Nedbank in big investment banking push

South Africa’s Nedbank is hoping to hire more investment bankers as it seeks to take advantage of a surge of deals in renewable energy, water and logistics in Africa’s most developed economy. 

With the bank’s home country in the throes of an electricity crisis and intensifying water shortages, outgoing CEO Mike Brown said the government is increasingly looking to ink public-private partnerships to adequately address those issues.

As a result, Nedbank is hoping to hire more investment bankers and deploy more capital to the business in order to put together such deals, he said in follow-up comments to an interview that took place on Monday.  

The lender’s corporate and investment bank has been a bright spot in recent quarters, generating R6.8 billion in headline earnings in 2023 even as operating expenses jumped.

Still, as its sought to boost returns, Nedbank has been reducing the amount of capital it allocates to the division, which is home to Nedbank’s property finance arm along with investment banking and transaction services. 

“This infrastructure opportunity — be it renewable energy, logistics and water — we think is a multiyear growth path for our investment bank,” Brown said in the interview on Monday. “Ideally, that is where we would want to deploy capital.”

Africa’s most developed economy has been dealing with a myriad of energy and infrastructure challenges, due to years of underinvestment and mismanagement.

As part of its response, the government introduced a program that offers state-guaranteed contracts to buy power for years to come.

The program has made South Africa a top destination for green-power investments across the continent.

Since its inception, officials have conducted six bidding rounds to secure new forms of power supply, securing R200 billion ($11 billion) for the construction of renewable energy, according to researchers at the University of the Witwatersrand in Johannesburg.

Nedbank has been involved in about 50% of those bidding rounds and is keen to take part in more public infrastructure deals, Brown said. 

Brown is set to retire from Nedbank next month after 14 years as CEO. After that, Jason Quinn, who is joining from Nedbank’s larger rival Absa and previously spent 15 years at Ernst & Young, will take the mantle at the lender.

Like many rivals, Nedbank is also planning to expand its investment banking arm across the rest of the continent, Brown said. 

“We’ve continued to try and grow our ability to execute transactions across the African continent out of our investment banking operations, and we’ve been able to do that really successfully in the M&A advisory space and in the mining environment,” Brown said.

Still, Brown said South Africa is likely to remain the company’s biggest market. 

“What we would like to do is is expand our franchise in some way in the southern and east African environment, because it makes strategic sense,” he said.

“It would make much more sense to be more wholesale-focused, given the interplay with corporates in South Africa.”