African banks generate a high proportion of fee and commission income from their assets, but this could reflect a shortage of quality lending opportunities.
African countries feature prominently among the top banking sectors for generating fee and commission income, based on 2010 data. The Banker has measured fee and commission income as a proportion of total assets to provide a fee income return on assets (ROA) figure for all the markets where this data is available for five banks or more.
Four African countries feature in the top 10 for fee income ROA, including Ghana and Nigeria in the top two spots. The US, the world’s largest and most sophisticated banking market, slips in only at number 10.
Of course, these figures may show more than just success in generating fee income. In some cases, the result may reflect banks’ relatively small asset bases in countries where lending opportunities are scarce. Even so, this ranking provides an indication of how far banks are able to generate returns without using large amounts of balance sheet, which may be a more sustainable model with lower inherent risks.
In terms of individual banks, the results more often reflect specific business models. The top bank for fee income ROA is Franklin Resources in the US, which is actually a fund management giant with a banking licence attached. Several closely held Russian banks that act as cash management vehicles for the industrial holdings of their owners also rank highly. However, the traditional centre for private banking and wealth management in Switzerland only comes in at 12 ranked by fee income ROA.
By contrast, it is the fourth-largest fee generator on a gross dollar basis, with its banks earning $33.5bn in commissions in 2010. For display reasons, we have excluded the US from this chart, because its total fee income of $185bn is off the scale compared to other countries. All the top 10 for gross total fee and commissions are developed markets, with one notable exception. Brazil’s vibrant capital markets and wealth management industries allow its banks to force their way in at seven, with total fees and commissions of $21.8bn.
