HSBC has revealed it is in talks to purchase a majority stake in South Africa's Nedbank. The deal would secure the largest bank in Europe a high profile on the African continent.
HSBC is planning to become a big name in Africa
In a statement to the London Stock Exchange, the UK-based bank said HSBC Holdings and South African insurer Old Mutual, which currently owns a controlling share in Nedbank Group Limited, had entered into "exclusive discussions" about the possible acquisition of a majority stake in the bank.
"The discussions are ongoing and if successfully concluded would be conditional on, among other matters, obtaining the necessary regulatory approvals," the statement continued.
Old Mutual confirmed the talks and described the HSBC proposal as a "major step" towards streamlining its complex structure, adding that the takings would go towards cutting debt.
Far from all South Africans have bank accounts
Although HSBC already has a commercial and offshore personal banking presence in South Africa, it is keen to get a more secure foothold in a country widely considered as the gateway to a rapid-growth continent.
It is not yet clear whether HSBC will be granted the necessary clearance from South African regulators to go ahead with the deal worth a potential 5.35 billion euros ($6.8 billion).
Speaking after the announcements, Errol Kruger, head of bank regulation in the country told the Reuters news agency that it was too soon to pass comment about the possible outcome of the discussions.
'They still have to submit all the applications they need to go through and then we'll need to apply our minds to it,' he said.
But Old Mutual CEO Julian Roberts said his company would not have started exclusive talks if regulatory endorsement were unlikely to be forthcoming.
In need of a change
Earlier media reports suggested that HSBC's rival, Standard Chartered had been eyeing up Nedbank, but had been pipped to the post. A claim which has neither been confirmed nor denied by any party concerned.
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This month, Nedbank, which is South Africa's fourth largest banking group by total assets, posted flat first-half earnings and revealed that it would struggle to make its medium-term forecasts.
In a statement of its own, Nedbank described HSBC as an attractive international banking partner.
Nedbank shares surged in response to the news of the talks, climbing 6.7 percent in Johannesburg. Old Mutual increased by just over four percent in London.
Author: Tamsin Walker (Reuters/AFP)
Editor: Rob Turner