The Banker Awards 2012 – Africa

Africa

United Bank for Africa

Phillips Oduoza, chief executive, United Bank for Africa

Last year was scarcely a good one for United Bank for Africa (UBA). It had traversed its way through Nigeria’s banking crisis of 2009 without needing any injection of liquidity from the government, unlike many of its peers. But the effects of that period, which led to bad loans soaring across the financial industry, lingered.

By 2011, UBA had yet to cleanse its balance sheet, and took the decision to sell some N130bn ($815m) of non-performing assets at a steep discount to Amcon, a state-owned bad bank. As a result, it posted a N28.5bn pre-tax loss for the year.But 2012 has marked the revival of what is Nigeria’s third largest bank by assets. UBA is once again highly profitable.

Between January and September it made a net profit of N36bn. Its return on equity during the period was 27%, well above that of most local rivals. And its shares have climbed 90% this year.

“The main reason for this turnaround was the bank’s decision to clean up its loan book and start this financial year on a clean slate,” says Phillips Oduoza, UBA’s chief executive. “We leveraged the Amcon window to dispose of our non-performing loans and this created room for the bank to create quality risk assets which added to our bottom line.”

The bank has also managed to boost its efficiency substantially. Its cost-to-income ratio in the first nine months of 2012 was 62%, down from 79% a year earlier. It used its large network of more than 700 branches to increase its deposits by 12% and, thanks to a drive to introduce new products and cross-sell them, its non-interest income by 22%.

Perhaps even more significantly, it has continued to build its pan-African footprint. UBA operates in 18 countries on the continent aside from its home market – far more than any of Nigeria’s other lenders, which have often been criticised for being too slow to move abroad. UBA’s subsidiaries in key markets such as Cameroon, Ghana and Senegal are growing rapidly in terms of assets and profits. Such is their progress that Mr Oduoza is confident UBA will reach its goal of deriving 50% of its revenues from outside Nigeria in the medium term, compared with 23% today and 13% in 2010.

“Our experience in expanding across the continent has awoken many of our peers to the opportunities in Africa outside Nigeria, with many commencing expansion plans in earnest,” says Mr Oduoza.

Angola

Banco de Fomento Angola

The rise of Angola’s banks over the past decade has been little short of spectacular. They had a total of just $3bn of assets between them in 2002, the year the country finally ended a bloody 27-year civil war. But by the end of 2011, they had just shy of $50bn of assets, according to The Banker Database. This makes Angola home to the fifth largest banking sector in Africa, behind only those of South Africa, Egypt, Morocco and Nigeria. That is an impressive turnaround for an industry that was a basket case only 10 years ago.

Banco de Fomento Angola (BFA), owned by local telecommunications firm Unitel and Portugal’s Banco BPI, has been of the banks best able to exploit oil-rich Angola’s economic boom since peace was ushered in. BFA has grown quickly and at the end of 2011 had a Kz673bn ($7.1bn) balance sheet. But even more impressive has been its ability to make profits. Despite being only the fourth largest bank in the country, it was the second most profitable in 2011, when its net earnings were Kz24bn, which amounted to a huge return on equity of 37%.

BFA has managed to keep itself efficient, despite its rapid growth. Its cost-to-income ratio was just 37% in 2011. Its non-performing loans ratio was a fairly high 6%, but management is not overly concerned and believes that figure can be brought down.

Part of BFA’s success has been a result of it widening its reach so as to try to gain more customers. With 131 branches, it has the largest network in Angola, while it also has more ATMs (20% market share) and cards distributed (24% market share) than any of its local rivals.

One aspect of BFA that will likely change as it develops further is its lending. It currently has a loan-to-deposit ratio of only about 30%. As competition in the Angolan banking sector increases with more foreign banks entering the market, it will probably seek to change that in a bid to maintain its high levels of profitability.

Benin

Bank of Africa Benin

Benin has yet to recover fully from the onset of an economic slowdown in 2010. Gross domestic product grew just over 3% in 2011, much less than in neighbouring countries such as Ghana and Nigeria. This year should be slightly better, although expansion will still fall below the levels experienced between 2006 and 2008.

As such, banks in the Francophone west African country have come under pressure. Bank of Africa Benin (BoA Benin), the largest lender in the country and a subsidiary of Mali’s Bank of Africa, has performed well, however, in the past two years.

Its net profits rose 16% year on year in 2011 to CFA Fr7.6bn ($14.7m). Its return on equity (ROE) was a solid 15.7%, while its cost-to-income ratio fell slightly to just 45%.

This was in large part due to BoA Benin focusing on increasing its number of retail customers. One of the most successful measures cited by Cheikh Tidiane Ndiaye, the bank’s managing director, was the offering of incentives to existing clients who introduced new ones. This brought in more than 32,000 new customers between October and December last year, which was more than the total number gained in 2010.

