VZCZCXRO5313
PP RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHDK #0468/01 1001230
ZNR UUUUU ZZH
P 101230Z APR 09
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 2222
INFO RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MCC WASHDC

UNCLAS SECTION 01 OF 02 DAKAR 000468 
 
SIPDIS 
 
DEPT FOR AF/W, AF/EPS AND EB/IFD/ODF 
TREASURY FOR AFRICA DESK, OASIA/EBARBER 
 
E.O. 12958: N/A 
TAGS: EFIN EINV ECON SG
SUBJECT: SENEGAL'S BANKING SECTOR BROADENING BUT CONSOLIDATION IS 
LIKELY 
 
DAKAR 00000468  001.2 OF 002 
 
 
¶1.  Summary:  Senegal's banking and finance sector, particularly in 
Dakar, has long been one of the country's most positive economic 
attributes.  French and African banks dominate, but new banks are 
also entering the market.  The mid-term trend, however, is for 
greater consolidation as competition (and perhaps the global credit 
crisis) decreases profitability.  Other factors include higher 
deposit requirements that will be hard for smaller banks to meet, 
and continued aggressive market expansion by international and 
regional banks.  West African and Monetary Union authorities are 
taking positive steps to boost bank account penetration rates and to 
improve the ease of regional transactions.  End summary. 
 
GROWTH IN BANKING SECTOR SHOWS POSITIVE SIGNS 
--------------------------------------------- 
¶2.  The Senegalese banking sector is generally considered solid and 
well developed compared to other West African Economic and Monetary 
Union (WAEMU) countries.  It remains the second largest in WAEMU 
after that of Cote d'Ivoire, with about one-quarter of the Franc CFA 
Zone's total banking assets.  The ratio of banking deposits to GDP 
is 34 percent in Senegal, versus the WAEMU average of 16 percent. 
The large banks, in particular, remain profitable, but competition 
on rates is fierce. 
 
¶3.  There are seventeen operational banks in Senegal, the majority 
of which are privately owned, with more to come in the next two 
years.  Societe Generale de Banques au Senegal (SGBS), the largest 
commercial bank, with total deposits and borrowing equaling USD 304 
million, is an affiliate of Societe Generale France.  The other 
commercial banks are owned by private and foreign shareholders, the 
major exception being the "Caisse Nationale du Credit Agricole du 
Senegal" (CNCA) and the government-controlled Housing Bank, Banque 
de l'Habitat (BHS). 
 
¶4.  Currently, the sector is dominated by SGBS and Compagnie 
Bancaire de l'Afrique de l'Ouest (CBAO), followed by Banque 
International pour le Commerce et l'Industrie du Senegal (BICIS) - 
part of BNP Paribas group, Togo-based Ecobank, and Bank of Africa 
(also headquartered in Togo).  They all offer a wide range of retail 
and commercial banking services.  Other traditional commercial banks 
include Credit du Senegal, (part of French Credit Agricole), and 
Morocco's Attijariwafa Bank (Atti).  Other banks cater to specific 
sectors, including CNCA for agriculture financing, BHS (housing), 
Banque Regionale de Solidarite (BRS) for the informal sector, and 
Banque Islamique du Senegal (BIS), which offers its customers 
sharia-compliant products (Septel).  Three new commercial banks 
entered the market in 2008-2009: Togo-based Bank Atlantique, Banque 
Regionale des Marches, a WAEMU-sponsored microcredit bank, and 
Malaysian-owned International Commercial Bank.  Nigeria's United 
Bank of Africa (UBA-Nigeria) has received authorization to begin its 
operations in later this month. 
 
¶5.  The other significant players for commercial financing in 
Senegal include Citigroup Senegal, which focuses on servicing local 
affiliates of multinational companies and does not offer retail 
banking, and BMCE Capital, an affiliate of the Bank Marocaine du 
Commerce Exterieur, which is very active in project finance, 
especially for major government projects, such as the new 
international airport currently under construction.  The 
International Finance Corporation (IFC) has also been active in 
local commercial project financing. 
 
MOROCCAN BANKS ON THE MARCH 
--------------------------- 
¶6.  Moroccan banks have been particularly active in expansion via 
acquisition.  The local subsidiary of Atti merged with Banque 
Senegalo-Tunisienne (BST) in July 2007.  Atti holds two-thirds of 
the the capital for the new bank, while BST hold the rest.  In 
December 2008, Atti acquired 79.15 percent of of CBAO (for USD 153 
million) to become one of Senegal's largest commercial banks.  The 
new CBAO-Atti venture maintained CBAO's logo, though the BST brand 
has been absorbed into Atti.  Also in 2007, BMCE acquired a 35 
percent stake in Bank of Africa's operations in Senegal. 
 
