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Middle Africa’s banking assets

Middle Africa’s banking assets

At end-2015 we estimate there were 476 commercial banks operating in Middle Africa, the region between North Africa and the Southern Africa Customs Union (SACU). Around 80% of these banks operated in Central and West Africa. The region’s total banking sector assets declined slightly, by 1% year-on-year, to an estimated USD389bn. This decline masked wide differences across the continent, with the sharp declines in Zambia & Nigeria being mostly offset by strong gains in Angola, the DRC and the UEMOA & CEMAC regions.

The overall decline in total assets was driven by two factors. The first was the depreciation of local currencies against the US Dollar, especially in the core markets of Nigeria and the five countries of the East African Community (Kenya, Tanzania, Uganda, Rwanda and Burundi), as well as in Malawi and Zambia. The second factor was commercial banks’ asset growth strategies which, in response to weak global commodity prices, moved from aggressive asset growth to portfolio management. Consequently, the region’s loan book and customer deposits also declined by 5% and 4% year-on-year, respectively (Table 1).

Performance of key balance sheet items, USD millions, FY2015

Portfolio Outstanding-FY2015 Year-on-Year Growth Rate
Assets Loans Deposits Assets Loans Deposits
Nigeria 132,474 57,451 85,651 -0.12 -0.18 -0.18
Angola 82,227 31,284 59,748 0.19 0.1 0.15
EAC 55,546 31,341 39,455 -0.05 -0.01 -0.04
UEMOA 47,025 24,560 31,313 0.07 0.04 0.06
CEMAC 24,448 14,828 7,124 0.05 0.09 0.15
Ghana 16,572 7,919 10,801 0.03 0.05 0.07
Mozambique 9,750 5,025 6,588 -0.02 -0.1 -0.11
Zimbabwe 6,282 2,647 3,524 0.1 -0.19 -0.06
Zambia 5,782 2,246 4,195 -0.22 -0.29 -0.21
DRC 4,630 1,980 3,291 0.12 0.15 0.09
Malawi 1,571 618 1,042 -0.07 0.01 -0.1
Sierra Leone 1,354 309 1,030 0.37 0.45 0.26
Liberia 899 385 607 0 0.12 0.09
Gambia 733 108 413 0.17 -0.04 0.1
Total 389,292 180,702 254,782 -0.01 -0.05 -0.04
Source: Ecobank Research, Central Banks.

Funding & liquidity

Funding & liquidity

Customer deposits continue to drive funding in Middle African banks. We estimate that customer deposits accounted for around 80% of total funding liabilities at end-2015. Liquidity buffers were strong, as evidenced by the relatively soft loans-to-deposit ratio (LDR) of 71% and ample local currency (LCY) liquidity. Total banking sector net revenues in FY2015 rose by 14% year-on-year to around USD36bn. On-balance sheet activities continue to drive revenues in Middle Africa, with funded revenues accounting for 65% of total revenues at end-FY2015. This reflects the fact that Middle Africa is a loan-driven market, with loans and advances accounting for nearly half of total assets (Chart 1). In FY2015 banks only retained only 26% of net revenues as pre-tax profit, reflecting high impairment adjustments and distribution costs (notably branches & staff).

The growth of Pan-African banks

The growth of Pan-African banks

The number of pan-African banks (PABs), operating in multiple jurisdictions in Africa, has grown dramatically over the past decade. At end-2016 there were six PABs with operations in 15 or more African markets. Ecobank had by far the largest pan-African footprint, with full banking operations in 33 countries (plus representative offices in South Africa, Ethiopia & Angola). The next largest were Standard Bank & UBA (both in 19 countries), Standard Chartered and Bank of Africa (both 16) and Attijariwafa Group (15). Standard Bank and Barclays Africa were by far the largest in terms of assets (USD128bn & USD74bn in FY2015, respectively), but their operations are heavily focused on Anglophone markets in Southern, West and East Africa. In contrast, Ecobank, UBA, Standard Chartered and Bank of Africa had operations across Anglophone, Francophone and Lusophone markets, making them truly pan-African.

Financials of leading PABs, USD billions, FY2015, ranked by total assets

PAB Assets Deposits Loans Shareholder Funds Number of  countries present in Africa
Standard Bank 127.70 116.16 69.48 11.54 19
Barclays Africa Group 73.85 44.41 45.38 6.36 11
ATTIJARIWAFA Group 41.53 27.73 25.55 4.16 15
BMCE (Bank of Africa) 28.22 18.01 17.50 2.23 16
Standard Chartered 25.20 10.98 11.56 n/a 16
Ecobank Group 23.55 16.43 11.86 2.35 33
FirstBank Group 19.96 14.60 9.13 2.54 6
UBA 13.83 10.46 5.21 1.67 19
Access Bank Group 13.02 8.46 6.86 1.85 7
GTBank 12.69 8.09 6.89 2.05 9
Citibank 7.79 n/a n/a 0.845 11
KCB Group 4.68 3.48 3.12 0.81 6
Source: Ecobank Research

PABs have emerged as the driving force of Africa’s financial revolution, enabling banks to build scale and increase efficiency, as well as to unify fragmented markets and spread innovation. Digital services – whether over the Internet or mobile – are key to leveraging PABs’ footprint to deliver financial services to the widest possible clientele, from a cost, revenue and risk management perspective. PABs can test new financial services in key markets, and then roll them out seamlessly and efficiently across Africa, helping spread innovation and best practice. This is more effective than creating pockets of excellence that are isolated and cannot be scaled or adopted by other African markets. A case in point is M-PESA which has been a huge success in Kenya and its adjacent markets (Tanzania & Uganda), but has failed to take root elsewhere in Africa.

Mobile banking is driving financial inclusion

Mobile banking is driving financial inclusion

Access to financial services is improving, leveraging on mobile phones

The World Bank’s Global Findex estimates banking penetration in Sub-Saharan Africa at 28% in 2014, a rate that has grown weakly over the past decade. This is well below the rate in other developing regions, notably East Asia & Pacific and Latin America. However, mobile networks and smartphones are providing a range of alternative payment, lending and savings services that are helping to boost financial inclusion. Findex estimates that 12% of Sub-Saharan Africans have access to mobile money, half of these without a bank account, which brings up the rate of financial inclusion to 34%, leaving around two thirds of the population unbanked.

The importance of mobile banking in driving financial inclusion cannot be understated – only 2% of adults worldwide have a mobile money account, versus 12% in Sub-Saharan Africa (half of these are a mobile money account only). Mobile money was responsible for nearly all the growth in account penetration since 2011. In East & West Africa mobile money penetration rates have soared, led by Kenya (82%), Tanzania (45%) and Côte d’Ivoire (27%). In Kenya the share of mobile payments reached an estimated 79% in FY2015, supported by the revolutionary M-PESA network.

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