LAGOS - Africa’s banking sector, miraculously spared the fallout from the subprime disaster, continues to consolidate growth and improve performance. The total assets of the 100 banks that appear in our rankings reached $856bn – a rise of 36% over last year while aggregate Tier 1 capital rose 47% to $60.6bn.
However, the continent’s 25 top banks hold almost 85% of the region’s banking assets with the ‘big five’ South African banks alone accounting for 42% of the total continental assets. Nigerian banks, as they have done for the past five years, continue to climb up the leader board and although they may still be far behind the South African behemoths, they are laying a strong challenge to North African financial institutions. But, wherever in Africa you look, the industry, once viewed as rudimentary at best, has been transformed so radically over the past decade it is now almost unrecognisable.
Modern, reliable, automated banking has become a matter of fact. Institutions are fewer but stronger. Line managers are better qualified and retail and corporate clients can expect improved services as the continent’s financial systems become ever more sophisticated and complex.
Over the last five years, our annual rankings have made intriguing reading — while the positions at the very top have shifted only slightly, the ‘second’ rank has shown considerable activity. What the charts will show in another five year’s time is anybody’s guess but the one set of figures you can count on to continue increasing will be in the total assets column.
As an emerging market, Africa represents an exciting opportunity for investment and future banking growth. The region is experiencing its fastest economic development in decades, with relatively low inflation, robust trade expansion, increased foreign direct investment and less political unrest than in previous years.
According to the International Monetary Fund (IMF), real GDP (inflation-adjusted) grew by 6% per annum over 2003-07, fuelled by a commodity-price boom, improved credit intermediation, market liberalisations supporting higher domestic investment and improving productivity across the region.
With increasing private capital inflows and debt relief, this benign climate looks set to continue into 2009, with more financing for consumers and businesses. The IMF noted in its Regional Economic Outlook: “The stronger financial systems complement the improved macroeconomic environment existing in many sub-Saharan African (SSA) countries.”
Meanwhile, the spill-over of the US subprime debacle on African banks has been negligible as they had little or no involvement in structured credit products such as collateralised debt obligations that cost Western banks dearly in writedowns.
However, Rand Merchant Bank, the investment-banking arm of FirstRand, reported losses of $200m for the second half of 2007, due to ill-judged investments into emerging market equities and equity derivatives (but not on subprime-related assets).
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