What have you been noticing around the movement in terms of financial service providers on the continent?

Yeah, it's been ongoing for almost 10 years, thinking of Barclays when they exited Standard Charter, etc., even HSBC, all for slightly different reasons.

The most recent exits have been from the French banks, Credit Agricole, BNP, Societe Generale, and so on.

With them, it's more specific.

Remember, they are generally being in the northern African, French francophone, as they say, francophone Africa, northern Africa.

And the reasons why they're leaving is mainly four, but the main one is reducing profitability of the African operations.

And that's partly due to lower growth in Africa, a lot more volatility, and then increasing KYC costs, especially on larger transactions like The risk of BNP Paribas now had been fined for facilitating transactions or potentially facilitating transactions with bad characters or bad businesses.

And that also presents a unique area of opportunity for banking partners, for financial services partners, How do you see that playing out, especially with Africa's population being on average the youngest in the world?

What have you been noticing around the movement in terms of financial service providers on the continent?

Yeah, it's been ongoing for almost 10 years, thinking of Barclays when they exited Standard Charter, etc., even HSBC, all for slightly different reasons.

The most recent exits have been from the French banks, Credit Agricole, BNP, Societe Generale, and so on.

With them, it's more specific.

Remember, they are generally being in the Northern African French francophone, as they say, francophone Africa, Northern Africa.

And the reasons why they're leaving is mainly for, but the main one is reducing profitability of the African operations.

And that's partly due to lower growth in Africa, a lot more volatility, and then increasing KYC costs, especially on larger transactions, The risk of BNP Paribas now had been fined for facilitating transactions or potentially facilitating transactions with bad characters or bad businesses.

Before I let you go, Omkoki, I want to take a look at the... future of banking on the continent because africa remains one of those continents that has a lot more fintech businesses that are coming up perhaps more so than other areas they're solving for financial solutions and financial inclusion a lot differently to how perhaps other continents might be doing so and that also presents a unique area of opportunity for banking partners for financial services partners How do you see that playing out, especially with Africa's population being on average the youngest in the world?

And I think it's really important.

Now, Nigel, I think what's vital to understand is Barry and Ben have been with me in the Denka team for, I think, 12 years almost.

Liesel has been in the team for 20 years.

Craig has joined a bit later.

And when we go on trips visiting these banks and insurers all over the world, it's not after the meetings, off to the pub.

It's, okay, guys, do go to the gym first.

or go for a run wherever we are.

you know they don't even have to look they know where the other player is going to be so uh so yeah i think that's some that's a real strength of the team cookie and uh you know all those disciplines come out when the guys when i go speak so okay let's finish up by um the interesting bit which is always what do you think is going to happen the rest of the year where are we we are almost into september so we are rolling through q3 the time seems to rattle past before we hit the beach in december what's going to happen

How does this geopolitical, these geopolitical issues affect us in South Africa and by defi- definition our banks?

Yeah, banks are, in that regard, uh, and that's global at the moment, banks are benefiting from the war.

It sounds contra to what you would normally believe, but the higher oil price is fueling inflation, keeping interest rates higher.

And so everywhere in the world, the bank net interest margins have been going up.

Normally, in the past, when interest rates go up, your bad debts go up.

But because post-2008 balance sheets and everything and regulation have been changed dramatically, the banks' bad debts in South Africa as well are, are still at record lows.

So, you're benefiting at least from net interest margins.

Um, but you're the expert.

Yeah.

So, exactly like yourself, we, we, we use the price to the net asset value.

Uh, the net asset value is just another term for the book value, which effectively is the capital of the business.

So, in accounting, uh, grade, is it now grade, uh, eight these days or whatever, uh, the first thing you get taught is, um, O plus L is equal to A. Owner's equity plus liability is equal to your assets.

So it's the assets of the business, less the liabilities, which is your owner's capital, and it's that owner's capital that you grow.

So we, we calculate for banks always the return on equity, which is effectively the return on that capital.

So, should we be looking at it, at, at its, its valuation differently?

Yeah

... and Standard Bank.

And I would assume that most probably, he most probably worked with, with Kenny Ebongane at, at Standard Bank, and maybe that's why he came across to, to African Bank in August 2023.

But since he joined it, it's just over three years, uh, that he's been there.

And so if, if I have to guess why he resigned, it...

I, I think most probably two reasons.

Uh, n-number one, in the last five years, African Bank under Kenny, uh, and his Accelerate, uh, 2025 program really changed the bank dramatically.

How do you clean this up to get to that IPO in 2030?

Gwoki, welcome to The Money Show.

Yeah, no, indeed, it's great.

It's always worrying when someone resigns with immediate effect.

And so it makes you think, you know, is there something wrong? We don't know at this stage.

It's just too fresh the news.

And Amnon Chetty has been at five different banks in the past 20 years.

He's got a lot of experience and has included Capitec, Net Group and Standard Bank.

a matter of him falling on his sword given that scandal that happened? Because as you say, the company had grown quite considerably and maybe even a bit of more than it could chew.

this particular asset in angola but quite an interesting development here that the angolan government is potentially looking to raise some money of their own from this

yeah no i forget and it's as to how originally uh the stake came about but i'm i'm sure standard bank when it formed standard bank angola most probably the insurance company where this fraud was the owner of the shares most probably where the fraudulent actions took place.

