Africa’s Prime 100 Banks in 2023

International Courant

The consequences of the conflict in Ukraine and the battle to cope with debt and restore momentum after Covid-19 reduce development within the African continent as an entire to three.8% in 2022, down from 4.8% in 2021. Nevertheless, the massive banks proceed to flourish regardless of challenges from new competitors and technological change.

South Africa, Egypt, Morocco and Algeria stay the houses of Africa’s banking giants. South Africa’s Normal Financial institution Group stays an unassailable primary on our rating of Africa’s Prime 100 Banks in 2023 with a formidable lead over Nationwide Financial institution of Egypt (#2) and compatriot Banque Misr (#3).

The rating is set by Tier 1 capital (see Methodology under). Normal Financial institution scores $13.2bn, in comparison with $7.3bn and $7.2bn for its rivals. Normal Financial institution’s capital slid again from $13.6bn, partly attributable to a 6% decline within the South African rand towards the US greenback. The Egyptian banks are nonetheless ranked on the premise of December 2021 numbers and alternate charges between the Egyptian pound and the greenback.

Normal Financial institution reigns supreme on different measures – together with earnings, which climbed $560m from final 12 months to $2.3bn. Whole belongings fell again a bit of to $169.9bn (from $170.9bn) when translated into US {dollars}. Nationwide Financial institution of Egypt scored $167.4bn in 2021. Return on fairness (ROE) at Normal Financial institution was 18% in December 2022, up from 13% the 12 months earlier than. Banque Misr scored earnings of $1.5bn and ROE of 21%.

Nedbank climbs to rank #4 in 2023 with Tier 1 capital barely as much as $5.9bn, climbing from rank #7 in 2022 with capital of $5.1bn, after falling again from #5 in 2021. It edges previous FirstRand, which is now #5. FirstRand, with Tier 1 capital of $5.5bn, was the second-biggest generator of web revenue at $1.6bn (up from $1.4bn) for ROE of 29%, forward of all the opposite top-10 banks.

Absa Financial institution slips again from #6 to #7, with Tier 1 capital of $5.3bn, displaced by Morocco’s Attijariwafa Financial institution, which continued its slide within the desk – down from #5 final 12 months and #4 in 2021, as its Tier 1 capital slid from $5.9bn within the June 2021 determine used for final 12 months’s rating to $5.4bn for December 2022. (The Moroccan dirham slid again 11% towards the US greenback in 2022).

Morocco’s Banque Centrale Populaire continues to carry the #8 place and Banque Extérieure d’Algérie and Banque Nationale d’Algérie are again at #9 and #10, after dropping out of the highest 10 rating in 2022. This 12 months they displace Egypt’s Business Worldwide Financial institution (CIB), which fell to #16 from #9 within the 2022 rating; and Morocco’s Financial institution of Africa – BMCE Group, which slips to #11. The CIB fall is partly attributable to its rating being based mostly on comparatively latest outcomes printed in December 2022 and translated into {dollars} after a 36% decline within the Egyptian pound.

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The rating guidelines

A number of the shuffling on the high is linked to the construction of the survey slightly than the banks’ efficiency. As in earlier years, the banks are ranked in keeping with the Tier 1 capital reported of their newest monetary outcomes, printed within the banks’ native currencies and transformed into US {dollars} on the date of the reported figures, or 31 December. Tier 1 capital is a main measure of monetary well being and represents a financial institution’s main funding supply, together with shareholders’ fairness and retained earnings. It contains a lot of the gathered funds that buffer banks towards shocks.

Most African currencies fell again towards the resurgent US greenback throughout 2022. For instance the South African rand slid over 6%, whereas the Nigerian naira and the Kenyan shilling fell 8%. The latest depreciation of the naira to deliver it according to the parallel fee may have a major impression on the USD efficiency of Nigerian banks of their 2023 outcomes.

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The Egyptian banks within the high 10 desk are ranked on figures from June 2021 (NBE) and December 2021 (Banque Misr) and alternate charges in impact on the time. Had the 2022 Egyptian pound worth been used for the rating it may have shuffled the Egyptian banks decrease than Nedbank, which is ranked on its December 2022 figures (and alternate charges) and FirstRand, ranked on June 2022 figures.

