroon, and Ghana. To facilitate this, Société Générale has engaged the services of the investment bank Lazard to find buyers. It is worth noting that these three subsidiaries accounted for 21.5% of its Africa revenue in 2023.

The various divestments by Société Générale have led to a repositioning of local players. Bgfi Holding has acquired the bank’s subsidiary in Congo, while Coris Bank International has acquired the subsidiaries in Chad and Mauritania. This new dynamic suggests a possible reshaping of the banking landscape on the continent. This perspective is also shared by the American financial rating agency Fitch Ratings. In their recent analytical note titled « French Banks’ Exit from Africa to Spur Local Banks’ Growth, Competition, » published on April 26th, Fitch Ratings states that « the withdrawal of French banks from Africa offers emerging pan-African banking groups significant room to grow, either organically or through mergers and acquisitions. » This development should « stimulate competition and benefit local banking sectors despite some short-term challenges, » the note adds.

The front page of LA VOIX DES ENTREPRISES newspaper, published on Tuesday May 7, 2024.
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This growth in banking activity in Africa stems from the fact that « African subsidiaries under French control are often unable to target certain segments of the economy due to their parent bank’s conservative risk appetite, and they follow stricter loan classification and provisioning policies than local banks. This can impede growth and profitability. Tighter capital management, with higher reserves than local minimum regulatory requirements, has also limited lending by the subsidiaries, » explains Fitch Ratings.

This trend of reshaping the banking landscape in Africa offers local players a unique opportunity to strengthen their presence and influence. African banks can now focus on market segments overlooked by French multinationals and adopt policies that are better suited to local economic realities. Moreover, they have the opportunity to develop partnerships and strategic alliances with other regional financial institutions, thus enhancing their positioning in the African market.

However, this withdrawal of French banking groups will not occur without certain short-term challenges. Local players will have to face increased competition and heightened pressure to improve their performance and operational efficiency. At the same time, they will need to seize the opportunities presented by the emergence of new financial technologies and evolving customer expectations regarding banking services.

Raphael Mforlem

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