Foreign banks will raise bar for Nedcor
February 23, 2005
By Sherilee Bridge-David
Johannesburg - Nedcor chief executive Tom Boardman is being kept awake at night by the imminent entry of foreign lenders into the South African banking space.
"The entry of one, if not two, foreign banks would significantly raise the bar," Boardman said yesterday.
Referring to Barclays' proposed acquisition of a controlling stake in Absa and market speculation that Standard Bank may be a takeover target for Standard Chartered or Citibank, Boardman said international players would make it more difficult for Nedcor, which is currently in fourth place, to get to the front of a race.
While Barclays' proposed takeover of Absa, valued at more than R23 billion, is currently being considered by the bank regulator and finance minister, the Financial Times of London yesterday reported that President Thabo Mbeki had come out in support of the deal.
He was quoted by the daily newspaper as saying: "I saw the Barclays people and, indeed, said that as far as I was concerned, there was absolutely no problem."
News of international interest in the local banking sector has, in the meanwhile, sent banking shares soaring. Banks' equities produced returns of close to 70 percent last year.
Nedcor, whose parent Old Mutual has said on more than one occasion that its stake in the banking group was not for sale, reported better-than-expected earnings for the year to December.
It said headline earnings a share excluding one-time items and foreign exchange losses rose slightly to R5.04 from R5.02, which is higher than the median forecast of R4.52 from seven analysts and investors surveyed by Bloomberg.
"What helped us was that we were doing this enormous turnaround in a year that was favourable to banks in terms of low interest rates, low inflation and low bad debts," Boardman said.
"For me, the biggest battle is still retail banking," he said.
Nedbank held on to its market share in the corporate banking arena but has lost ground in the home loans and credit card market.
Earlier this month, Bloomberg reported that Nedbank's slice of the mortgage market declined to 20.5 percent at the end of 2004 from 22 percent a year earlier, and its credit card market share slipped to 16.5 percent from 18.8 percent.
Based on data released by the Reserve Bank, Standard Bank's share of the mortgage market increased to 26 percent from 23 percent in 2003 and its credit card market share grew to 33 percent from 29 percent.
"Our commitment is that our market share erosion stops at June this year," Boardman said.
He said all the time and effort that was poured into completing the group's merger and recovery plan in the past year would be redirected into rebuilding Nedbank's presence in the retail market.
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