In distinction, Egypt’s Business Worldwide Financial institution (CIB) is down from #9 to #16, with Tier 1 capital of $2.1bn in December 2022, down from $3.6bn in 2021; and QNB Alahli falls to #20, with Tier 1 capital right down to $1.8bn utilizing year-end figures from December 2022, in comparison with its 2022 rating at #15 based mostly on Tier 1 capital of $2.5bn printed in December 2020.

Different rankings additionally embrace improvement finance establishments and multilateral banks, however we don’t embrace these in our rating. For example, large Afreximbank, additionally based mostly in Egypt, would possibly rank #5 based mostly on its Tier 1 capital.

Banking in a hostile surroundings

The stability of capital and persevering with development in earnings and belongings at Africa’s banks exhibits their power and their experience in weathering storms, as most of the economies during which they function are fighting unsustainable debt, hovering meals import payments, international alternate shortages, and poverty for a lot of.

In line with the African Improvement Financial institution’s African Financial Outlook 2023, “African international locations are coping with a number of shocks, together with the results of the Covid-19 pandemic, disruptions to world provide chains attributable to Russia’s extended invasion of Ukraine and a tightening of world financing situations… Nevertheless, African economies stay resilient, with common development (GDP development after contemplating inflation) projected to stabilise at 4.1% in 2023–24.”

Climbing earnings

By 2022 banking revenues throughout Africa had recovered and have been above the degrees earlier than the pandemic, in keeping with consultants McKinsey. On the optimistic aspect are “sustained quantity will increase, greater rates of interest, and secure threat prices”. In lots of international locations, central banks have been elevating indicative rates of interest as they attempt to rein in inflation. This normally means greater web curiosity margins for banks, partly as a result of they might enhance charges demanded from debtors quicker than they increase the charges they pay to savers.

Profitability stars among the many high 100 banks are Egypt’s CIB, South Africa’s Capitec Financial institution (up three spots to #19) and Tanzania’s CRDB Financial institution (as much as #55) – every providing ROE of 31%. Credit score Agricole Egypt (right down to #80) scores 32%. State-owned Business Financial institution of Ethiopia (#30) has 33% ROE, Ethiopia’s Awash Worldwide Financial institution SC (up at #82) provides 34%; and Tanzania’s Nationwide Microfinance Financial institution (#50) 34%. Angolan banks rating highest on ROE: Banco Angolano de Investimentos (climbing to #53) at 51% and Banco de Fomento Angola (right down to #56) at 59%.

McKinsey says the longer-term image is damaging, with declining earnings and ROE in 4 of the 5 greatest banking markets – Egypt, Kenya, Morocco and South Africa – since 2016. Solely Nigeria has proven beneficial properties.

The common cost-to-asset ratio on the banks is between 4% and 5%, in keeping with McKinsey – virtually twice the worldwide common. Prices embrace massive department networks and legacy pc programs, some constructed and arrange within the Nineteen Seventies – an issue shared with many world banks. Banks additionally face downward strain on earnings as different suppliers of digital monetary companies deliver new competitors and push down price margins and earnings. Three banks within the desk present web losses (Arab Tunisian Financial institution, Ghana Business Financial institution and Absa Financial institution (Ghana). This compares to Arab Tunisian Financial institution being the one loss-maker within the 2022 rating.

Regulatory frontiers proceed to widen, together with guidelines on capital; new environmental, social and governance considerations; and ever-tighter efforts towards cash laundering. The requirement not simply to “know your buyer” however typically to “know your buyer’s buyer” led some world banks to withdraw fully from some African international locations slightly than face fines at head workplaces in New York or London. For African banks such guidelines imply greater prices and tighter constraints; and typically they really feel that the taking part in subject on which they meet their fintech challengers isn’t even. Fintechs have, nevertheless, not fully escaped: regulators are beginning to look more durable at them and have frozen accounts at one or two fintech companies accused of lax controls towards money-laundering.

Whole Tier 1 capital for all the highest 100 banks, measured in US {dollars}, is down 6.24%, in comparison with the 2022 rating, and complete belongings are down 1.25%. The Tier 1 capital required to succeed in the highest 100 desk was $226m at Algeria’s BNP Paribas El Djazaïr (#100) this 12 months, in comparison with final 12 months when Arab Tunisian Financial institution, ranked #100, had $255m in Tier 1 capital.

