BNP Paribas to buy S.African unsecured lender for $253 mln

By Helen Nyambura-Mwaura and Tiisetso Motsoeneng
French BNP Paribas bank logo is seen at their presentation of their 2010 annual results in Paris February 17, 2011. REUTERS/Charles Platiau

By Helen Nyambura-Mwaura and Tiisetso Motsoeneng

(Reuters) - BNP Paribas, France's largest bank, has offered to buy South African unsecured lender RCS Group for 2.65 billion rand ($253 million) from clothing retailer Foschini Group and Standard Bank, they said on Thursday.

RCS, which offers store credit cards and personal loans and insurance, is owned 55 percent by Foschini and the remainder by Standard Bank, Africa's largest lender.

The business would be run by BNP Paribas's Paris-based Personal Finance unit, which said the transaction would be in line with its international growth strategy.

"The potential for growth in South Africa combined with the quality of RCS management allow us to consider with confidence our entry into the South African market," Thierry Laborde, head of the Personal Finance unit said in a statement.

Personal Finance also has businesses in Morocco and Tunisia. In South Africa BNP already has a branch of its corporate and investment banking business in Johannesburg as well as a joint venture stockbroking joint venture, BNP Paribas Cadiz Securities, in Cape Town.

"RCS can give then a relatively cheaper entry into the retail market," said Peter Mushangwe, head of research at Legae Securities.

"We know that BNP Paribas has a strong personal finance franchise in Europe that specialises in the provision of individual and consumer credit. It could be that they intend to take their expertise into the South African system."

But after more than two years of pushing into the unsecured loans market, local banks and retailers in South Africa are now pulling back as debt-laden consumers struggle to keep up with repayments. Household debt stands at a dangerously high level of around 70 percent of disposable income and rising interest rates are fanning fears of more debt defaults. Credit-based retailers Truworths and JD Group wrote off a total of more than $100 million of consumer debt in the second half of 2013, their results statements showed in February. "Where we are at now is that the South African consumer is over-indebted and we can't see why it can get better in the short term. In actual fact there are probably a few headwinds against the consumer," said David Hurwitz, chief executive of asset-backed lender Transaction Capital.

Transaction Capital sold its unsecured business Bayport Financial Services for about $133 million last year to get out of an industry fraught with risk, Hurwitz told Reuters at the Africa Investment Summit on Wednesday. [ID:nL6N0N1498]

SHARE BUYBACK

Foschini, whose share of the net proceeds from the RCS sale would be around 1.4 billion rand, said it would use the money to buy back shares, sending its shares up over 3 percent to 109.11 rand.

Standard Bank's shares were down 0.3 percent at 139.56 rand by 1407 GMT, while BNP was down 0.5 percent at 56.59 euros.

"This is a great deal for Standard Bank as it will release additional capital, which we will look to invest in our operations across the African continent," said Peter Schlebusch, the bank's head of personal and business banking.

Standard Bank has been getting out of businesses in Europe and Latin America to concentrate on growing at home in Africa.

($1=10.4622 South African rand)