BNP Protected AB Rtn S&P

In a telephonic interview with the Bloomberg, the managing director of JPMorgan Chase & Co. (JPM) in Johannesburg stated that the company is planning to offer lending as well as treasury and foreign exchange services to its corporate clients in South Africa.

JPMorgan already has its presence in South Africa since 1998, when it started providing advice on mergers and acquisitions (M&A) as well as on debt and stock offerings to the institutional clients.

The plan to expand further in South Africa is a part of JPMorgan’s long-term strategy to increase its foot-hold outside the U.S. and Europe, where growth has almost stalled. The company seeks to tap resources in the faster growing economies. According to the South African central bank, the country’s economy is expected to grow at the rate of 3.7% this year.

JPMorgan, once the top-ranked advisor on equity offering in South Africa, fell to the ninth position in 2010 and did not figure on the stock offerings list this year. Since the company’s market share for stock offerings is declining in the country, the company is trying to add more clients to its kitty.

JPMorgan’s main competitors for equity offerings in South Africa include BNP Paribas (BNP) and Citigroup Inc. (C), which are at present the two top-ranked stock underwriters in that country.

According to the data collected by the Bloomberg, to date about nine companies have held share offering this year with the combined value of $1.4 billion in South Africa. Furthermore, South African companies have proposed 156 acquisitions worth 81.8 billion rand till date.

Hence, JPMorgan expects that with almost all the sectors (including mining, banks and retailer) expanding in that country, the company will be able to improve its market share by working more closely and understanding the financial needs of the local companies.

Currently, JPMorgan retains a Zacks #3 Rank (short-term Hold rating). Also, considering the fundamentals, we hold a long-term Neutral recommendation on the stock.

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