Challengers

Evaluation by banking consultants at EY (Ernst & Younger) says the banks are “caught within the winds of digital transformation and ever-increasing buyer expectations”. Within the greatest market, South Africa, trendy banks and fintech firms are rising as potent challengers, though none have but reached the highest 100 rating.

Throughout Africa, billions of {dollars} of enterprise capital and different funding is pouring into fintech options, many making information with gorgeous success fuelling development, e-commerce and transformation. Just a few former darlings have additionally hit the headlines for issues with governance and transparency.

To reply to the challengers, banks want capability so as to add new merchandise a lot quicker than earlier than, and must domesticate an agile and responsive method to seizing alternatives. Banks are additionally new partnerships, working with fintech companies that may present components of latest cost or different programs.

Which nation is finest for banks?

South Africa and Egypt dominate each the highest 10 and the highest 100 rankings. Egypt contributes 22 of the highest 100 banks, 22.5% of the Tier 1 capital and 27.8% of the full belongings of the banks within the rating. South Africa, by comparability, contributes 26.8% of the Tier 1 capital and 29.6% of the full belongings; regardless that it solely has six banks within the rating, all are throughout the high 20.

Nigeria is the nation with the third-largest contribution to the ranks of banks, with 13 banks within the high 100, 11.8% of Tier 1 capital and 10.6% of complete belongings (measured in US {dollars}). Different robust banking international locations are Kenya, with 10 banks, and Morocco and Tunisia with 8 every. The rise of East African banks, now taking on 19 of the highest 100, up from 14 final 12 months, exhibits a marked regional swing. These banks contribute 7.7% of the Tier 1 capital, up from 6.5% in 2022.

Race for area

Banks from a number of centres are racing to grab area and develop buyer numbers and earnings by increasing throughout the continent. South Africa’s giants have lengthy been the leaders. Normal Financial institution Group (#1) subsidiaries within the high 100 are the banks in Nigeria (Stanbic IBTC climbs to #33), Mozambique (#60), Uganda (#70) and Kenya (#72). Absa Financial institution, in Ghana at #93 and in Kenya at #64, highlights the size in key markets. Ecobank Group (#17) contains banks in Nigeria (#41) and Ghana (#74).

Morocco’s banks have been extending, particularly throughout western and francophone Africa together with Financial institution of Africa (#11), which operates in 18 different international locations. Nigeria’s Entry Financial institution (as much as #13 from #16) has subsidiaries in 13 international locations unfold throughout the continent. Kenya’s Fairness Financial institution (#23) operates in six different international locations, together with increasing operations within the Democratic Republic of Congo (DRC), the place it has purchased and mixed two banks to turn into the nation’s second-biggest lender by belongings. KCB of Kenya took a controlling stake in DRC’s Belief Service provider Financial institution.

Smaller banks are additionally contemplating cross-border enlargement. In July 2023 Mustafa Rawji, CEO of DRC’s Rawbank, stated: “We’re contemplating acquisitions of banks in neighbouring international locations the place there’s a strategic sense to the acquisition to leverage on our current buyer base.”

There could also be alternatives as worldwide banks similar to Normal Chartered, Barclays and Atlas Mara divest themselves of African banking operations. Uganda’s Centenary Rural Improvement Financial institution has received a banking licence in Malawi.

Challenger banks similar to Kenya’s Fairness Financial institution (#23 general, #1 in East Africa) have risen to the highest after many years of seizing a chance uncared for by a number of the earlier institution banks that most popular to give attention to greater companies and wealthier clients: people who find themselves unbanked or underbanked. There are a lot of extra probabilities to grab this chance – some research estimate that one out of each two Africans, some 730m individuals, nonetheless can’t entry appropriate banking companies.

