The 100 best banks in Africa in 2021
In this year’s survey of Africa’s 100 Biggest Banks, profits fell, but total Tier 1 capital rose 10.9 percent to $ 124.5 billion, while Banks in North Africa are beginning to question the continental dominance of South Africa‘s Big Four.
Our annual survey ranks African banks according to their Tier 1 capital. It is made up of: capital + reserves + retained earnings + minority interests. These are published in local currencies and then converted to US dollars at the exchange rates on the year-end date in the results (or December 31, 2020), so changing exchange rates may affect the ranking. .
We collect data from Bankers Almanac and internal research of African affairs. We excluded some banks with old or unreliable data.
In the article below, Tom Minney examines how major African banks are coping with the second year of the Covid pandemic. We include a table giving the full ranking of the top 100 banks, as well as links to articles focused on regions in Africa.
How have major African banks fared over the past year, a year defined by the Covid-19 pandemic that has resulted in massive disruption in businesses, volatility in commodity prices and shifting fashions consumption and how people pay for goods and services?
The short answer is that they have continued on their positive growth trajectory and almost all have remained profitable.
At major banks, profits fell sharply from the 2019 rankings, in part due to an increased allowance for non-performing loans as banks and regulators braced for the giant impacts on businesses and other borrowers. the global health pandemic.
By the second half of 2021, many economies will rebound or even accelerate, despite a resurgence of the virus in many countries resulting in further lockdowns and restrictions.
McKinsey consultants say data from four major economies – Kenya, Morocco, Nigeria and South Africa – show that “the impact of the pandemic on African banks in 2020 has been less severe than initially expected. “. Due to the giant role that banks play in economies and societies, this “could signal a faster recovery for the continent”.
The South African economy has been hit the hardest, due to existing weaknesses and tight lockdowns nationwide. Other countries have not been hit as hard as initially feared, bolstered by government support programs including credit, loan guarantee programs and late repayments.
Many banks African affairs spoke for praising the rapid interventions of central banks and finance ministries, providing them with liquidity and facilities to support their clients and the real economy.
The flip side is that the fall in domestic interest rates, necessary to ease and stimulate investment, has in fact resulted in lower net interest income for many banks. But at the same time, banks have seen an increase in loans and deposits, some linked to government-backed relief grant programs that banks have put in place.
All the major South African banks have put billions of rand in reserves to meet non-performing loans and these could be unwound as business risks return to more normal levels. Non-performing loans are likely to increase due to economic turmoil and contraction, although this may not be as bad as initially feared. Nigerian banks, for example, exposed to the oil and gas sector, which saw its price drop sharply at the start of the pandemic, are hedged and the price has since rebounded to risk-acceptable levels.
The total of the totals of the top 100 banks this year shows that total Tier 1 capital increased by 10.9% to $ 124.5 billion from Sh 112.2 billion in 2020, which is in turn an increase of 10.5% over 2019. However, total net profit was $ 14.4 billion, a significant drop of 31% from last year’s $ 20.8 billion . Africa’s largest bank, Standard Bank, said the group’s 43% drop in overall profits in the year through December 2020 was “driven by a significant increase in depreciation charges.”
McKinsey reports a 50% drop in the average return on equity (ROE) of African banks to 7% in 2020, down from 14% the previous year. He says this should rebound to approach pre-crisis levels within three years.
In South Africa, Standard Bank says its retail and corporate banking customers have received a total of 154 billion rand ($ 10 billion) in pandemic crisis relief. All of the major South African banks have implemented a government-backed credit extension program for small and medium-sized businesses.
Banks have quickly adapted to the new ways of working and working from home and now have many opportunities to reduce their operating costs and invest prudently in IT. Reserves were also increased after banking regulators in many economies told banks not to pay their usual generous dividends so that they had the liquidity to support customers during the pandemic.
The large reserves that many banks have built up can constitute an arsenal of investment firepower to be devoted to new opportunities.
“Our view is that after the pandemic there will be vast opportunities for growth,” Standard Bank CEO Sim Tshabalala said in March 2021 when he announced the December 2020 results. was reduced to Rand 2.40 from Rand 9.94 the previous year. Tshabalala said the new opportunities included accelerating digitization, investing in non-banking businesses and adding new businesses.