BoA Benin has also courted small and medium-sized enterprises (SMEs) in the past 18 months. It introduced a product that, for a low monthly fee, gives them SMS (text message) banking services, a current and savings account and a debit card. It opened four new branches in rural areas, largely on the basis of building up its SME business. And, to further develop its relationships with them, it offered SMEs advice on the possibility of listing on the BRVM, the regional bourse based in Abidjan, Côte d’Ivoire.

Next year, BoA Benin hopes for a fuller recovery in the local economy and to boost its lending in tandem with that. If so, and as long as costs are kept in check, it should be soon approaching an ROE of 20% or more.

Botswana

Barclays Bank of Botswana

Having suffered a sharp contraction of almost 5% in 2009, Botswana’s economy is once again in good health. The diamond-rich southern African country’s economy grew just over 5% in 2011 and is expected to do the same again this year.

Nonetheless, local banks are struggling to grow their balance sheets substantially. Many saw their assets decrease in dollar terms in 2011. The pula’s slide of 13% against the US currency was partly to blame. But so was the fact that Botswana’s already fairly mature banking sector – at least by African standards – and small population of 2 million do not lend themselves to rapid expansion of its banking sector.

Barclays Bank of Botswana, the winner of this year’s award for the country, saw its asset base decline by 2.6% in 2011 and its Tier 1 capital fall 1.7% to P938m ($117m). Yet, thanks to it being able to keep costs low – its cost-to-income ratio was just 43% – net profits increased by 5.4% to P527m. This amounted to an impressive return on assets of 5.7%, which was higher than that of its rivals.

In its corporate banking arm, Barclays Bank of Botswana has put plenty of effort into developing its technology. As such, its corporate internet banking platform is the only one in the country to offer cross-border functionality, as well as features such as foreign exchange booking.

Among its success in this unit in the past 18 months was being appointed as the collecting bank for the central government at all major collections points. It was also awarded the collection bid by the city council of Gaborone, the capital, for its rate collections.

Barclays Bank of Botswana has also developed its retail banking arm to try to take more market share. It recently became the first local lender to cancel ATM fees, and has increased its disbursements of low-cost unsecured loans. It is also attempting to cross-sell products. Among its initiatives was to set up kiosks in its branches to sell life and non-life insurance.

Burkina Faso

Ecobank Burkina Faso

Ecobank has continued to benefit from the fairly stable macroeconomic and political environment in Burkina Faso. The Francophone west African state is expected to see gross domestic product increase about 5% in 2012, which is similar to the levels of the past few years.

Ecobank Burkina Faso has exploited this to further consolidate its position as the largest bank in the country. Its assets grew by 36% – more than any of its rivals – in 2011 to CFA Fr401bn ($775m). Its next biggest competitor had $470m in assets at the end of that year.

Ecobank has also pulled away in terms of earnings. Its net profits were CFA Fr6.7bn in 2011, an increase of 45% from the previous year (the next two largest Burkinabe lenders saw their net profits rise by 25%). This amounted to a return on equity of 25%, up from 19% in 2010 and 14% in 2009. Its return on capital of 2.15% was again higher than that of any of its local competitors.

Ecobank has been improving by other measures too. Its cost-to-income ratio fell from 73% in 2009 to 55% two years later, while non-performing loans were cut from 15% to 6% in that period.
The bank has achieved this progress largely by focusing on revenue diversification. It also, at times, decided to take on more exposure to government securities. Such measures led to its revenues rising by 50% year on year in 2011 to more than $14m.

Its ability to cut costs, meanwhile, testifies to the success of its strategy of streamlining its IT platform in recent years.

Next year, Ecobank Burkina Faso will focus more on retail banking. “We see a lot of opportunities thanks to our extensive network – the largest of the country – and large customer base,” says Cheick Travaly, the bank’s managing director. “We want to push the use of cards, electronic banking channels, consumer loans, insurance products and mobile banking.”

Burundi

Ecobank Burundi

Togo-based Ecobank entered Burundi in 2008 when it took over liquidated lender Société Burundaise de Banque et de Financement. Although it made a loss in 2009, it has since become firmly profitable. In 2011, it made a net profit of BuFr2.04bn ($1.4m). This was an increase of 240% from what it earned in 2010 and marked the first time it had made more than $1m in profits. It also amounted to a return on equity of 15%, compared to 5% a year earlier.

Other metrics also testified to the bank’s growing strength. Its cost-to-income ratio fell from 86% in 2010 to 77% in 2011, which, while still high, its management is confident will come down further in the next few years.

Nonetheless, the bank’s assets, having risen 51% to BuFr73bn in 2010, rose just 9% the following year. This testified to the severe liquidity crisis facing the impoverished east African country in the wake of international donors restricting grants to the government. Inflation soared to 25% in April this year, while a rise in coffee and tea exports has done little to halt a widening current account deficit.

