ABSA Eyes Botswana Acquisitions

| Monday August 9, 2010 00:00

Absa, which is majority owned by Britain's Barclays), is also considering acquisitions in Namibia, Zambia and Botswana to boost its bank assurance business, the lender's deputy chief executive told Reuters in the same interview.

Absa CEO Maria Ramos, Deputy Chief Executive Louis von Zeuner and Financial Director David Hodnett met with Reuters following an investor presentation in Johannesburg on Thursday.

Under the planned Basel III series of banking reforms, lenders will be required to hold more capital and liquidity to avoid another financial crisis and massive taxpayer bailouts.

'For Absa the impact is primarily on the liquidity side,' Ramos said.

'It is the liquidity issue that is the big challenge and will bring with it the highest cost.'

Analysts have said South African banks are unlikely to struggle to meet Basel's capital requirements. However, South Africa's banks rely on short-term funding and are therefore sensitive to liquidity regulations, Hodnett told Reuters.

Under the proposed rules, Banks will have to hold enough cash-like assets such as sovereign debt or high-ranked corporate debt, to tide them through short-term shocks.

Absa currently holds about 8 billion rand ($1.1 billion) in short-term liquid assets, Hodnett said. The bank could be forced to raise that to anywhere from 15 billion to 90 billion rand, depending on the final outcome of the proposed regulations.A significant increase would likely have a big impact on earnings, he said.

Absa would also consider inorganic growth, meaning acquisitions or capital tie-ups, in southern Africa to boost its bank assurance business, Von Zeuner said.

Bank assurance involves the selling of insurance products by a bank.

'We're looking at three countries at the moment, Namibia, Zambia and Botswana. Ninety percent of the life insurance business is in the southern part of of Africa,' Von Zeuner said.

'We're exploring whatever opportunity to go into (those) markets.'

South Africa's largest retail lender reported flat first-half earnings on Wednesday, hit by slack demand for loans, and stuck to a cautious outlook.

The bank released its results a day earlier than scheduled, after details of its earnings were first published in a local magazine, and not through the Johannesburg Stock Exchange's news service.

Absa said on Thursday it was investigating the causes of the early release and was working with the bourse. (Reuters)