African banks have enjoyed mixed fortunes over the past year but there is no doubt that the sector as a whole is in better shape than at this time in 2010. North African financial institutions face an uncertain future, while the recent upheavals in the Nigerian banking sector have not quite settled, but the continent as a whole continues to recover from the fallout of the global financial crisis. Higher GDP means more revenue for African banks and greater foreign investment in expanding African companies.
The underlying core capital of banks in some African regions has increased by 10% in the past 12 months and our survey of the Top 100 Banks across the continent demonstrates this growth has been steady growth overall.
Last year, Bidvest Bank of South Africa needed just $76m of Tier 1 capital to take the 100th position in our table but Zambia National Commercial Bank required $99m to take the same spot this year.
The core capital of Africa’s biggest bank, Standard Bank Group (Stanbank) has increased by a similar proportion over the same period, from $9,562m last year to $12,062m for 2011. Similarly, core capital of $4oom was recorded by Angola’s Espirito Santo this year in 50th position, ahead of the $369m core capital of Mali’s BOA Group for the same ranking in 2010.
The number of West and Central African banks in our Top 100 has fallen from 27 to 24, as the region’s banks experienced something of a stagnation in core capital over the past 12 months. This is rather disappointing, given that the African banking sector as a whole is still recovering from the fallout of the economic financial crisis.
The number of West and Central African banks in the top 50 has also fallen, from 15 to 13. North Africa has the best representation in our table in terms of numbers, with 40 banks in the Top 100, including 22 in the Top 50, although the latter figure is three fewer than last year.
The privatisation of Egyptian banks, in particular, over the past decade has helped to boost North Africa’s presence but all five nations of the African Mediterranean littoral have at least five banks in our Top 100.
Southern Africa has just 22 banks in our table but is by far the most important region in terms of core capital. The four biggest banks on the continent are all South African and with core capital of between $5.7bn and $12bn, they have a big lead over the largest bank on the continent outside South Africa, Attijariwafa Bank of Morocco, which has core capital of $2.7bn.
Nevertheless, North African banks have made slight inroads into South African dominance. Attijariwafa and Libyan Foreign Bank have both jumped over South Africa’s Investec Bank, although this was the result of Investec’s falling core capital rather than because of rapid North African growth.
Libyan Foreign Bank has jumped five places in our table to sixth, with an increase in core capital from $1,501m to $2,573m.
Other big climbers include Morocco’s BMCE Bank Group and Banque Nationale d’Algérie, which jump from 20th and 29th to 13th and 14th respectively. African Bank of South Africa has also moved up dramatically from 25th last year with a core capital of $872m, to 17th and $1,255m this year.
There are just 10 new entrants in our table, suggesting a high degree of stability. The highest ranked of the new players is National Commercial Bank of Libya in 44th place, with core capital of $453m, closely followed by Capitec Bank of South Africa, with $447m in 47th position. Of the other eight, two come from Mauritius and one each from Morocco, Egypt, Angola, Ghana, Kenya and Zambia.
In the short term, so much remains to be decided that it is difficult to make predictions for the year to come. A total of 41 banks out of our African Top 100 are in four countries facing challenging times: 26 in Egypt, Libya and Tunisia, where new financial regulation may be introduced on the back of political change; plus 15 in Nigeria, where difficult times may still lie ahead.
There are 14 Eastern African financial institutions in our Top 100 this year, one more than in 2010 and most of those listed have moved up a couple of places in the rankings.
Nevertheless, Eastern Africa remains underrepresented in our survey, both in terms of population and regional GDP. Indeed the highest-ranked bank in the region, Mauritius Commercial Bank, secures just 34th position in our listings.
Yet sustained, steady economic growth in Tanzania, Uganda, Rwanda and Ethiopia, plus growing stability in Kenya and continued success in Mauritius, should enable the region to make more of an impact over the coming years.
As readers of African Business and sister publication African Banker may have noticed, many East African banks have expanded their operations into neighbouring states in order to take advantage of economic integration within the East African Community.
KCB initially suffered losses from its new foreign subsidiaries but all four are now registering a profit. It has 19 branches in Southern Sudan, 14 in Uganda, 11 in Tanzania and nine in Rwanda, in addition to 169 in Kenya itself.
As with other banks that are expanding across national borders, KCB is integrating its IT platforms to enable customers to bank in several countries at the same time.
The impact of the Central Bank of Nigeria’s (CBN) plans to dispose of the eight banks that it nationalised in an effort to save them has not yet had an impact on our rankings but could have a big influence over the years to come.
Five of the eight banks signed acquisition agreements before the 30th September deadline for them to recapitalise.
Intercontinental Bank is to join with Access Bank; Oceanic Bank with Ecobank Transnational; Union Bank of Nigeria with African Capital Alliance; FinBank with First City Monument Bank; and Equatorial Trust Bank with Sterling Bank. The deals will yield fewer but hopefully stronger Nigerian financial institutions. The other three banks over which the CBN took control, PHB, Afribank and Spring Bank, were delisted from the Stock Exchange on 5th August. They have now been renamed Mainstreet, Keystone and Enterprise banks respectively.
To take one example of the new mergers, Oceanic has agreed to transfer all of its share capital to Ecobank Transnational Incorporated (ETI) in return for N38.5bn ($246m) in ordinary shares and N16.5bn ($105) in preferential shares, to be paid to existing shareholders.
Oceanic Bank and Ecobank Nigeria will then be merged, following ETI’s strategy of previously merging the three other Nigerian financial companies that it has acquired with Ecobank Nigeria.
The shareholders of the other banks involved had formed associations to seek to recover as much of their investment as possible. They were all expected to hold a vote on the proposals but with the 30th September deadline to contend with, any option other than in favour of the deals seemed unlikely as African Business went to press.
Impact of mobile banking
It will be interesting to see what impact the growing importance of mobile banking has on the banking sector across the continent over the next few years.
The chief executive of Standard Bank’s innovation subsidiary, Beyond Payments, Herman Singh, summed up the advantages of mobile banking over physical banks in Nigeria. As elsewhere in Africa, far more Nigerians have access to a mobile phone than to a traditional bank account.
Singh said that in terms of the roll-out of payments and financial services, Nigeria was hampered by the absence of a fixed infrastructure: from branches, ATMs and even point-of-sale devices.
The mobile phone will be the transacting device of choice given its proliferation, accessibility, affordability and its familiarity with most people. Thus, the award of the mobile payments licence to Stanbic IBTC is very significant.
Mobile and micro-credit banking are beginning to place financial services within the reach of a greater proportion of Africans. This must surely be good for the people and economies of Africa, although it may take many years before it feeds through onto the balance sheets of the continent’s biggest banks.