High risk of getting things wrong in Africa could be pushing multinational banks away – Andani

Former Chief Executive Officer (CEO) of Stanbic Bank Ghana Limited, Alhassan Andani has stated that foreign banks may have various reasons for packing from the African continent.

First, he explained that technology and the ability to access client base could be a major factor for the banks’ decision to exit the continent.

The other factor is aggregate risk, he said.

Aggregate risk is often defined as the total amount of an institution’s exposure to foreign exchange counterparty risk deriving from a single client. Foreign exchange contracts—both spot and forward—involve a counterparty who is responsible for holding up their side of an agreement.

Over the period, multinational banks have been exiting the African market.

For instance, in 2017, Barclays BARC.L cut its stake in Barclays Africa Group BGAJ.J to 15 percent, ending more than 90 years as a major presence on the continent.

Similarly, Standard Chartered Plc in April 2022 announced a strategic move to fully exit some African and Middle East markets.

The bank in a statement said the markets are Cameroon, Gambia, Angola, Zimbabwe, Sierra Leone and two other markets in the Middle East. As part of the restructuring, the statement said Standard Chartered will also do away with all aspects of its private and business banking operations in Tanzania and Ivory Coast, whilst focusing only on corporate, commercial and institutional banking in those two countries.

“We remain excited by a number of opportunities we see in the AME region, as illustrated by our new markets, but remain disciplined in our assessment of where we can deliver significantly improved shareholder returns,” he said.

“Collectively, our actions will position the AME franchise for the next phase of growth after a very strong 2021 performance. We are grateful to our colleagues and partners in each of these impacted markets for their hard work and dedication and are committed to supporting them through this transition.”

Asked what could be accounting for these developments, Mr Andani who is currently the Executive Chairman of LVS Africa told TV3’s Nana Akua Aborampah Mensah in an interview that “I don’t think we should conclude that anything is pushing them out of Africa.

“There are a number of moving parts. One is technology and ability to access to the client base.

“The other is also aggregate risk. For most of those exiting banks, whether Barclays or Standard Chartered, you want to look at the aggregate risk value versus the value, you will see that comparatively the risk of getting things wrong in Africa.”

Source: 3news