Rising stars

One high-climbing new entrant to our rankings is Egypt’s First Abu Dhabi Financial institution Misr, debuting at #34 with Tier 1 capital of $777m at December 2022 and belongings of $8.3bn. It is among the largest international banks working in Egypt and was shaped after the June 2022 completion of a merger between 45-year-old First Abu Dhabi Financial institution Egypt and Financial institution Audi Egypt (final 12 months #64 on the rating, and the Egyptian arm of a Lebanese financial institution). Hana Al Rostamani, Group CEO of FAB, the most important financial institution within the UAE, stated the merger “… will allow us to additional prolong our operations’ footprint in Egypt—some of the promising strategic markets within the area”. The financial institution has a brand new model identification as FABMISR and operated 69 branches in March 2022.

Société Générale Côte d’Ivoire bounces again at #63 with Tier 1 capital of $410m based mostly on its December 2021 outcomes, after dropping to #97 within the 2020 rating and failing to make the highest 100 for 2 years. Its share worth on the Bourse Régionale des Valeurs Mobilieres (BRVM) has climbed sharply this 12 months. Société Tunisienne de Banque (STB) is again at #67 after being ranked #77 in 2021 and lacking the highest desk final 12 months.

Al Baraka Financial institution Egypt was simply outdoors the highest 100 final 12 months at #102 with Tier 1 capital of $241m based mostly on December 2020 outcomes and this 12 months climbs to #79 as Tier 1 capital in December 2021 was $310m.

Dashen Financial institution in Ethiopia joins the rating at #86 with Tier 1 capital of $282m, based mostly on June 2022 outcomes. It boosts its nation’s participation within the high rating to a few banks from two, regardless of the headwinds of a managed 8% decline within the birr towards the US greenback throughout 2022.

Africa’s Prime 100 Banks in 2023

Methodology

The Prime 100 Banks survey ranks the banks in keeping with their Tier 1 capital, which is made up of capital + reserves + retained earnings + minority pursuits.

We accumulate information from Bankers’ Almanac and from in-house analysis at African Enterprise. The banks publish their figures in native currencies and the analysis workforce converts them into US {dollars} ($) on the alternate charges on the date of the outcomes (or on 31 December). Modifications within the alternate charges due to this fact have an effect on the rankings. We now have excluded some banks for which information is outdated or unreliable.

Three banks have been consolidated at group stage, the place their outcomes embrace belongings outdoors their principal nation. Normal Financial institution South Africa would by itself be the third greatest in our rankings, with Tier 1 capital of $6.4bn, belongings in extra of $100bn and earnings in extra of $1bn. Kenya Business Financial institution would by itself be Kenya’s greatest financial institution with capital of $718m, belongings of $7.9bn and earnings of $281m. Fairness Financial institution Kenya has capital of $520m, belongings of $7.2bn and earnings of $271m.

Improvement finance establishments

African improvement finance establishments (DFIs) are more and more taking part in an necessary position throughout various sectors. We additionally see an rising position for Assure Funds and the like in rising lending to underserved communities and sectors – similar to ladies, in addition to the small and medium enterprise (SME) and agriculture sector. African DFIs have grown their stability sheets significantly over the previous few years. As governments are fiscally constrained, DFIs are anticipated to play a fair greater catalytic position in strategic areas similar to infrastructure and the vitality transition.

The Arab Financial institution for African Financial Improvement (BADEA) has not too long ago elevated its capital to just about $5.5bn. With a mortgage ebook in the identical area, the financial institution has a lot scope for development.

The African Export Import Financial institution (Afreximbank) has grown its stability sheet quickly over the previous decade: immediately it stands at $30bn, with nonetheless bigger ambitions. Its capital has additionally elevated to just about $5bn, with plans for additional development. In 2022, it posted earnings of $455m. Relying on which metric is used, Afreximbank would characteristic within the Prime 10 or Prime 15 of our rankings.

The African Improvement Financial institution has belongings in extra of $40bn and over $200bn of callable capital, making it Africa’s largest DFI. There are different necessary regional gamers. The Jap and Southern African Commerce and Improvement Financial institution (TDB) has grown its stability sheet to over $8bn, from below $5bn 5 years in the past, posting wholesome earnings of over $200m in 2022. One other silent large is the Improvement Financial institution of Southern Africa (DBSA). It has capital of $2.7bn and belongings of $6.9bn – which exhibits room for development – and posts robust outcomes with web earnings of $264m.

The interventions of DFIs are proving important for the continent and can solely enhance in coming years.

Africa’s Prime 100 Banks in 2023

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