French bank’s exit from Africa will create opportunities for local banks

Societe Generale entered Ghana in 2003

Fitch Solutions, an international rating agency, says the departure of French banks from Africa will create more opportunities for local banks.

The ratings agency said his departure could potentially spur growth and competition among local banks.

“We see significant opportunities for local and regional banks in Africa despite the challenges. Some banking groups with pan-African ambitions should eventually gain enough scale to compete with long-established institutions. Increasing competition among pan-African banking groups should drive growth. credit growth.

“We expect credit growth to accelerate with the exit of French banks, although mainly in lower risk segments, which will help preserve asset quality indicators,” the ratings agency said.

This forecast comes against the backdrop of Société Générale’s (SG) decision to withdraw from the banking market in Ghana and two other countries, notably Tunisia and Cameroon.

The ratings agency said the challenges that had caused the French-owned banks to exit the African banking market included their inability to target certain segments of the economy due to the conservative risk appetite of their parent bank.

Fitch also said French-owned banks followed stricter loan provisioning and rating policies than locally owned banks, which may act as a drag on growth and profitability.

The ratings agency noted that tighter capital management, with greater reservations on local minimum regulatory requirements, has also limited the ability of French-owned banks to lend in the African market.

The ratings agency noted that French banks’ exit from African retail and commercial banking was slightly positive for their credit.

“They are refocusing on more mature retail banking markets in Europe and on activities such as insurance, leasing and corporate and investment banking, where they can achieve greater synergies. Their reduced presence in Africa also better aligns with their conservative risk appetite and its efforts to optimize risk-weighted assets under European banking supervision, which is stricter than the local supervision of its African peers, increasing economic uncertainties and geopolitical tensions in some African countries are also influencing its strategic reassessment,” the rating agency said.

In the past six months, SG has also agreed to sell some other smaller African subsidiaries and launch a strategic review to divest its 52.34 percent stake in Tunisia-based Union Internationale de Banques.