The bank deal that isn’t. Really. But what if …? 

When Standard Bank popped up on a recent SENS announcement as a holder of almost 6% of Investec, the collective South African financial imagination might in different circumstances have run away with itself.

Cue the excitable questions: Is consolidation back? Is this a blocking stake? Is someone about to blink?

The short answer, confirmed by a spokesman for Standard Bank Group, is an emphatic no. The holding is not proprietary. It is held exclusively on behalf of clients (for example, of Stanlib and Liberty), through mandated funds. There is no bid. There is no stealth build-up. There is no corporate chess move unfolding behind the scenes.

And yet.

As Kokkie Kooyman, director and portfolio manager at Denker Capital, puts it: “No, no — don’t get excited. But it’s interesting.”

Just as an intellectual exercise, what might an argument in favour of a bid by Standard for Investec be? Or any other bank merger in South Africa, for that matter.

It would not be a conventional banking consolidation story. It is, at best, a selective and strategic argument about capabilities, culture and a market context where organic growth has become increasingly difficult.

Standard Bank already dominates the areas where scale matters: corporate lending, transaction banking and African investment banking. What it lacks, structurally, is exactly where Investec is strongest — high-touch private banking, entrepreneurial clients, advisory-led relationships and integrated wealth management. Investec offers something that cannot easily be replicated: a deeply embedded culture of decentralised decision-making and long-term client trust. In this view, a bid would be a way for Standard to buy time, rather than spend decades attempting to grow similar capabilities from scratch.

Juicy targets

And there is another thing: Investec is right now pretty cheap, trading at 8.63 times annual earnings, even after a respectable 12% rise in its share price over the past year. Standard trades at around 11 times annual earnings, FirstRand at 12 and Absa at 9. That makes Investec something of a juicy target.

In some senses, the same logic applies to an acquisition of Investec by FirstRand, but it’s noteworthy that neither would be synergistic mergers that might be rooted in increasing efficiency.

And there is another thing: the regulatory mechanics. South African banks can own stakes in other banks, but the capital treatment makes it deeply unattractive unless control is the objective.

“A lower stake still loads you with capital as if you owned 100%,” Kooyman explains. “And then the problem is you haven’t got control.”

That dynamic was one of the reasons Barclays ultimately exited Absa years ago: partial ownership, full capital pain. The same logic applies today. Which is why Kooyman is sceptical that Standard Bank — or any of the big local players — would seriously contemplate buying Investec outright.

“To merge Standard Bank with Investec would be a nightmare,” he says flatly. “If Standard Bank announced an acquisition of Investec, the price would fall 10% to 15% immediately.” Culture clash, integration risk, union resistance, competition scrutiny — all would overwhelm any theoretical synergy, and there is not a lot of that.

Which makes Nedbank’s audacious hostile takeover attempt of its bigger rival Standard, back in 1999, seem all the more ballsy today. Readers with long memories will remember Trevor Manuel, the then-finance minister, eventually shot the attempt down in 2000, and that was that. 

Internationally, minority stakes between banks are not unusual, particularly where learning, market entry or optionality is the goal.

Ringside seats to the plumbing

“Japanese banks have been acquiring stakes in banks and insurers,” he notes. “BBVA bought a stake in a US bank. Capitec bought 20% of a banking holding company in Eastern Europe, which later led to full control. In those cases, the stake buys more than financial exposure. You get a ringside seat — board exposure, regulatory insight, understanding systems. It actually pays for itself,” says Kooyman.

Closer to home, he points out that Nedbank has just submitted an offer to buy 66% of NCBA Group PLC, one of East Africa’s leading financial services groups, for around R13.9bn.

The dynamic is whether in SA, the explanation for why Standard’s clients have built up such a large stake in Investec – and Nedbank as it happens – is more mundane — and more structural.

“The JSE has become very small, and banks have become very big market-cap stocks,” Kooyman says. “For a large pension fund, it’s almost impossible not to have 20% to 25% of your portfolio in banks and insurers. Very quickly, that turns into 3%, 4%, 5% stakes.”

Standard’s holding of Nedbank comes to just under 5%, according to a sens that the bank issued this week. Nedbank is even cheaper than Investec, trading on a pe of about 7.6.

The timing of the disclosure and the speculation it (briefly) fuelled has happened for a reason. Globally, banking M&A — dormant for much of the post-crisis decade — is stirring again.

“The US has opened the floodgates,” Kooyman notes. “Bank M&A that was stuck for years is happening.”

Room for consolidation?

Canada and Australia, meanwhile, long ago opted for tightly regulated four-pillar banking systems, allowing consolidation in the name of stability and efficiency.

South Africa, Kooyman observes, already has six meaningful banks. In theory, that leaves room for consolidation — if policymakers prioritise efficiency and stability over competition optics.

But that is a very big “if”.

“Those who argue that our banking sector isn’t competitive enough would be absolutely against a bank merger,” he says. “The Competition Commission, unions, regulators — all would be involved.”

However, Kooyman doesn’t rule it out in principle. Banks always look at what’s available. Assets occasionally come into play — as with African Bank, Mercantile Bank, or distressed balance sheets that suddenly need a home.

Which brings us back to where we started.

Last week’s sens announcement is absolutely not a precursor to a bid. The structures don’t support a merger. The cultures don’t align. The regulatory cost would be brutal.

And yet — in a low-growth domestic market, with banks growing larger, markets shrinking, and global regulators once again warming to consolidation — it is no longer completely absurd to ask the question.

Just don’t get excited.

Not yet, anyway.

_{Top image: Currency collage.}