South Africa’s largest bank has announced that it will be taking over Edcon’s unsecured lending portfolio, which is fancy speak for all of its store cards. This is the bank’s largest investment since the takeover by Barclays a few years ago.

The deal cost ABSA R10 billion, which is a bargain if it is able to collect all the debts. These are currently valued at approximately R26 billion, which is calculated off a customer base of 3,9 million South Africans. Collecting that debt is not going to be easy though, as economic conditions have meant that many clients are not able to meet their financial obligations.

ABSA will be taking over much of the ‘back-end’ managing of Edcon’s lending service, including fraud management, credit, as well as legal and financial compliance responsibilities. Edgars will remain the face of the service, and maintain its responsibility in all customer facing interaction. This makes the acquisition very similar to ABSA’s purchase of Woolworths Financial Services in 2008.

According to analysts, ABSA is now the leader in the unsecured lending market amongst the four big banks in South Africa.

[Source: BusinessDay]