African banks delivered some of the world’s highest returns on equity last year, but current factors make a repeat performance unlikely.
The African banking industry produced some of the highest returns on equity anywhere in the world in 2019, in some cases vastly outperforming their counterparts in more developed economies. Among the more dramatic examples are three of Global Finance’s 2020 Best Bank award winners: BNI Madagascar, with an ROE of 43.6%; Fidelity Bank Ghana, at 32.0%; and Zenith Bank in Nigeria, at 23.8%. For comparison, US banks’ average ROE has hovered in the range of 3% to 12% for the past decade, according to the Federal Reserve Bank of St. Louis.
But while 2019 was a good year for African banking, it wasn’t indicative of a trend. Even before the Covid-19 pandemic, Moody’s Investors Service last December posted a negative 2020 outlook for banks in Africa, owing to a weakening operating environment. Government debt levels are high on the continent and GDP growth will remain below potential, Moody’s predicts.
“Weakening operating conditions are pressuring governments’ credit quality, leading to a knock-on effect on banks through reduced business generation, slower credit growth and rising asset risk,” Constantinos Kypreos, senior vice president at Moody’s, commented. Asset risk will remain high, a result of rising government arrears, high loan concentration, borrower-friendly legal frameworks and still-evolving risk management and supervision capabilities, he added.
That said, pan-African banking groups, both homegrown and foreign-owned, are continuing to introduce modern banking products and services into new areas, despite difficult operating environments—and in some cases, as a way to negotiate around them.
Best Bank in Africa
Standard Bank, Africa’s largest banking group by assets with a presence in 20 sub-Saharan countries and 1,200 branches total, is Global Finance’s selection as Best Bank in Africa 2020 as well as our country winner in South Africa, its home base. Stanbic Bank Uganda, a member of the group, is Best Bank in Uganda.
“Africa is our home. We drive her growth,” says Standard Bank Group CEO Sim Tshabalala, who predicts that the bank’s growth elsewhere on the continent will outperform growth in its home country this year.
Standard Bank is a facilitator of financial flows into and across Africa and invests heavily in technology, turning out new product releases at a rapid pace both by harnessing its digital capabilities and through partnerships. The bank has cloud partnerships with Amazon Web Services, Microsoft and Salesforce.
Earnings for the group’s banking operations rose 5% in 2019, but headline earnings were up only 1%. The challenging economic environment in South Africa, where electricity supply problems undermine growth, had a negative effect on earnings, as did losses at a UK joint venture with strategic partner International and Commercial Bank of China. Nonetheless, Tshabala says the 10-year-old strategic partnership “remains of great benefit to both parties.”
Stanbic Bank Uganda, that country’s largest bank, is 80% owned by Standard Bank. Earnings rose 20% last year while deposits were up 21% and loans grew 14%.
Stanbic acknowledges the effect the coronavirus will have on the lives of many Ugandans and the economy, says CEO Anne Juuko. “We are looking at several interventions that can support our customers and to work closely with the government to ensure a minimized impact on the economy,” she says. “As Uganda’s leading bank, we are at the heart of the economy and it is our duty to ensure we support our clients.”
Societe Generale, with more than 1,000 branches in 19 African countries, is Global Finance’s Best Bank in Algeria, Cameroon, Guinea and Senegal. The French bank combines strength in trade finance with best-in-class foreign exchange and structured finance solutions.
In Algeria, Societe Generale has 95 branches and 1,500 employees serving more than a half-million clients. Algeria is home to one of three African desks at Societe Generale, promoting trade flows between the Maghreb countries and the rest of Africa.
Earnings at Societe Generale Cameroon rose 21% last year with ROE of 17%. The bank has a leading 20% corporate market share in the equatorial country, where its 35 branches cover all 10 regions.
Societe Generale is also the leading corporate bank in Guinea, with a 29% share of overall lending. It handles nearly a quarter of the country’s import letters of credit.
In Senegal, Societe Generale is the leader in investment banking as well as trade and foreign exchange. It operates 40 branches and commands a 20% market share in both loans and deposits.
Pan-African Ecobank is our winner in four West African countries: Cape Verde, Gambia, Mali and Togo. The latter country is home to Ecobank Transnational, the group’s holding company, where it has 24 branches and a market share of 15.5%.
Earnings at Ecobank Cape Verde more than doubled last year and ROE was 19.2%. Last year, it introduced Rapidtransfer, a cross-border remittance app; remittances account for more than 12% of the country’s GDP.
