28.2 C
Sunday, December 10, 2023

FirstRand, Zenith, GTB Top Africa’s Banking Groups Ranking

Must read

- Advertisement -
Listen now

FirstRand and Nigerian groups dominate the top spots in The Africa Report’s 2023 ranking of the continent’s banks, which for the first time combines multiple metrics.

The Africa Report’s new ‘TAR Index’, introduced this year, enables a more accurate assessment of the strength and performance of the continent’s banking institutions.

Through a unique composite index (see Methodology, below) our annual report offers a more detailed analysis and a sharper snapshot of the African financial sector’s health, along with its upheavals. Banks are now split into two separate rankings – one for consolidated groups and another for national entities.

The distinction will help readers better differentiate between parent companies and their subsidiaries, while also ensuring a like-for-like comparison.

The African financial sector is still grappling with the aftermath of multiple shocks over the past three years, from the Covid-19 pandemic to soaring energy and food prices, partly due to the war in Ukraine.

In a bid to support their most vulnerable citizens, governments have seen their public deficits deepen. As financing needs have surged, interest rates set by the central banks have climbed.

The debt burden in sub-Saharan Africa currently exceeds an average of 60% of gross domestic product (GDP), a level not seen since the early 2000s.

This situation impacts banks, says Mik Kabeya, a senior finance analyst at ratings agency Moody’s: “On one hand, [the pain is] at the level of loan portfolios – borrowers, hit by inflation, find their repayment ability constrained. On the other, government bonds have also deteriorated … The capitalisation level of African banks is generally strong, which has allowed them to absorb these shocks.”

He cautions that “for the countries in question, currency devaluations pose a risk to the banks’ capitalization.”

Nigerians on a high

With five Nigerian banks in the top 10 – Zenith Bank (#2), Guaranty Trust Bank (#3), United Bank for Africa (#5), Access Bank (#6) and First Bank of Nigeria (#10) – the consolidated Nigerian groups make an enviable showing.

They benefit from a comfortable refinancing structure, illustrated by good customer-engagement coefficients with high loan-to[1]deposit ratios.

They also share a conservative lending policy with relatively low non-performing loan rates.

Access and United banks deserve special mentions, ranking joint second among our 27 consolidated champions on this indicator (with only 3.1%).

Zenith and Guaranty Trust stand out from their competitors in terms of profitability – particularly the former. Zenith Bank’s historical operations in the energy sector have largely benefited it, following the steady rise in oil prices in recent years. It has also managed to keep costs down.

“Over the first half of 2022, its cost-to-income ratio was 54%, compared with 64% average for the peer group of Nigerian and West African banks,” Standard and Poor’s reported.

Kenyans: Profitable but exposed

In Kenya, Equity Bank (#14) leads the pack. This positioning is primarily due to a better credit portfolio quality than its counterparts. In fact, this is a common trait among the country’s banking groups, all of which, with the exception of Equity (7.7%), have non-performing loan rates above 10%.

This includes KCB (#17) at 17.3%, Aga Khan’s Diamond Trust Group Bank (#23) at 11.4%, and NCBA (#18) at 11.2%.

On the flip side, most major Kenyan banks also boast outstanding profitability performance, with three banks in the top 10 for this metric. Notably, KCB is crowned the ‘most profitable banking group on the continent’ based on our calculations.

FirstRand’s winning ways

With a score of 72.17 out of 100, South Africa’s FirstRand (#1) is the best financial performer in our new ranking of consolidated groups.

While the bank, led by Alan Pullinger, is ‘only’ the third-largest bank in Africa, with nearly $117bn in assets, it manages to stay ahead of Standard Bank (#8) with $169bn and the behemoth National Bank of Egypt (#4) with $176bn on our composite metrics.

With a non-performing loan rate of 3.68%, FirstRand fares better than South African Counterparts Standard, Nedbank (#15) and ABSA (#11).

FirstRand adopted a conservative approach to lending in the wake of the pandemic, abstaining from aggressive loan growth and focusing on low/medium-risk clients.

FirstRand also stands out from its South African peers with a better equity-to-asset ratio and boasts a strong refinancing structure, dominated by deposits.

It holds the third-highest total deposits in Africa, trailing behind the National Bank of Egypt and Standard Bank.

“South African banks have weathered the multiple crises that have hit the continent over the past three years somewhat better [than those in other African countries], particularly due to the existence of a pension-fund industry providing them with liquidity and refinancing,” says Kabeya.

They have also been less impacted by the inflationary pressures, he adds, because they operate “within a tried and tested regulatory environment wherein the South African Reserve Bank has applied the same reserve management rules for decades, unlike in many African countries”, which tend to enforce a less predictable exchange-rate policy.

Get More of our proprietary news and analysis as MoneyCentral is now on WhatsApp Channels 🚀 Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!

- Advertisement -

More articles


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

- Advertisement -spot_img

Latest article