¶7.  Atti is also making a push to become one of the biggest 
pan-african banks.  As of January 2008, Atti holds a 51 percent 
stake in the International Bank of Mali and a 51 percent stake in 
Cote d'Ivoire's Societe Ivoirienne de Banque.  It acquired Credit du 
Congo (81 percent), Societe de Banque Cameroon (65 pct of capital), 
and Union Bank of Gabon (59 pct of capital).  Atti is also taking an 
equity stake in Burkina Faso's Cauris Bank International and is 
reportedly pursuing the International Bank for Africa in Niger. 
Similarly, the President of Ecobank has stated an interest in 
acquiring the WAEMU holdings of France's Credit Lyonnais. 
 
¶8.  In a recent press interview, SGBS' General Manager Sandi Gallo 
minimized the CBAO-ATTI deal and retorted, "We are not afraid of the 
new ATTI/CBAO.  We control 29 percent of the market, 26.5 percent of 
 
DAKAR 00000468  002.2 OF 002 
 
 
the banking workforce, provide USD 22 million in new medium-term 
loan to our commercial clients, and purchased USD 48 million of 
Senegal's treasury bonds in 2007."  Gallo welcomed the ATTI/CBAO as 
an opportunity to strengthen banking competition. 
 
CONSOLIDATION IS LIKELY 
----------------------- 
¶9.  In spite of the entry of new banks into Senegal, the mid-term 
trend is likely towards merges and consolidation for a number of 
reasons.  One important factor is that the WAEMU Central Bank 
(BCEAO) is imposing higher cash reserve requirements on commercial 
banks, with minimum deposits increasing from CFA 1 billion to CFA 5 
billion (USD 2-10 million) by the end of 2009.  This reserve 
requirement is scheduled to increase to CFA 10 billion by December 
31, 2010.  There is much speculation that the smaller banks do not 
have the capital available to meet these new requirements.  The 
banking sector in Senegal is also much more competitive than most of 
the WAEMU region and banks are forced to charge lower rates of 
interest than elsewhere.  Two local bank directors speculated that 
this is due to Societe General and other French banking interests' 
efforts to push down rates and profitability to force weaker banks 
out of the market.  Finally, though Senegal's banking sector was not 
directly impacted by the "toxic assets" that have weighed down 
balance sheets in the U.S. and Europe, the global credit crunch 
could still put some local banks in jeopardy.  In the shake-out, the 
strong banks, including Socite General, Atti, and Ecobank, are 
likely to gain market share at the expense of the small banks. 
 
¶10.  According to a BCEAO report published in December 2008, the 
proliferation of banks has not contributed to improvements in 
development financing in the WAEMU region.  For instance, total 
loans granted to support development projects within WAEMU represent 
only 16 percent of GDP compared to 80 percent in South Africa, 
according to the report.  BCEAO authorities stated that further bank 
proliferation "could weaken the sub-regional banking system." 
 
¶11.  A recent measure put in place to improve the WAEMU banking 
integration is the "groupement interbancaire monetique" (GIM) an 
integrated banking card for all of the 97 banks and financial 
institutions in the Franc CFA Zone.  In addition, an electronic 
clearing system which links all the banks in the WAEMU has been 
introduced recently, allowing the immediate settlement and transfer 
of checks.  These new systems, however, require investment and staff 
from the financial institutions, which again, might be too steep 
expensive for some of the smaller operations. 
 
¶12.  While Senegal, especially Dakar, remains an attractive market 
for banks, the pressure on interest rates is reportedly decreasing 
local profitability and is motivating some banks to become more 
active in other WAEMU countries, including Cote d'Ivoire and Mali. 
At the same time, one attraction for local banks is that the 
customer base is set to grow.  While it is estimated that only five 
to six percent of Senegal's 12-plus million residents currently 
holds a bank account, WAEMU's authorities have introduced 
legislation that lowers the required monthly income threshold for 
opening a standard bank account as an incentive to increase banking 
penetration rates. 
 
COMMENT 
------- 
¶13.  While local bankers complain about the increasingly cut-throat 
competition in Senegal's banking sector, the relatively lower 
interest rates could help the country maintain adequate levels of 
new investment during the global recession.  At the same time, there 
is a tremendous need for the competition to also be reflected in 
improved service and new financing and investment instruments.  The 
WAEMU's efforts to ease regional banking is very welcome and should 
decrease the amount of (legal) currency being carried across borders 
in the Franc CFA zone by traders, business people, and Embassy 
TDYers. 
 
BERNICAT