In Kenya, Equity Bank froze its dividends for two years, which allowed it to build up reserves. Cash and cash equivalents increased 154% to KSh 219.5 billion ($ 2 billion) in the six months to June 2021 (ranking is based on December 2020 annual results) and investments in public debt soared 46% to KSh 315.5 billion.
CEO James Mwangi said the bank plans to use the funds to rapidly deploy loans, especially in the Democratic Republic of Congo and Uganda. It was also able to reduce loan loss provisions by 64% and increase loan income.
McKinsey consultants highlighted the speed and daring with which major African banks have handled the crisis. They call for greater attention to three key challenges and opportunities.
Productivity is a major challenge, especially as the cost / asset ratios of African banks are more than twice the world average, while the impact on ROE “has been masked to some extent by margins. high banking aided by high interest rates ”. Lower interest rates will focus on change, and banks could increase their efficiency by up to 25%. The pandemic has created opportunities. Customers are much more willing to embrace cost-effective digital banking and avoid branches.
Banks have taken a crash course in new ways of managing risk during the crisis and can take advantage of them through new technologies, including real-time analysis and reporting. This is already boosting the performance of some banks, especially when lending to small and medium-sized businesses.
Technological change offers huge opportunities for Africa’s 100 largest banks as they find ways to develop their internal systems and embrace new partnerships. However, the rapid growth of financial technology (fintech) across the world, including in Africa, brings challenges and competition.
The banks in our survey are very well established, offering huge customer, brand and infrastructure bases. They can leverage this to take advantage of the best of Africa and the global FinTech revolution.
Read our focus on the performance of the 100 best banks in Africa by region.
The best banks in East Africa in 2021
The best banks in West Africa in 2021
The best banks in southern Africa in 2021
North African banks, which focus on strong growth, are starting to question the continental dominance of South Africa’s big four. Standard Bank retains its seat at the top, supported by massive 24% Tier 1 capital growth to $ 13.8 billion in December 2020. National Bank of Egypt climbs two places to # 2 with 26% capital growth pushing it to $ 6.7 billion, but it still has a long way to go to challenge the king of the African banking savannah.
South African bank Absa slips to third place. Its capital grew only 6% to $ 6.3 billion, in part due to the South African rand’s 4.6% decline against the US dollar until December 2020. Rankings may be affected by fluctuations in the exchange rate (FX) of the local currency against the US dollar. Nedbank is now climbing from # 5 to # 4, with equity also up 6% to $ 5.5 billion.
Morocco has two banks in the top 10: Attijariwafa Bank climbs from one place to 5th place with a level 1 capital of 6 billion dollars, while the Banque Centrale Populaire (BCP) is in 7th place and 4 , $ 7 billion.
Moroccans are sandwiching South Africa’s FirstRand, down from 3rd to 6th place with Tier 1 capital down 9% to $ 5 billion (half of which is due to FX). FirstRand is still the most profitable in the top 10 measured by return on equity (ROE) with a very good 17% (compared to a whopping 30% in last year’s ranking), tied with Outside Bank from Algeria. Banque Misr is another 15% ROE star.
The Egyptian Misr Bank (unchanged capital at $ 3.4 billion in the June 2019 results), dropped from 11th to 8th place, while the National Bank of Algeria ($ 3.4 billion) and the External Bank of Algeria (3 , $ 2 billion) go from 8th to # 9 to 9 and 10 respectively.
North Africa now has 45 banks in Africa’s top 100, up from 42 last year, and Egypt and Tunisia each have two other top-tier banks. Southern Africa’s share fell from 25 to 22, with South Africa and Namibia each losing the top tier banks, although this may be partly due to currency fluctuations.
South Africa holds 28% of total level 1 bank capital, ahead of 20% for Egypt, 13.5% for Morocco and 10.6% for Nigeria. However, by region, North Africa is in the lead, with 45% of the total capital (against 44% last year), against 34% in Southern Africa (against almost 36%). There are still 12 Nigerian banks in the top 100.