National Bank of Canada is expanding beyond its traditional base in Central Canada, buying a stake in a financial services firm based in Ivory Coast, even as the smallest of the Big Six banks stressed that it is not shifting its strategy.
“We have no intent in becoming a global bank,” said Louis Vachon, National Bank’s Chief Executive, during an appearance before the Canadian Financial Services Conference.
The deal announced on Wednesday gives the bank a 20.9% interest in NSIA Participations SA, based in the Ivory Coast.
NSIA is a big player in French-speaking Africa, operating in 12 countries and with assets totaling more than €1.2B, or $1.6B. It is the leading insurance group in the region and is the third-largest bank in the Ivory Coast.
The deal, which is expected to close in the third quarter of 2015, is valued at a maximum of $116M. National Bank believes the stake will boost its earnings by three cents a share in 2016.
In 2014, its reported earnings were $4.32 a share.
Montreal-based National Bank said that the expansion into Africa is consistent with its strategy of boosting its international presence through targeted equity acquisitions, as it seeks to diversify beyond its Quebec roots.
Earlier this year, the bank increased its stake in Cambodia-based ABA Bank to 42% from 30%, in a $20M (U.S.) deal. In December, it acquired a 9.5% stake in Mauritius-based AfrAsia Bank Ltd., in a move that its chief executive hailed as a step toward further growth in the region.
Though it has been expanding its interests beyond Quebec, particularly in Western Canada, National Bank is still largely a domestic player and pales next to the international profile of Bank of Nova Scotia, which has significant operations in Latin America, the Caribbean, and Asia.
Mr. Vachon stressed that National Bank’s profile wasn’t likely to change, calling his strategy a “supra-regional model” that focuses on targeted equity investments in select regions. The bank also prefers to work with existing partners rather than take majority stakes.
He said that the move into West Africa wasn’t much of a stretch for the bank, given strong cultural connections: Most of the people in the Ivory Coast speak French and National Bank already employs a large number of people with West African backgrounds and ongoing ties to the region.
“West Africa is already here,” Mr. Vachon said.
Yet, the expansion exposes National Bank to a number of encouraging features in Africa.
Economic growth in sub-Saharan Africa rose to 4.5% in 2014, far outpacing activity among most developed economies. The Ivory Coast expanded at about twice that pace, according to the World Bank.
Despite this growth, and a young population, the penetration rate of financial products in Africa remains low, implying huge growth opportunity for financial services, particularly so as consumer affluence surges.
Mr. Vachon also singled out the “humongous” demand for expertise in alternative energy financing in Africa.
Adapted from: Home – The Globe and Mail.