In any case, he most probably had a bank and Standard Bank most probably bought his stake and he kept 49%.

But I'm just guessing that.

But the good news is I think here this is one of those where it's a win-win for everybody in that the Angolan government and the new president there who has got a reform agenda seized the stake and it was obviously forfeiting in terms of debts mostly tax debts that were owed to the state and then realized what they want to actually start an angolan stock exchange which was also done forget how long ago three fairly recently and at the same time list a few other state owned and other enterprises on that stock exchange already another positive because once let's say any state-owned enterprise is listed, it's got outside, albeit minority shareholders, but it must give account of what it does, even when it has debt, it's got to account for that, it's got to report to those shareholders.

So, And this stake, it seems like the Angolan government, most probably due to a prior arrangement, is offering some to standard banks.

The standard bank wins.

And I suppose if you are operating on the continent and something like this does happen, it is their reputation on the line at the end of the day.

But quite an interesting development here that the Angolan government is potentially looking to raise some money of their own from this.

Yeah, no, I forget.

And it's as to how originally the stake came about.

But I'm sure Standard Bank, when it formed, Standard Bank Angola, most probably the insurance company where the fraud was the owner of the shares, most probably where the fraudulent actions took place.

In any case, he most probably had a bank.

And Standard Bank most probably bought his stake and he kept 49%.

But I'm just guessing that.

And I suppose if you are operating on the continent and something like this does happen, it is their reputation on the line at the end of the day.

Just for those that perhaps don't know the fund so well, just talk a little bit about the investable universe and the geographical spread within the fund, if you could, and how you guys really manage it.

And essentially what we do in global financials over the years, we've built up this expertise and knowledge of the sector.

And so we go around the world, literally following our research, finding companies, looking for companies who have got a good track record and inevitably find there's a good team at the top.

So you go and meet those teams and the CEOs and try and listen to them, what they say, read up on the track records.

And above all, when the valuation is attractive, we invest.

So that's actually led to quite a large diversification in the fund, which is very important in terms of the volatility and what we're seeing.

But at the moment, the US is still dominant in the fund.

We're gonna hear from them

We're going to be taking a look at these regulatory approvals and getting a sense of what happens next with our resident banking expert, director at denka capital koki koima and he joins me on the line now to see what we make of this lovely having you on the show as always thanks so much for taking the time it's nice to talk about an acquisition it doesn't happen very often in the banking world where one bank buys an entire other bank or at least a majority stake in this particular case but it's nice to talk about an acquisition

yeah no i i think it does show where the salafi banking system is at that The large four, if you include Investec, the large five, and actually now you should include Capitec as well, six.

It's a very, very competitive environment at that level.

And even at the lower level, it's becoming increasingly competitive with Peck Bank and Lasaka.

So the problems South Africa does face, especially for corporate banking transactions and lending, is that we've become a low-growth country.

And so and well, the African countries on average are growing their gross domestic product or the economy at a higher rate.

And for instance, the bank at that NCBA, that net bankers have taken a 66 percent stake in just recently reported results in their loan growth was 27 percent year on year.

before I let you go let's stick with that premium and that overpaying valuations in the financial services space are critical because institutions like banks typically have to factor things like loan books have to factor in how it is that they achieve their earnings and how it is that they grow financial institutions can often be very complex to achieve and to quantify a valuation that we can all agree on how much more on a continent like ours where a lot of the continent does still remain unbanked

We're going to be taking a look at these regulatory approvals and getting a sense of what happens next with our resident banking expert, director at denka capital cookie coin money joins me on the line now to see what we make of this lovely having you on the show as always thanks so much for taking the time it's nice to talk about an acquisition it doesn't happen very often in the banking world where one bank buys an entire other bank or at least a majority stake in this particular case but it's nice to talk about an acquisition

yeah no i i think it does show where the celebrity banking system is at that's The large four, if you include Investec, the large five, and actually now you should include Capitec as well, six.

It's a very, very competitive environment at that level.

And even at the lower level, it's becoming increasingly competitive with Peck Bank and Lasaka.

So the problems South Africa does face, especially for corporate banking transactions and lending, is that we've become a low-growth country.

And so, well, the African countries on average are growing their gross domestic product or their economy at a higher rate.

And for instance, the bank at NCBA, that NetBank has taken a 66% stake in, just recently reported results, and their loan growth was 27% year on year.

How much more on a continent like ours where a lot of the continent does still remain unbanked?

Where does South Africa sit compared to other global banks?

Yeah, we actually sell expensive.

And funny enough, in this case, it's not the banks.

I know.

Well, Revolut and guys like that and Wise are coming in and trying to cut that.

And the banks, I think, have made fairly good margins on international card transactions.

But the main culprit is actually really MasterCard and Visa, who set a very high interchange fee.

But how do we look at this particular problem from a South African perspective, understanding that as an emerging market, we are still subject to the likes of the duopoly that you mentioned?

