why French banks are accelerating their departure


LThe rumor has been growing in recent weeks. Société Générale is reportedly on the verge of leaving Morocco. Nothing is official yet, no one denies or confirms. And the details are pouring in. The agreement would concern the sale of its 57% stake in the capital of its local subsidiary SG Maroc, for an amount of 732.5 million euros (8 billion dirhams). The approached buyer would be the Moroccan holding company Saham, headed by businessman Moulay Hafid Elalamy. Société Générale would have mandated the investment bank Lazard to carry out the operation, which would of course be subject to the approval of the Moroccan authorities.

This rumor is not unfounded in the sense that it is based on reality and a general context. For almost fifteen years, French banks have been gradually withdrawing from the continent and the movement is accelerating. Present for more than 100 years in Africa, Société Générale is the latest to begin this decline.

Strategic withdrawal

Since June 2023, the French group has announced its desire to sell six of its seventeen subsidiaries on the continent (Burkina Faso, Congo-Brazzaville, Equatorial Guinea, Mauritania, Mozambique and Chad). She even clarified that she was studying her departure from Tunisia. On the other hand, until now, nothing was planned for Morocco.

This strategy has been taking shape since the arrival in spring 2023 of new boss Slawomir Krupa at the head of the Société Générale group. “2023 was a year of transition and transformation,” he highlighted when announcing the annual financial results.

From November, through an internal appointment, François Bloch took over the Africa activity part. Although he has never worked on the continent, he is renowned for his expertise in transforming the activities he has carried out in Eastern Europe. Appointed director of international banking networks in Africa, the Mediterranean basin and overseas, his mission is therefore “to optimize the system and increase its efficiency in order to ensure sustainable profitability while ensuring management risks and compliance with the best standards,” according to the Société Générale press release. The Bank is also committed to a vast cost reduction plan – 1.7 billion euros by 2026 – and nearly a thousand job cuts planned in France.

General movement

“The disengagement movement of French banks in Africa really began after the financial crisis of 2008. Faced with big losses and the drastic strengthening of prudential standards which followed in 2010, European establishments had to review their strategy. That Société Générale, which had the largest presence in Africa, is starting this process is not surprising,” explains Estelle Brack, economist, specialist in banking and financial issues.

Crédit Agricole was the first French establishment to separate from its subsidiaries in West Africa. The mutualist group BPCE (Banque populaire, Caisse d'Épargne, Natixis) followed, selling, in 2018, almost all of its African subsidiaries. BNP does the same and sells many of its holdings on the continent (Gabon, Mali, Comoros, etc.) and in 2022, it sheds its holdings in Ivory Coast (BICICI) and Senegal (BICIS).

The observation is implacable. The presence of French banks in Africa is melting like snow in the sun. More established in English-speaking countries, British banks are following the same route: Standard Bank is scaling back just like Barclays Bank.

Risk-return trade-off

The real motivation lies in the search for profitability, in a degraded economic and tense geopolitical context. In September 2023, in his speech to investors, Slawomir Krupa focused on more efficient allocation of equity and better risk management. “This trade-off between risk and profitability is at the heart of the African disengagement of French banks. This was the case for BNP Paribas, which has sold six of its subsidiaries on the continent since 2020,” comments Estelle Brack.

In terms of risk, the constraints linked to the prudential requirements of financial institutions have been regularly reinforced since the financial crisis of 2008. “The ratios required by Basel 3 encourage banks to concentrate on good quality capital and lower risk activities. . Even if there is a difference between actual risk and perceived risk, seen from Europe, Africa is considered an expensive continent in terms of prudential capital,” explains Estelle Brack. Thus, by announcing the sale of four of its subsidiaries last June (Congo, Equatorial Guinea, Mauritania, Chad) Société Générale anticipated “a positive impact of around 5 points on the CET1 ratio (one of the most important solvency ratios , Editor’s note) on their finalization date.”

Change in economic and political context

Over the past two decades, Africa has been riding a trend of dynamic growth and the emergence of a middle class. The Covid pandemic and then the impact of the war in Ukraine have disrupted the world economic order, leading to a surge in inflation and a rise in interest rates. “Geopolitical risk has once again become a preponderant factor in global risk analysis. In some of these African countries, it tends to remain higher than in other markets,” recalls Rafael Quina, analyst at Fitch Ratings at Agefi. Compliance risks are also higher. “This disengagement… It’s a logical continuation,” notes Estelle Brack. This involves responding to profitability concerns, by selling the riskiest profitable franchises to reduce capital costs at the level of the parent company, subject to the supervision of the European Central Bank (ECB).

Competition and opportunities

On the continent, everything has also changed. Local banks have developed and set out to conquer other markets to become true pan-African institutions. “Moroccan banks took advantage of these subsidiary sales to position themselves well and continue their establishment on the continent. They understood that it was more interesting to look towards the South than towards the European Union,” notes Estelle Brack. “It’s also a good time. On the continent, many potential buyers are willing to pay a good price. Société Générale is taking advantage of the opportunity to sell at a good price, and at the same time, local banks in Africa are ready to seize a quality customer portfolio at a time when, themselves in full expansion, they seek to gain new markets,” she concludes.


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