6 October 2010

Africa: Sixteen Local Banks in Africa's Top 100

Lagos — THE reform exercise in Nigeria's banking industry is after all not a ruse, as 16 Nigerian banks have made the top 100 in Africa, according to the latest ranking by the African Business.

In the latest ranking, Zenith Bank Plc maintained its lead in financial strength across the West African sub-region. A survey carried out by best selling Pan-African magazine, African Business revealed that the financial giant had secured the choice position in the 2009 ranking.

In the Sub-Saharan ranking, Zenith also came first. According to the report, even though the bank's capital valued at $2.2 billion in this year's survey seemed to have downed from $2.9 billion it was in 2009, Zenith Bank appears to hold the number one position up till next year.

Statistics showed that the bank's pre-tax earnings for the first half of the year stood at N25.34 billion, a sharp rise from N12.63 billion for the period in 2009, even as year-on-year gross income fell by 12.8 percent due to low interest rate regime of the apex bank.

Already, as part of further consolidation strategies, new boss of the bank, Mr. Godwin Emefiele has revealed that Zenith bank is currently seeking to expand its branch network at a time it has equally implemented a "strategy of ensuring a large capital and liquidity ratio to protect against harsh operating conditions.

Closely trailed by Zenith according to the survey is First Bank even with a similar drop in capital from N2.8 billion to her current N2 billion. The bank remains the largest in ownership of asset base in the West African region, a factor that has kept it strong even in harsh business operating environment.

The survey further revealed that "although the number of non-Nigerian banks in the top 20 has increased from two to five in one year to include banks from Togo, Gabon, Mali, Coted'Ivore and Senegal, Ghana Commercial bank leads two others within the Top 30 after securing 22 spot.

Giving details of the ranking process, the group said "the Top 100 African banks were ranked according to shareholders' equity as defined by Basle-based Bank for international Settlements (BIS)".

BIS 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, bad debts and investments in risky securities or speculative investment activities.

It said: "We used a $20m capital base as the benchmark for our listing. A number of smaller banks were excluded from the rankings because data on and from these banks is outdated".

"However, we hope to include more banks to our 2006 survey as and when up-to-date data becomes available.

"Banking profitability is calculated before corporate taxes and minority interest payments for end-reporting period. The financial health of a single bank is measured by annual Returns on Total Assets (ROA) employed and Returns on equity (ROE).

"African banking can be roughly split into two systems - sub-Saharan Africa and North Africa. The sub-Saharan Top 70 listing is dominated by the 'big five' South African financial giants, notably Standard Bank, ABSA, Nedcor, FirstRand and Investec - the investment bank. African Bank, South Africa's micro-credit specialist, occupies sixth position in our listing, ahead of three of the largest Nigerian banks. In fact, African Bank is ranked as the world's 14th strongest capitalised bank with a total BIS capital ratio of 40.4 percent. This compares with an average of 14 percent for the big five.

Further details showed that "In 2004, South African banks accounted for about 75 percent of the sub-Saharan Africa's total Tier 1 capital, 83 percent of aggregate assets and 70 percent of the total pre-tax profit".

Experts say the new generation of Nigerian banks, led by Zenith International Bank, Guaranty Trust Bank and First Bank is emerging as dynamic players in regional markets, adding that in future, there will be fewer but more vibrant mega banks as a result of the consolidation drive currently driven by the on going reforms of the Central bank of Nigeria (CBN).

Mauritius Commercial Bank, Barclays Bank of Zimbabwe, Commercial Bank of Ethiopia, Barclays Bank of Kenya, the Lome-based Ecobank Transnational, Socit Generale de Banque en Cte d'Ivoire, Banco Fomento Angola, Bank Windhoek (Namibia) and Ghana Commercial Bank, among others, are major financial institutions in their respective markets.

The UK bank Barclays' $5.5bn takeover of ABSA will create the biggest pan-African banking group - managed from Johannesburg rather than out of London. ABSA, ranked third-biggest by assets, is the largest South African retail bank with 6.3m customers, 700 branches, 4,500 ATMs, and about 20,000 staff. According to Barclays, synergies from the two banks should increase ABSA's pre-tax profit by R1.4bn ($223m) per year. ABSA will remain a South African-registered company with its primary listing on the JSE securities Exchange.

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