When the going gets tough, the tough go shopping, which is precisely why the local arm of J.P. Morgan is looking to garner more business in the rest of Africa. Of course, the strategy is not quite as simple as it sounds since it’ll also mean J.P. Morgan will be competing for business directly with several of SA’s big four banks, many of which om happen to be some of its most important clients on the continent.
“”Africa is a substantial growth opportunity for us not only in the near term but also in years to come,”” says John Coulter, J.P. Morgan’s Senior Country Officer for sub-Saharan Africa. “We are not trying to take on local banks. Central to our Africa strategy is being able to service the needs of our global multi-national clients on the continent. Our increased involvement in fact means that it improves our ability to partner with local banks.”
The need for J.P. Morgan to diversify into the rest of the continent is obvious when one considers that 80 out of the bank’’s top 120 multinational clients have a presence in Africa. These include the likes of Daimler Chrysler, Total and Johnson & Johnson.
Coulter says that quite often the parent company of these multinationals, which can be based in far-off locales such as like Frankfurt or Dallas, make their decisions based on global banking relationships which then apply ies to their subsidiaries in other markets.
The upshot is that if a US-based multinational has an established relationship with J.P. Morgan for global banking services, it will then also call on the same bank when it needs trade finance or a foreign exchange line for an African unit.
While SA is the area of the continent where most of J.P. Morgan’’s investment
banking attention is drawn, the primary need on the rest of the continent is for
basic corporate and transactional banking services, particularly with services like trade finance, working capital requirements and foreign exchange transactions.
Coulter says the strategy for African growth will definitely be to grow business organically rather than pursue any potential acquisitions.
“To merge with or acquire a bank anywhere in the world, and to integrate its their business, compliance and risk management processes can be anything from a cumbersome to a very difficult exercise,” he says. “The emerging nature of many African markets, would only add to the difficulty and complexity of integrating a bank in Africa.”
As an example he cites Nigeria, where credit bureaus that pool consumers’’ credit history, are a relatively new concept, with the nation granting its first licence to operate as a credit bureau to XDS in 2009. That can make it very difficult for a bank accustomed to operating in an environment where an individual’’s payment and borrowing history can be accessed at the touch of a button.
Coulter is also pretty frank in terms of which banks he thinks are making the greatest strides in Africa.
“Our global bank competitors in the region are Standard Chartered, Citibank and Barclays whicho all have established, profitable operations with a broad footprint across Africa,” he says.
When asked how much money J.P. Morgan is making in Africa, Coulter will only say that it’s less than Standard Chartered and Citibank today, but the plan is to hopefully catch up with them “in the not too distant future”.
“Although we have a very well established businesses in both South Africa and in specific countries elsewhere in the sub-Saharan Africa region, our level of earnings is still small not only in the context of J.P. Morgan’s earnings globally, but even relative to the earnings of the EMEA region,” he says. “It’s a ratio we are working hard to increase over the next 5-10 years,” says Coulter..”