Citigroup, Top Africa Loan Arranger, Sees M&A Boosting Lending

LAGOS (Capital Markets in Africa) – Citigroup Inc., sub-Saharan Africa’s top loan arranger in 2016, expects increased sovereign demand and mergers and acquisitions to drive lending in the region this year as low valuations spur deals.

“Lots of financing activity is expected in 2017,” Aziz Rahman, the bank’s head of corporate finance in the region said in an interview on Monday. Loans to sovereigns and corporates will increase as M&A deals rise and infrastructure spending picks up, he said. A total of $34.3 billion in loans were arranged for borrowers in the region last year, according to data compiled by Bloomberg.

Citigroup reclaimed its position as the top loan arranger in sub-Saharan Africa for the first time since 2008, edging out Standard Chartered Plc, which held the top spot since 2011. The U.S. lender, which operates in 12 countries in the region, helped arrange $3.5 billion in loans, while the London-based bank arranged $2.5 billion, the data showed.

With 12 deals versus Citigroup’s six in 2016 “we have been the book runner on more transactions in sub-Saharan Africa than most other lenders,” Ben Constable, head of loan syndication and distribution for Standard Chartered in Europe & Africa, said on Tuesday. “Sovereign demand may be higher in 2017 as governments increase infrastructure spending and we’re hopeful of more corporate activity outside of South Africa.”

International lenders operating in sub-Saharan Africa are adapting as the region’s economies struggle with a commodity rout, depreciating currencies and widening government budget deficits. Standard Chartered cut jobs and closed branches, while Barclays Plc sold the first slice of its controlling stake in Barclays Africa Group Ltd. last year as part of a plan to cut its holding to 20 percent or less.

The league tables don’t always reflect a bank’s commitment to funding across the continent, Barclays Africa said. “We’re making progress in executing our strategy,” the bank said.

“Whenever you have a competitor revising its strategy, there’s an opportunity,” Citigroup’s Rahman said. “Our strategy is clear — we want to be very close to our clients and multinational clients.”

Citigroup last year helped to arrange a total of $1 billion in loans for Africa’s largest mobile operator MTN Group Ltd. and $666 million in lending to South African-born retailer Steinhoff International Holdings NV. The New York-based bank held 16 percent of the region’s market share, while Bank of America Corp. held a 12 percent share and Standard Chartered accounted for 11 percent, according to the data.

Still, lending in Africa doesn’t come without risks. Mozambique said on Monday that it won’t honor a $59.8 million coupon payment on Jan. 18, which would be Africa’s first sovereign default in five years.