International banks find prime hunting ground in Côte d'Ivoire

Frederic Stiels knows what it is like to be courted by banks. As the country manager for Brussels Airlines in Côte d’Ivoire and the local president of the Belgian Chamber of Commerce, Stiels has been besieged by bankers eager for his custom – and for a bigger chunk of the market in one of Africa’s fastest-growing economies.

Is that good news? “Yes, insofar as other banks will pitch to us attractive offers to leave our existing banking partners,” Stiels observed earlier this year. “Our group policy is that the bank that can manage the biggest chunk of our network best serves us,” he adds, no doubt giving hope to institutions with a pan-African footprint such as Standard Bank, eager to make headway in the country.

Likewise, Alexander Koch, the general manager of Brassivoire, Heineken’s local operation, is positive about the arrival of several new financial institutions in Côte d’Ivoire.

“More and more banks are fishing in the same pond,” he says. “The Ivorian pond is a promising one but it also has its limitations in size. So the more banks come in, the more competitive it will get.”

It’s little wonder that banks are tripping over each other to do business here. Côte d’Ivoire boasts a growing middle class and attractive commercial opportunities. The World Bank expects economic growth of at least 7% in the coming years in this leading exporter of cocoa and coffee – among the highest in Africa, if not among emerging markets generally.

“Putting aside countries like China, I don’t see many countries, particularly African countries, with this growth rate,” says Jose Gijon, resident representative of the IMF in Côte d’Ivoire.

“This country has very good economic potential. There are a few sectors that are outstanding,” he adds, pointing to agribusiness (“you can grow anything you want in this country”), energy and finance as sectors with real promise.

When Standard Bank advertised 28 openings at its new Ivorian bank, launched earlier this year, it received a ludicrous number of CVs; 27,641, to be precise. 

Though an old hand at banking, with a career spanning four continents, Hervé Boyer, the managing director of Standard Bank Côte d’Ivoire, was taken aback by the sheer volume of responses. Others have been similarly overwhelmed. Heineken, for one, is said to have attracted 200,000 applications for 200 job offers there: again, a thousand hopefuls for every position.

Côte d’Ivoire is a prime target for international financial institutions that want to set up or expand in West Africa. Standard Bank is only the latest to arrive, launching a fully licensed bank in Abidjan in April. Around the same time, Standard Chartered launched a standalone digital bank, to supplement its existing presence on the ground.

Société Générale chose Côte d’Ivoire as one of two countries in which to launch Yup, its new digital platform, in September last year, before deploying it across the bank’s other West African operations. And Attijariwafa Bank’s local subsidiary, Société Ivoirienne de Banque, has tripled its client base in the country since 2010, and multiplied its branch network by four.

These developments provide some sense of the international forces at work in Côte d’Ivoire, as financial companies from France, Morocco, South Africa and China – Standard Bank’s largest shareholder is Chinese – all jostle to secure work on the trade and infrastructure projects funded by those four countries, and by others too.

The country’s banking penetration rate of just 41%, according to the World Bank, gives retail bankers plenty of room to seek out new clients, while the continuous influx of multinationals, from brewers to airlines, gives corporate and investment bankers a host of firms to covet.

No wonder banks are so eager to be there.

Sim Tshabalala, Standard Bank’s group CEO, can barely contain his enthusiasm when he meets Euromoney in Abidjan’s luxurious Sofitel Hotel, on the day of the official launch of the group’s Ivorian bank. “It is immensely exciting,” he says. “There’s nothing like starting a bank from scratch.”

Of the journey leading to that point, he says: “It’s a long, drawn-out affair, involving your own team, the regulatory authorities, the politicians, the clients. And then, having to allocate the capital is quite an exercise.”

Standard Bank was already in 20 African countries and had worked on some transactions in Côte d’Ivoire, without having a presence on the ground. But the country is growing too fast to be ignored, Tshabalala says, and one has to have a permanent presence there to make the most of the opportunity.

“You start off doing suitcase banking,” he says. “Then you notice that your clients really need you to be on the ground, providing them with liquidity, with capital, with advice, with hedging, with risk management.”

“It’s an attractive market,” he continues, “and there’s no reason to believe that trajectory of growth and development will not continue.”

