Africa's top banks.

Author:Versi, Anver
Position:Banking in Africa

Our March 2004 Cover Story, Africa's Top Companies, was such a hit with our readers--including institutions--worldwide that we decided to give a similar treatment to African banks.

Although banking in various African countries is fairly well covered by national financial media, there has been little effort to look at the industry from a pan-African perspective.

Yet all the indications are that Africa has begun to follow the wider global trend towards multinationalism. Banks are becoming bigger with a wider, more global reach and--more to the point--making unprecedented profits.

For example, according to The Banker magazine, its 1000 World Banks list achieved the stunning figure of $417.5bn aggregate pre-tax profits over 2003-04. This represented an almost unbelievable 65.4% increase over the previous financial year.

African banks enjoyed perhaps an even more spectacular performance. The dollar value of Tier 1 capital of the top South African banks has shot up by between 10%, to a whopping 76%. (Standard Bank 42%; ABSA 76%, First Rand 10%, Nedcor 27% and Investec 38%.) This is, of course, partly due to the strength of the rand against the dollar, but profitability has also been very healthy. In terms of sheer performance, Nigerian banks have been the star turns. First Bank of Nigeria delivered a brilliant return on capital of 66.6% and Union Bank of Nigeria managed a more modest but nonetheless commendable return of 37.1%.

It might be a sign of the times that the strongest banks in Africa are also the most adventurous in terms of a pan-African presence. Standard Bank, the giant of Africa (the rest of Africa makes up only 8% of its 2003 revenue) now has a presence in 16 African countries; Ecobank, with affiliates in 12 countries, continues to flourish and several other banks are expanding operations to service the growing need for a pan-African service.

On the following pages we present a listing for Africa's Top 50 banks and an explanation of how we arrived at our ranking. We also highlight the top banks in each sub-Saharan African region.

Our list of Africa's Top 50 banks follows overleaf.

How we ranked Africa's Top 50

The Top 50 sub-Saharan African banks were ranked according to shareholders' equity (Tier 1 capital) as defined by the Basle-based Bank for International Settlements (BIS). This stipulates that commercial banks should hold capital against risk-weighted assets. The BIS definition refers to the banks' soundness or underlying strength--the shareholders' core capital available for absorbing actual or potential losses occurring from non-performing loans.

Banking profitability is calculated before corporate taxes and minority interests for the end-reporting period. The financial health of a single bank is measured by annual Returns On total Assets employed (ROA) and Returns on Equity (ROE).

The sub-Saharan Top 50 listing is dominated by South African banks, which occupy the first five positions. In 2003, South African banks accounted for 70% of aggregate Tier 1 capital of the SSA banking sector, followed by Nigeria (9.8%), Zimbabwe (4.6%) and Mauritius (3.8%).

The Nigerian banks are led by the big-three--notably Union Bank of Nigeria, First Bank of Nigeria and United Bank for Africa.

Barclays Bank of Zimbabwe and National Merchant Bank of Zimbabwe Holdings enjoy the largest market share in that country, but like other banks have been affected badly by sustained stagflationary conditions, i.e., plunging economic output amid hyperinflation. The Mauritian banks are headed by Mauritius Commercial Bank and State Bank of Mauritius. The Commercial Bank of Ethiopia, the Lome-based Ecobank Transnational, Kenya Commercial Bank and Ghana Commercial Bank remain major players in their respective markets.


According to the Reserve Bank of South Africa, the combined assets of 20 registered banks rose by 35.7% to R1260.7bn ($188.44bn). The top four retail banks--Stanbic, Nedcor, ABSA and FirstRand accounted for 88% of the sector's assets. The industry's profitability also improved, with average return on capital and assets of 10.9% and 0.7%, respectively, in 2003. By contrast, the Reserve Bank's figures show that returns on equity and assets were 5.6% and 0.5%, respectively, in 2002.


* Balance sheet is a financial statement showing a bank's assets, liabilities and equity, as well as yearly income on a given date, approved by an external auditor.

* Total assets deployed refer to cash and short-term funds, demand balances with other banks, loans/advances (business/personal lending, structured project finance), short-term investments (Treasury bills), investment securities (including stakes in non-banking ventures), debt stock and fixed assets.

* Deposits include the customers' deposits and certificates of deposits. There are two types of savings account--non interest-bearing current account and time deposit. The latter is usually referred to as a checking or deposit account that pays a fixed-term interest.