Where does South Africa sit compared to other global banks?

Yeah, we actually sell expensive.

And funny enough, in this case, it's not the banks.

I know.

Well, Revolut and guys like that and Wise are coming in and trying to cut that.

And the banks, I think, have made fairly good margins on international card transactions.

But the main culprit is actually really MasterCard and Visa, who set a very high interchange fee.

But how do we look at this particular problem from a South African perspective, understanding that as an emerging market, we are still subject to the likes of the duopoly that you mentioned?

How do you understand the logic behind this move?

Ja, Stephen, uh, it's indeed, it's indeed a, a very interesting development, and it's been coming for some while, but they've acted quickly.

Uh, so just for background, the, the, the lower end of, of the consumer market, uh, sort of the cash market, has for long been ignored by the formal banks, um, mainly because of, of high volumes, low, low transaction cost, and it's really expensive to service that and to have branches, et cetera, et cetera, et cetera.

But for many reasons, it was ignored, and then slowly there were a lot of players who started to grow, uh, s- start sending devices into that market.

Until Lasaka was really a big one who, who came and put together a lot of the pieces and started providing services to both clients in that lower end unbanked market and to the traders and spaza shops.

And now Pep has actually suddenly outflanked Lasaka, um, by combining two businesses.

So one is Flash, which it, it's developed over the past, I think, eight, nine years as a startup, and it's grown very rapidly.

I mean, and this tells us something about how perhaps the retail sector is changing.

How do you understand the logic behind this move?

Yes, Stephen, it's indeed a fintech.

Very interesting development, and it's been coming for some while, but they've acted quickly.

So just for background, the lower end of the consumer market, sort of the cash market, has for long been ignored by the formal banks, mainly because of high volumes, low transaction costs.

And it's really expensive to service that and to have branches, et cetera, et cetera, et cetera.

But for many reasons, it was ignored.

And then slowly, there were a lot of players who started to grow, start sending devices into that market until the soccer was really a big one who came and put together a lot of pieces and started providing services to both clients in that lower end unbanked market and to the traders and spousal shops.

I mean, this tells us something about how perhaps the retail sector is changing.

Yeah.

Well, the one was National Bank of Abu Dhabi, and the other one was First Abu Dhabi Bank, and they merged in to become First Abu Dhabi Bank.

But the important thing is the acronym, acronym under which they trade is FAB, F-A-B.

Uh, and obviously, that is quite close to, to FNB.

Um, and FNB, funny enough, on the court case, objected, uh, on its appeal against the registration of, of the, um, trademark of First Abu Dhabi Bank.

Objected against saying that the, that bank is not serious about coming to South Africa, first wanting to lodge a trademark before applying for a license.

And that case went to and fro with, with the appeals, uh, for actually nine years until finally the Supreme Court, um, ruled against FNB and said, you know, uh, the bank can-

Mm

Good to chat you once again on The Money Show.

Yeah, Ray.

No, it's a very interesting development.

Just by background, First Abu Dhabi Bank is actually a result of a merger that occurred in 2017, and banks actually had really similar names.

You can see why they merged.

Well, one was National Bank of Abu Dhabi, and the other one was First Abu Dhabi Bank, and they merged them to become First Abu Dhabi Bank.

But the important thing is the acronym under which they trade is FAB, F-A-B.

This has got to be hurting the big four or the big five.

What were we here for?

Hey, near Jimmy.

Uh...

Nia, this is, as you pointed out, quite a long, drawn-out affair, and it was fraught with complications.

But essentially, maybe just to take a step back, it started in 2015, sent to the drawing board, or the competition commission sent back to the drawing board, resubmitted 2017, and the real alleged offence was one of, saying that there was an overarching conspiracy by 28 local and foreign banks, and the offence was that together they colluded to fix the exchange rate and or segment the market between them.

Now, the allegations of this case and of the points was never really tested.

because the banks kept pointing out that there were procedural and other legal inaccuracies in the presentation that the Competition Commission made.

Does that mean that these banks would be subject to penalties? What was the Competition Commission seeking out here?

What was your role there? Because, I mean, that would be something that helps you to really get under the skin of business.

No, you're, you're totally right.

Uh, as, as a ...

After teaching, I, I went into lecturing at UCT.

That's a different story, but interesting, there were two guys who lectured with me as junior lecturers in accounting.

Uh, and, uh, the one actually later got me involved at Old Mutual, but before that, there was another one who became CEO of this, um, finance division, which is part of the old Bancor group.

And he one day phoned me and he said, "Look, I need help.

Mm.

Do you find they're sort of the same game, just on a different playing field, or are they fundamental differences? And I imagine that the global field is just a lot more complex because there are a lot more elements.

Yeah, no, totally.

You know, over the years, I've employed quite a few analysts and fund managers who started their career as local fund managers, local analysts, and then wanted to make a change to global.

And each time I warned them, you have no idea as to how big the difference is And all of them afterwards said, you were right.

But the big difference is, I think, firstly, local.

If you've been doing it long enough in South Africa, you get to know what's happening almost by process of osmosis.

Right.

wow, wow, what a great idea.