Yes, there are problems: the Ivorian economy is still over-reliant on commodities and susceptible to swings in cocoa prices; and politically, there are fears of a difficult transition of power after the presidential elections to be held two years from now.

Following a presidential election in 2010, the results of which were disputed, about 3,000 people were killed and more than a million were displaced in a four-month civil war. Former president Laurent Gbagbo, who refused to cede power to Alassane Ouattara after the disputed poll, faces charges of crimes against humanity and is on trial at the International Criminal Court in The Hague.

Tshabalala pays tribute to the Ivorian authorities that have begun to heal the country from years of economic hurt when Gbagbo was president.

“One of the reasons the economy has been growing the way it has is that the authorities have had the courage to effect structural reforms that are conducive to growth,” he says.

President Alassane Ouattara, a former IMF official, is a favourite among international investors

Ouattara’s economic and financial credentials include several years at the IMF, most recently as a deputy managing director of the fund; he is also a former governor of the Central Bank of West African States. As president, he has driven the country’s economic transformation through two comprehensive National Development Plans (for the periods 2012-2015 and 2016-2020), together worth around $72 billion and supported by contributions from the private sector and by development partners. 

Since the start of his mandate, social expenditures have led to a significant rise in access to electricity and clean water, and he has pushed for greater efficiency in areas such as tax collection. Meanwhile, the country has attracted numerous foreign enterprises, as well as foreign capital in the form of Eurobonds and sukuk Islamic financing.

Gijon and all of the bankers Euromoney speaks with say ease of doing business has improved dramatically, too. By way of example, Boyer notes that the administrative processes required to open Standard Bank’s representative office in Abidjan were handled in one day.

Standard Bank is one of many international financial firms with a strong interest in the country’s potential.

For that particular institution, Côte d’Ivoire has two main draws. First, China has pledged more than $7 billion in investment into the country, and Standard Bank – in part because its main shareholder is the Chinese bank ICBC – believes it can play a key part in that booming partnership. Second, many multinational clients that Standard Bank serves elsewhere on the continent have recently entered Côte d’Ivoire, or are contemplating entry. 

It is Standard Bank’s strategy to follow its clients wherever they go. Now, Côte d’Ivoire is where they are headed. Boyer tells Euromoney that the group banks MTN and Heineken in other parts of Africa. Both companies are now in Côte d’Ivoire. They are therefore natural targets for the new Ivorian bank, which can make the case that multinationals would benefit from a seamless international banking service, if they would only bank with a single institution across the continent.

Of course, Standard Bank won’t automatically get either MTN’s or Heineken’s custom simply by virtue of knowing its management team, or of entering markets where they have established a presence. Still, these two firms are clear targets of the bank, and representative of Standard Bank’s overall strategy in Côte d’Ivoire: to focus on corporate and investment banking (or CIB), catering specifically to existing multinational clients of the group.

“We want to work with them,” Boyer says.

The group may eventually offer its services to a broader range of clients, but it first wants to prove its worth in CIB. It is also hoping to make the most of its Ivorian banking licence by upgrading it to a banking licence for the West African Economic and Monetary Union, a union of eight mostly francophone countries that also includes Senegal and Mali.

That objective highlights another reason the country is proving so appealing to international banks: it has the ability to act as a hub for neighbouring states such as Senegal and Burkina Faso, thanks to the increasing harmonization of banking and business practices across the region. So, there is scope for Standard Bank to grow more broadly in west Africa now that it is on the ground in Côte d’Ivoire.

Standard Chartered, another international bank present in Côte d’Ivoire, recently demonstrated its own capacity for innovation. The bank has been in the country since 2001, initially as a universal bank. However, in part because of the country’s political and economic crisis in the 2000s, it decided in 2009 to focus on corporate and investment banking rather than retail.

At the start of the year, it relaunched its retail operation, only this time, rather than rely on a bricks and mortar network, the bank is betting on a standalone digital bank.

“We wanted to start a new model,” says Jean-Charles Yallet, head of retail at Standard Chartered Côte d’Ivoire. He says that model – which allows clients to open an account, then transact from anywhere without ever having to step into a bank branch – will enable the bank to reach more people, at a lower cost.

Standard Chartered delivers bank cards at home (although only in Abidjan for now, thus limiting the digital bank’s reach), and modern ATMs around the city are equipped to receive deposits.

