Banking deals snapshot: Buying and selling banks in Africa

A case in point is The Economist’s cover-page proclamation of “The Hopeless Continent” in May 2000. In December 2011, the same publication was praising “Africa Rising” on its cover. By March 2013, the continent had become “Aspiring Africa”.

Today, African banking is the darling of commentators of all stripes.

“Africa’s banking markets are among the most exciting in the world,” enthuses global consulting firm McKinsey & Company in a report.

The continent’s overall banking market is the second-fastest-growing and second-most profitable of any global region, and a hotbed of innovation.

The retail banking sector in particular is a locus of new business models, emerging in response to challenges including low levels of banking penetration, heavy use of cash, sparse credit bureau coverage, and limited branch and ATM networks.

At the same time, Africa’s banking markets continue to present a set of challenges—including large numbers of low-income customers, high usage of cash, and low levels of physical distribution.

The markets are also highly varied, from the relatively advanced markets of South Africa and Morocco, to the nascent markets of Ethiopia and DRC.

The technologies that enable growth in these markets have never been more widely available, and the market needs remain as large as ever.

In our featured deal this week focuses on reports that former Barclays Bank CEO Bob Diamond is looking to sell his holding in Union Bank of Nigeria.

Atlas Mara, the pan-African banking group started by Bob Diamond, has drawn interest from Nigerian and Middle Eastern lenders for its remaining assets on the continent.

The London-listed group has received a number of approaches for its 49.97% holding in Lagos-based Union Bank of Nigeria.

Nigeria’s Zenith Bank and Access Bank are among suitors that have expressed interest, alongside other African rivals such as Morocco’s Attijariwafa.

Middle Eastern banks and private equity suitors have also shown interest, according to the people.

Some potential buyers have indicated they may acquire all of Atlas Mara’s remaining assets in Africa, which would include its Zimbabwe unit, the people said.

Atlas Mara has been working with Rothschild to consider options for its Union Bank stake. So far, no final decisions have been made.

A deal could bring down the curtain on Atlas Mara’s African foray after Diamond, a former Barclays Plc chief executive officer, misjudged competition on the continent and overpaid for acquisitions.

The company said it has secured regulatory approval for the sales of its businesses in Botswana and Mozambique and received interest in other assets.

Bob Diamond, an American executive who was forced out as Barclays’ CEO in 2012, decided to buy British bank’s African operations.

Barclays Africa Group Limited (BAGL) had been generating decent returns—healthier, at least, than that of Barclays’ investment bank—but stark losses for the company overall forced Barclays to regroup.

In addition, volatility in Africa’s political and economic climate perhaps helped make the choice to exit the continent an easier decision to make.

Diamond was bullish on Africa.

In 2013, after falling from grace at Barclays over the bank’s involvement in an interest-rate-rigging scandal, he co-founded, with the Ugandan investor Ashish Thakkar, an investment vehicle he hoped would become the next powerhouse of African banking.

The company, called Atlas Mara, has investments in seven countries on the continent.