Ecobank Gambia’s earnings were up 30% in the first nine months of 2019, producing a 27.3% ROE. The bank recently launched a digital payment solution, EcobankPay, using QR technology from Mastercard and Visa.
In Mali and elsewhere, Ecobank has integrated its money transfer platform with Nedbank’s mobile banking system. Ecobank also has deepened its relationship with Western Union to enable direct-to-account deposits.
Banque Atlantique is our winner in Cote d’Ivoire and Benin. Earnings grew 19% in the first half of 2019, with deposits up 10% and loans up 11%. In Cote d’Ivoire, the bank targets the cocoa-growing areas in the east of the country and the mining areas of the northwest. It has also introduced new programs for entrepreneurs and small to medium-size enterprises (SME) in the southern part of the country. Benin’s GDP grew 6.7% last year on public investment and favorable agricultural output, particularly for cotton.
United Bank for Africa, which has operations in 20 African countries, is our Best Bank in Burkina Faso. UBA is 64% owner of the Burkina Faso bank, which recently launched UBA Smart Process, a workflow automation tool that allows all of the bank’s staff to work from anywhere in the globe.
Fidelity Bank Ghana is our Best Bank in that country, and its largest privately owned indigenous financial institution. Earnings rose 46.5% last year and ROE was 32%. Fidelity Bank created a financial structure for the government to pay contractors, who were owed significant back pay.
Zenith Bank, our winner in Nigeria, has 400 branches and business offices in all of the country’s states and the Federal Capital Territory of Abuja. Earnings rose 5% last year for a 23.8% ROE, with growth largely stemming from Zenith Bank’s expanding platforms and channels. The bank offers free banking to Nigerians age 55 and older.
Union Trust Bank, Best Bank in Sierra Leone, is the country’s only privately owned indigenous bank. It operates 15 branches and uses technology to reach remote rural areas. In 2017, the African Development Bank gave Union Trust a $3 million credit line to enhance access to finance for SMEs and women-owned enterprises.
In Angola, which has the third-largest banking sector in sub-Saharan Africa after South Africa and Nigeria, our Best Bank is Banco de Fomento Angola, which has the lowest nonperforming loan ratio among Angolan institutions. Unitel, the leading mobile provider in Angola, is BFA’s majority shareholder; former Minister of Justice Rui Mangueira was named as the bank’s new chairman in January.
Absa Bank Botswana, formerly Barclays Bank of Botswana, is that country’s leading bank with 32 branches. Parent Absa Group of South Africa has operations in 12 African countries. Revenue grew 14% for the group’s African operations outside South Africa last year.
BNI Madagascar, our winner in the island nation, saw 2019 earnings rise 34% and ROE reach 43%. BNI commands a 35% market share for corporations and 19% for retail customers. Its network of 93 branches is the country’s largest.
SBM Bank is Global Finance’s Best Bank in Mauritius, with a total banking market share of about 25% and 43 branches. SBM has 52 branches in Kenya, five in Madagascar and four in India. Third-quarter 2019 earnings were up 32%.
Millennium bim is our selection as Best Bank in Mozambique. It holds a 25.4% share of deposits and 19.5% of loans, and operates 200 branches with a presence in all provinces of the country. Along with Portugal’s Millennium bcp, it established a €20 million credit line to boost trade with Portugal.
Global Finance’s Best Bank award “strengthens the bank’s commitment and responsibility toward the financial and economic development of Mozambique and emphasizes Millennium bim’s contribution to spreading banking services across the country,” says CEO Jose Reino da Costa. “Furthermore, it is a demonstration of the high level of performance shown by the bank’s entire staff in search of new solutions to meet our customers’ needs and satisfaction.”
Millennium bim marks its 25th anniversary in Mozambique this year. “Today, we have more than 1.8 million customers. We are the reference bank for Mozambican companies as well as new investors, and we have developed a network of branches in regions where there were no banking services before,” da Costa says.
First National Bank of Namibia, the country’s largest bank and our Best Bank winner there, is part of the FirstRand Namibia Group, a financial services company listed on the Namibian Stock Exchange. While the country’s economy has suffered from drought and recession in recent years, FNB’s bank’s assets have continued to grow on flat earnings. FNB supports the FirstRand Namibia Trust Foundation, which provides low-cost housing and aid for farmers.
