Crédit Agricole closes South African IB unit, 48 jobs lost
If there were any doubts about the impact that the eurozone crisis is having much further afield, the sudden decision by Crédit Agricole to close its investment banking business in South Africa will serve as a sharp reminder. The Johannesburg-based unit, which has been open for sixty years and employs fifty people, is being sacrificed to help the French bank meet new stringent capital adequacy rules imposed by Europe’s banking regulator. The bank’s strategy is to cut the financing needs of its corporate and investment banking business by between 15 and 18 billion euros.
Crédit Agricole was until now the fourth-biggest foreign bank in South Africa and the unit, which provided corporate finance, structured finance and capital markets services, had a balance sheet of R18.4bn (1.65bn euros). Most importantly, it was profitable, which made the decision to close it even harder, said Guillaume Fay, the bank’s SA manager: “We have been making money, it’s absolutely not linked to the South African picture or environment, because we consider it relatively good. If things had not changed we would certainly have been staying in South Africa.”
Of the fifty people who worked for Crédit Agricole in South Africa, 48 will lose their jobs and two will be redeployed elsewhere within the bank. “Obviously it’s disappointing for everybody but we are being pushed by the international picture,” Fay said. “All the banks are doing the same. It is clear that all the corporate and investment banks have to reduce the number of countries, clients and products.” Closing the business will take a while, Fay added: “We are in the process of winding down and selling assets, and selling assets takes some time.”
Crédit Agricole follows in the footsteps of Germany’s Commerzbank, which closed its SA unit during the 2008 financial crisis. Analysts believe more closures may follow. “The regulator in Europe is placing quite a bit of pressure on the European banks to beef up their capital balances so you are going to see this trend continue,” said Faizal Moolla, banking analyst at Avior Research in South Africa. “It will be favourable for the incumbent banks in Africa who now have the opportunity to use their excess capital to grow into Africa.” Local players like Standard Bank and First Rand are the most likely to benefit from the French bank’s departure.
Where old world banks leave, emerging markets ones are ready to step in: Industrial and Commercial Bank of China, which has a 20% stake in South Africa’s Standard Bank, opened its first office in Johannesburg last month.
