FirstRand to sell problem-plagued Ansbacher bank
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Sale is a chance to repatriate capital
Financial Services Correspondent
BANKING group FirstRand is to shed its controlling stake in the scandal-plagued UK banking operation Ansbacher, effectively ridding itself of its UK retail banking operations.
The SA banking group bought 100% of Ansbacher in 1998, but subsequently got dragged into a messy dispute with the Irish government over alleged breaches of the Irish tax code to which Ansbacher was a party during the 1980s..
CEO Laurie Dippenaar said FirstRand had a number of options, including either selling Ansbacher in total or keeping a minority stake while selling a majority interest to a new controlling shareholder.
But Dippenaar said this decision had nothing to do with the tax scrap with the Irish government.
"That had nothing to do with this. It was a strategic decision we took as we couldn't see a convincing enough strategic fit between Ansbacher and our core operations," he said.
But if FirstRand liked the new partner, "we may stay for the ride", he said.
"Our focus is on our SA client base and how we can provide offshore services to them. The Ansbacher team wanted to expand into other markets and we were not keen to do that," he said.
A reduced exposure to Ansbacher will please analysts, who had often pointed to the suboptimal returns on capital provided by Ansbacher as one of the weaknesses in FirstRand's armour.
For the six months to the end of December, Ansbacher made a R65m loss.
Several parts of Ansbacher will not be sold as "these remain central to FirstRand's international strategy".
Assets that will remain under the FirstRand banner include Ansbacher Investment Services, Ansbacher Multi Managers, the UK-based RMB Resources and the Jersey-based Ashburton Group.
Dippenaar said a deal would free up the capital in Ansbacher and allow FirstRand to repatriate the capital to SA, should it wish.
But the scrap with the Irish authorities is not yet over.
The Irish government is claiming an as-yet undetermined amount of past tax for alleged breaches of the Irish tax code committed before FirstRand bought Ansbacher, as well as à 3,6m for other expenses.
However, FirstRand believes it has no tax liabilities and is contesting this.
"We are still the middle of discussions. We have already submitted an expert opinion to them on why we have no liability and are awaiting a response," said Dippenaar.
But even if the tax headache is not sorted out by the time a deal for Ansbacher is placed on the table, FirstRand will still have to deal with the matter, either being called on to indemnify any buyer or taking on the mantle of handling any litigation.
Hillie Meyer, CEO of FirstRand's wealth management activities, said that Ansbacher represented FirstRand's sole UK retail banking operation.
With Ansbacher gone, FirstRand's international operations will be mostly in the asset management arena and focused around RMB International.
"In terms of our revenue, Ansbacher's operational business was not a big contributor to our earnings and was quite capital intensive to maintain," he said.
He said that the deal represented "a huge opportunity to release capital" for FirstRand.
Jul 22 2003 07:30:01:000AM Rob Rose Business Day 1st Edition
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