Zambia National Commercial Bank (Zanaco) has a nationwide network of 49 branches and more than 5,000 Zanaco Xpress agents serving more than one million customers. Our Best Bank in Zambia, Zanaco has focused in recent years on improved service, efficiency and sustainability.
CBZ Bank is our winner in Zimbabwe, with a leading market share of more than 23%. CBZ, which aims to be the country’s main conduit for foreign investment, issued $80 million of bonds to finance loans to corn and soybean producers in January.
Attijariwafa Bank is Global Finance’s choice for Best Bank in Morocco. The bank has a total of 5,024 branches, including 3,483 in its home country. Its earnings rose 4.9% last year, but ROE slipped a bit to 14.6%. Last November, Attijariwafa signed an MOU with the Export-Import Bank of China to promote African exports to China and to finance the construction of industrial parks in countries where Attijariwafa is present.
Omdurman National Bank, our winner in Sudan, is a Khartoum-based Islamic bank and a leader in new technology. It specializes in trade finance, payment services and project finance.
Our Best Bank in Tunisia is Amen Bank, one of the first privately owned banks in the country. It has more than 160 branches and introduced a mobile payment solution, AmenPay, last April. Amen First Bank, Tunisia’s first fully online banking branch, was launched in 2015.
CAC International Bank is Global Finance’s Best Bank in strategically located Djibouti. Earnings rose 18% and ROE hit 17% in 2019. Located at an important Red Sea transit point, CAC introduced new commodity financing facilities last year that allow clients to bring in more imports for re-export.
Commercial Bank of Ethiopia is that country’s largest bank, with a 67% share of deposits and 53% of loans. It has 22 million account holders and operates 1,444 branches. It is growing rapidly; in the fiscal year through last August, it opened 157 new branches.
KCB Bank Kenya has the largest network in East Africa with 258 branches, including locations in Tanzania, South Sudan, Uganda, Rwanda and Burundi, and a representative office in Ethiopia. The group’s earnings rose 22% last year to $240 million, bolstered by good recoveries of some nonperforming loans.
I&M Bank Rwanda, the former Banque Commerciale du Rwanda, was the country’s first commercial bank. It also has a regional presence in Kenya, Mauritius (where it is known as Bank One) and Tanzania. I&M has 16 branches in Rwanda and plans to expand its footprint through innovation and financial inclusion.
CRDB Bank, our Best Bank winner in Tanzania, reported an 87% rise in earnings and ROE of 15.4% in 2019. It has particular expertise in project finance and trade finance and plans to open an office in the neighboring Democratic Republic of Congo and to expand its footprint in Burundi.
Trust Merchant Bank is Global Finance’s selection as Best Bank in the Democratic Republic of Congo. Earnings rose 35% last year and ROE was 16%. Trust Merchant Bank has 110 branches and increased its number of accounts by 25%.
National Bank of Equatorial Guinea (Bange), our winner in the former Spanish colony, opened a representative office in Madrid in 2017 to facilitate Spanish investment in the country. Bange has 25 branches and serves companies in the energy, petrochemicals and textile sectors.
In Malawi, our choice as Best Bank is National Bank of Malawi. Based in the financial capital of Blantyre, it has 30 branches and is the country’s leading bank by assets. National Bank has made strides in improving in asset quality, recording a 50% decline in nonperforming loans last year.
|Algeria||Societe Generale Algerie|
|Angola||Banco de Fomento Angola|
|Botswana||Absa Bank Botswana|
|Burkina Faso||United Bank for Africa|
|Cameroon||Societe Generale Cameroun|
|Côte d’Ivoire||Banque Atlantique|
|DR Congo||Trust Merchant Bank|
|Djibouti||CAC International Bank|
|Equatorial Guinea||National Bank of Equatorial Guinea|
|Ethiopia||Commercial Bank of Ethiopia|
|Ghana||Fidelity Bank Ghana|
|Guinea||Societe Generale de Banques en Guinée|
|Kenya||KCB Bank Kenya|
|Malawi||National Bank of Malawi|
|Namibia||First National Bank of Namibia|
|Rwanda||I&M Bank Rwanda|
|Senegal||Societe Generale Senegal|
|Sierra Leone||Union Trust Bank|
|South Africa||Standard Bank|
|Sudan||Omdurman National Bank|
|Uganda||Stanbic Bank Uganda|
|Zambia||Zambia National Commercial Bank|