| MADDY WHITE | The US representative office is expected to be operational by the end of the year. It follows Absa opening a London office in September and the bank revealing it is also looking at other locations such as Asia.
Absa is one of Africa’s largest financial services group, with offices in 12 countries on the continent.
The bank says the New York office will enable it to better serve its US clients, which include global corporates and institutions that invest in, or work in, Africa. Charles Russon, chief executive of Absa Corporate and Investment Banking (CIB) notes that the opening of the US office is “critical” to the bank’s strategy, that is, to be closer to its customers who invest in Africa.
It is hoped that the ongoing expansion will enable Absa to be a “globally scalable” business by strengthening ties with US and international clients.
It is a particularly important move following the bank’s split from its parent organisation Barclays: Barclays announced on March 1, 2016 that it would reduce its ownership of Barclays Africa Group (now Absa Group) from 62.3% to a minority shareholding, over time. Today Barclay’s share in Absa Group stands at 14.9%.
Last year Absa Group rebranded and launched a new growth strategy. The strategy prioritises cultural transformation as well as restoring leadership position in the group’s core business areas, the group said in a statement at the time.
Russon adds that Absa wants to be a “key enabler” of Africa’s success and believes this is possible through representative offices around the globe and via other initiatives such as the memorandum of understanding the bank announced earlier this year with Société Générale. The agreement aims to expand the banks’ activities through the development of a pan-African wholesale banking offering. Separately, Absa agreed to acquire Société Générale’s custody, trustee and clearing services operated in South Africa.
In August, Absa secured a US$500mn syndicated loan from 19 banks, the proceeds of which will be used for general corporate purposes, including trade finance.
The loan was initially launched at US$300mn on May 29 to select financial institutions and received significant commitments. Absa subsequently decided to upsize the transaction to US$500mn. The loan has an initial tenor of two years, with the availability of a one-year extension option. It pays a margin of 1.05% per annum.
This development comes as the South Africa’s third-largest lender recorded 5.4% growth in net income to 7.64 billion rand ($500 million) for the first half of this year as the bank provided more personal loans and credit cards, while boosting the revenue it generates from fees and commissions.
The improvement at its retail and business banking unit and its operations in 12 other African nations helped offset a drop in profit at its domestic corporate and investment bank.
The lender’s retail banking operations account for more than 60% of its earnings and have undergone a revamp to drive efficiency and boost sales.