South Africa a battleground for foreign banks

There is no visible blood on the floor, but South Africa is becoming a battleground for foreign banks fighting for deals - and for talented people to execute them successfully.

"There are far too many players hunting from the same talent pool as well as the same deal pool," says Phryne Williams, director of Capital Assignments, a specialist financial services recruitment firm. "There is only so much deal flow going around and the number of players that are competing for that limited resource pool is growing by the month."

This week JP Morgan Chase announced it has beefed up its team, luring to South Africa bankers from its Geneva and London offices and also poaching people from other foreign banks. "We lost critical mass with people leaving and the financial crisis. We want to be in a top-tier position in any business," said John Coulter, Ceo of JP Morgan's sub-Saharan Africa division. "This is a market set for increasing investment both by existing players and a number of additional new participants."

The declared objective is climbing up South Africa's equity sales rankings and catching up with Morgan Stanley, which in joint venture with Rand Merchant Bank has conquered a 40% share of the market this year. Damian Dolland, JPMorgan's new head of investment banking for sub-Saharan Africa, has been poached from Morgan Stanley.

This year, Credit Suisse officially ended its joint venture with Standard Bank after four years because they both want to control their own brokerage. The Swiss bank is now keen to grow its own business offering trading, private banking and investment banking. "The changes with Credit Suisse Standard Securities may be a hiring opportunity, but it's also a further squeeze on already tight resources in the local market because one institution becomes two," admits Coulter.

Other foreign players, big and small, crowd the field. BoA Merrill Lynch, Deutsche Bank, Goldman Sachs and Hsbc are all trying to grow their presence. Russia's Renaissance Capital has also aggressively been building up its business in South Africa.

The situation is not sustainable, says Williams: "There is a wave of loss leaders flooding into SA all hoping for a big pay off at some stage. The question is for how long they can hold out before they lose patience and leave again. My concern is that the international banks that are coming in and growing rapidly may find that they grow tired of having to finance such a competitive risk."