Big international bank leaving Ramaphosa's South Africa

HSBC has exited its operations in South Africa after concluding deals with FirstRand and Absa to take over its two main divisions in the country.

The bank first opened a South African office in 1995 and sought to capture the increasing value of global trade with Africa.

However, its stay in South Africa is not going to reach its 30th anniversary as it sells its operations to FirstRand and Absa.

Earlier this month, Bloomberg reported the international bank was in discussions regarding the sale of its corporate banking unit to FirstRand's RMB.

This was the result of a review of its global operations, where HSBC committed to selling non-core assets to cut costs.

HSBC's plan is part of its strategy to shed businesses in many parts of the world and boost investment in Asia.

The bank has sold its global equities and securities business in South Africa to Absa, while its corporate banking operation has been sold to RMB.

In terms of the agreement, Absa will provide HSBC and its clients with access to a full suite of equities trading and prime brokerage products in South Africa.

The agreement aligns with Absa's growth ambitions, which includes serving corporate and investment banking clients with access to equities markets and product, Absa said in a statement.

"The agreement is an endorsement of our strategy, which emphasises providing our clients with best-in-class equities product and equity market access," Quintus Kilbourn, the head of equities at Absa Corporate and Investment Banking, said.

Absa said the agreement with HSBC came into effect on 26 September 2024.

FirstRand's takeover of the banking business is slightly more complicated, including the transfer of clients and banking assets and liabilities.

HSBC's local employees will also be transferred to FirstRand. The transaction is expected to be completed in the fourth quarter of next year, subject to regulatory and governmental approvals.

The clients of HSBC South Africa are mainly subsidiaries of multinationals operating in South Africa, and some
large domestic corporates.

Therefore, the transfer will be led and implemented by FirstRand's corporate and investment (CIB) banking franchise, Rand Merchant Bank (RMB), FirstRand said in a statement.

FirstRand will allocate the required capital to back the transferred risk-weighted assets, which meets the
group's financial resource allocation principles.

"Following a strategic review, we are pleased to have signed agreements with FirstRand Bank and Absa," Colin Bell, HSBC Bank plc and HSBC Europe CEO, said.

"They both have extensive networks and are leading corporate and investment banks in the region. They will continue to provide clients with a broad offering in terms of service and products."

HSBC's exit follows that of BNP Paribas, Europe's largest bank, which closes its corporate and investment banking operations in South Africa in May.

"We can confirm that we have closed BNP Paribas CIB in South Africa," a bank spokesperson told Bloomberg.

"From a legal perspective, the approval from the regulator came in April 2024."

An April 19 notice shows the Prudential Authority withdrew the French lender's authorisation to "conduct the business of a bank by means of a branch" with effect from March 8.

Barclays and Standard Chartered have both scaled back in Africa, while rival Societe Generale is also cutting its footprint on the continent.

"French banks' exit from Africa, which is nearing its end, gives emerging pan-African banking groups significant space to grow organically or through mergers and acquisitions," Fitch said in an April note.

"This should stimulate competition and benefit local banking sectors despite some short-term challenges."