“We expect the country’s bank account take-up – led by digital – to rise rapidly over the next five years, with the country poised to act as a digital banking catalyst for the wider region, just as Kenya sparked east Africa’s mobile money revolution a decade ago,” Standard Chartered said in March at the time it launched the digital bank.

With Ivorian football star Didier Drogba as its ambassador, the digital bank hopes that it can grasp a significant chunk of that growth. The bank aims to have 10,000 clients by the end of its first year; Yallet has set himself his own target: 10,000 by the end of 2018. 

Société Générale, too, is focusing its energies on Côte d’Ivoire, deploying new digital technology to benefit from the country’s spectacular growth. Yup, its new platform, is a key part of that effort.

“Yup is a very important tool for us in our strategy to offer better banking tools for the population,” says Aymeric Villebrun, the recently appointed CEO of Société Générale’s Ivorian bank, which has long ranked number one among the country’s commercial banks and which is the French banking group’s most important bank in sub-Saharan Africa.

“With Yup you can pay your utility bills,” Villebrun says, “you can buy some credit on your phone, you can transfer money to your parents in the village, you can transfer money to your friends, you can receive your salary, you can pay for your food at the shop, you can withdraw money from an agent.” 

Villebrun admits that the percentage of overall transactions that takes place through digital channels remains low in the country, at under 10%. Improving that figure will be crucial to international banks trying to make their mark on the local economy, as mobile operators such as Orange also handle small money transactions at the expense of traditional financial institutions.

“Today the telcos on the retail part of the business are our strongest competitors,” Villebrun says, adding that these telecommunication companies have a significant market share in payments, and are making inroads in loans and in deposits, too.

Not all of the international banks active in the country have the same approach to building a business: some see opportunity in a more traditional form of banking.

Société Ivoirienne de Banque (SIB) is expanding its already large branch network, particularly in the east of the country, where it has only two branches. That expansion on the ground is supported by the bank’s parent, Attijariwafa Bank, which views expansion outside of its home base in Morocco as a key part of its strategy. For SIB, that support enables it to compete with the other large international banks active in the country, after years of relative abandonment by its previous owner, Crédit Agricole, a bank that had little interest in sub-Saharan operations.

With Attijariwafa’s backing, SIB has increased its client base from 112,000 in 2009 to 300,000 today, and gone from 16 branches to 60 to become one of the country’s top five banks.

“In important economic areas, we must have at least one branch, if not two. In cocoa production areas, there were entire towns where we had no presence,” Daouda Coulibaly, the CEO of SIB, tells Euromoney.

“We have a population where cash and contact are still very important,” he adds. “Progressively the habits of digital usage will arrive and may become increasingly important, but it will take a few years for it to really take hold.”

Coulibaly tries to be upbeat about the new entrants to the market, such as Standard Bank and Standard Chartered’s digital business, seeing in them the opportunity for SIB to prove itself.

“It’s good that they came,” he says. “They will bring dynamism and competition to the market.”

There is certainly no shortage of dynamism in the Ivorian market since Ouattara’s election in 2010. That long-awaited change of leadership put an end – after a difficult transition of power – to the presidency of Gbagbo, who ruled over a country divided by civil war, and plagued by economic turmoil.

Côte d’Ivoire has the advantage of attracting investments – for infrastructure mega-projects, as well as for less spectacular endeavours – from a variety of countries, so it is not exclusively dependent on Chinese money, as some other African countries are.

“China is one of many,” says Gijon of the IMF.

But there are still risks and shortcomings in the market. Gijon notes that the Ivorian economy has not yet sufficiently reduced its dependence on commodities such as cocoa. The recent collapse of the country’s largest domestic cocoa exporter, the SAF-Cacao group, highlights that risk. The group reportedly owed Ivorian banks several hundred million dollars, so the event will likely be very damaging to the country’s financial sector.

Banks are still overly focused on servicing multinationals, because they are more likely to generate big fees, and on Ivorian civil servants, who appeal to banks because they have a steady income, at the detriment of SMEs and the rural unbanked; as a result, financial inclusion remains low. But Côte d’Ivoire’s attractiveness means its banking sector is getting more crowded, as international financial institutions compete for a piece of the, admittedly growing, pie. And that may be a good thing.

“People who never paid attention to this region are doing it,” Gijon says.