Banking: Nedbank weares HSBC's pin

HSBC made the following announcement to the London Stock Exchange on 23rd August:

"HSBC Holdings plc has entered into exclusive discussions with Old Mutual plc about the possible acquisition of a majority stake in Nedbank Group Limited, South Africa's fourth largest banking group by total assets.

"The discussions are ongoing and if successfully concluded would be conditional on, among other matters, obtaining the necessary regulatory approvals.

"Further announcements will be made in due course as appropriate."

The markets were not impressed and HSBC's share price did not respond positively to the news. A Citi analyst quoted by one UK newspaper dismissed the proposed deal as giving HSBC a foot in Africa but implied there would be little benefit.

That's not a fair assessment: Nedbank is a major player in the only economy in Africa that has a significant part of it that could be classified as developed. For sure, much of the country remains a mess but there is considerable improvement. Banking infrastructure in the country is sophisticated - in part because of the long term investments that all banks have been making as an attempt to bring the populations of the townships into the banking fold.

Payment mechanisms have been at the forefront of the banking revolution - something HSBC struggles with in some other markets.

But there is a small part of the Nedbank story that is especially interesting: it is a member of the Ecobank Nedbank alliance - that provides more than 1,000 branches with Ecobank's network in more than 30 countries, mostly across Africa.

That's more than a "foot in Africa." And it rounds out a rather interesting circle: Ecobank has another alliance, of sorts. It's with Bank of China which is seeking a pan-African presence. In July, Ecobank entered into a separate alliance with Old Mutual - relating to insurance products not banking with a plan to expand insurance, unit trusts and related businesses in Ghana and Nigeria amongst others.

HSBC rarely looks at the immediate picture - there is often something much more obscure that drives its deals. In this one, behind the facade of Nedbank's branches in South Africa, there are some fascinating possibilities.