* Non-performing loans refer to loans that are in default or close to being declared in default i.e., typically in interest arrears for 90 days or more.

* Tier 1 capital comprises (i) common shareholders' equity and retained profits or net earnings; (ii) qualifying non-cumulative preferred stock (up to a maximum of 25% of Tier 1 capital); and (iii) minority interests in equity accounts of consolidated subsidiaries.

* Tier 2 capital is defined as (i) reserves for problem assets [bad debts] that may not exceed 100% of Tier 1 capital; (ii) perpetual preferred stock not qualified to include into Tier 1; (iii) hybrid capital instruments and mandatory convertibles; (iv) subordinated debt; and (v) preferred stock with medium-term remaining current maturity. Tier 2 capital is sometimes referred to as "supplementary capital" and Tier 1 as "core capital".

* The Basle Capital Convergence Accord as operated by most domestic regulators requires banks to hold total capital equivalent to at least 8% of their combined assets, with half of this cushion in the form of Tier 1 capital.

Assets are weighted according to perceived risks, with a 100% weighting for most private-sector lending; 50% for residential mortgages; and only 20% for short-term inter-bank credits.

Loans to banks from non-Organisation for Economic Cooperation and Development countries (exceeding one-year) receive a 100% risk-weighting. However, claims on central banks and governments in local currency have zero-weighting.

* Syndicated lending refers to large loans made jointly by a group of banks to one borrower. Usually, one lead bank takes a small percentage of the loan and partitions (syndicates) the rest to other banks.

AFRICA'S TOP 50 SUB-SAHARAN BANKS Ranking by capitalisation (US$ mn) Capital Assets CAR (%) Standard Bank Group (South Africa) 12/03 4,233 81,384 5.2 ABSA Group (South Africa) 12/03 3,012 47,938 6.3 FirstRand Banking Group (South Africa) 06/03 1,851 40,238 4.6 Nedcor Group (South Africa) 12/03 1,595 47,076 3.4 Investec Group (South Africa) 03/04 1,092 23,078 4.7 Mauritius Commercial Bank 06/03 295 2,586 11.4 African Bank (South Africa) 09/03 287 925 31.0 Union Bank of Nigeria 03/04 265 3,002 8.8 Barclays Bank of Zimbabwe 12/02 242 2,216 10.9 National Merchant Bank of Zimbabwe 12/02 215 1,367 First Bank of Nigeria 03/03 201 3,224 6.2 State Bank of Mauritius 06/03 177 1,334 13.2 Commercial Bank of Ethiopia 06/03 163 2,932 5.5 United Bank for Africa (Nigeria) 03/03 117 1,607 7.3 Ecobank Transnational (Togo) 12/02 100 1,143 8.7 Zenith International Bank (Nigeria) 06/03 99 883 11.2 Intercontinental Bank (Nigeria) 12/02 74 500 14.8 Kenya Commercial Bank 12/03 74 794.5 9.3 Banque Internationale pour le Commerce et l'Industrie de la Cote d'Ivoire 12/02 57 455 12.5 BGFI Bank (Gabon) 12/02 56 546 10.2 Wema Bank (Nigeria) 03/03 53 483 11.0 Ghana Commercial Bank 12/02 50.4 553.6 9.1 Banque Internationale pour le Commerce et l'Industrie du Gabon 12/02 48.2 498 9.6 Bank Windhoek (Namibia) 03/03 47 483 9.7 Afribank Nigeria 03/02 47 720 6.5 Standard Chartered Bank Ghana 12/03 46 432.6 10.6 Investment Banking & Trust Company (Nigeria) 03/03 46 189 24.3 Diamond Bank (Nigeria) 04/02 45 458 9.8 Merchant Bank of Central Africa (Zimbabwe) 12/02 42.9 193.5 22.1 Commercial Bank of Namibia 12/03 36.7 376.2 9.7 Barclays Bank of Ghana 12/02 36 321 11.2 FSB International Bank (Nigeria) 03/02 35 271 12.9 Chartered Bank (Nigeria) 03/03 32.7 348.8 9.3 Societe Generale de Banques du Senegal 12/02 31 514 6.03 Universal Trust Bank of Nigeria 03/02 29 253 11.4 National Bank of Malawi 12/02 29 182.5 15.9 CFC Bank Kenya 12/03 29 216.2...

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