HSBC in talks to take controlling stake in South Africa bank

The London-based firm has entered into exclusive talks with Nedbank's majority owner Old Mutual about buying up to 70 per cent of the South African bank.

HSBC's chief executive Michael Geoghegan has made no secret of his ambitions to increase the group's presence in emerging markets. The group already has a small business in South Africa, as well as a number of interests across the rest of Africa.

Nedbank is one of the largest financial groups in South Africa and has links with banks in 30 countries across the continent.

Old Mutual, which is based in South Africa and listed on the London Stock Exchange, is understood to have received a number of approaches for its Nedbank holding in recent years, which foreign banks could use as a platform on which to build a business across the continent. But previous discussions have not amounted to a deal.

HSBC, which is expected to pay as much as 4.5bn for the Nedbank stake, is said to have beaten off competition from Standard Chartered, a specialist in emerging markets, for the latest round of talks.

But there are concerns that the South African authorities may try to block the sale, following a run of acquisitions in the country by foreign banks.

Restrictions on foreign currency movements out of South Africa have also raised questions about how Old Mutual would use any money it generates from the sale. Old Mutual said it had held preliminary discussions with regulators but acknowledged that the authorities and the Nedbank board will want to have their say on any deal.

It said it believed the proposed sale would result in a "material strengthening" of South Africa's financial sector.

Earlier this month HSBC reported that it had more than doubled its half-year profits to 7bn in the first six months of this year.

The group, which is heavily focused on Asia, said much of the growth came from emerging markets.

Profits were also boosted by a sharp fall in losses on bad debts, with these dropping by 46 per cent to 4.7bn – their lowest level since the financial crisis began.

HSBC made profits in all regions except the US, where it has suffered mammoth impairment charges since the sub-prime mortgage market collapse and subsequent financial crisis.