As a result of this, Ecobank Burundi has been targeting major utility-building projects. “Burundi has major projects in the sectors of telecommunications, electricity and water supply,” says Alassane Sissoko, head of Ecobank Burundi. “And working with the investment arm of Ecobank, we intend to take part in these financing opportunities.”

Ecobank has also focused relentlessly on cutting costs. This included measures as small as getting staff to print only when necessary, and drives to reduce travel and electricity expenses.

Such measures should stand the bank in good stead for the next few years and enable it to carry on building its earnings, even if the domestic economy does not pick up substantially.

Cameroon

UBA Cameroon

UBA Cameroon, a subsidiary of Nigeria’s United Bank for Africa, has made an impressive start to its banking life. Only five years old, it is already highly profitable. Having made a loss in 2008 and just a small profit in the next two years, it achieved a net profit of CFA Fr1.7bn ($3.3m) in 2011. This was a return on equity of 20% and marked a rise in profits of 21% from 2010 and was almost a 10-fold increase from 2009. The bank’s costs are still high; it had a cost-to-income ratio of 72% last year, but it expects that to decrease in future.

Part of UBA Cameroon’s success has been down to it winning business from some of the central African country’s biggest companies. Among them has been state-owned oil refiner Sonara. Most significantly, UBA helped finance a $76m crude oil import facility with the firm earlier this year. It also handles tens of millions of dollars-worth of foreign exchange forwards for them each month.

UBA Cameroon has, however, also put plenty of effort into growing its retail arm. It now grants an average of CFA Fr1.2bn of personal loans every month to employees of its corporate banking clients. This is a particularly lucrative business given that the margins are much higher than on corporate loans.

It has managed to win retail market share thanks in no small measure to its savvy use of technology. Through its U Direct product, it is the only bank in Cameroon that has a real-time online banking platform. “We have been able to significantly grow our retail loan book and roll out some tailored solutions that are making a difference in the market,” says Georges Wega, head of UBA Cameroon.

Next year he plans to grow the bank’s branch network and, in particular, target Cameroon’s high unbanked population.

Chad

Ecobank Chad

Ecobank Chad, the biggest bank by assets in the Francophone central African state, has focused heavily on boosting efficiency in the past two years. This has enabled it to improve its profitability even while its balance sheet is not growing substantially.

In 2011, its assets actually shrunk by 10% to $282m, which was partly a consequence of an economic slowdown that led to gross domestic product in the country rising by about 3%, compared to almost 15% in 2010.

Despite this, Ecobank Chad’s net profits increased during 2011 by 4% to $7.6m. More significantly, its return on equity (ROE) rose to an eye-watering 41%, while it kept its cost to income ratio below 50%. “Our over-riding objective is to improve shareholder value,” says Mahamat Ali Kerim, the bank’s managing director. “A number of initiatives were taken during the period to achieve this. For one, we renewed our focus on strategic cost management to improve ROE as headwinds in top-line growth remained fierce.

“As a result we focused on driving branch efficiency and an overall awareness with the company to rein in costs. This continues to pay off and sees us rank as one of the most efficiently run banks in Chad.”

The bank also made a push to integrate its corporate and retail banking units further. “This allowed us to bank the value chain, thus offering our services to the suppliers, distributors and employees of our big corporate clients,” says Mr Kerim. “As a result, revenues received a boost.”

The bank lends a hefty 26% of its loan book to small and medium-enterprises. But it expects, given their importance to Chad’s economy, that figure to rise. It hopes to be able to exploit its position within the Ecobank group – an organisation with a presence in 32 African countries, more than any other bank – to help more Chadian companies operate regionally.

Côte d’Ivoire

Ecobank Côte d’Ivoire

Côte d’Ivoire, once the firm economic and financial powerhouse in French-speaking west Africa, has for most of the past decade been stagnating. The situation came to a head during disputed elections in December 2010, after which almost six months of near-civil war occurred.

Banks in the country had to shut down and endured a spike in non-performing loans (NPLs) as a result of the conflict. “The main challenge faced by the bank in the past year was undoubtedly the sharp deterioration in the quality of the asset book in the aftermath of the political crisis,” says Charles Daboiko, head of Ecobank Côte d’Ivoire.

“At the height of the crisis, the bank had to resort to suspending its operations for three months. On resumption of activities, we were faced with a situation where the level of NPLs shot up to 15% and the performance of the bank was adversely affected by income forgone during that period.”

But the country and its banks have recovered quickly since the installation of a new government in May 2011. Gross domestic product, having contracted by 5% in 2011, is expected to grow 8% this year. The government believes it can sustain rates of 10% or more over the medium term.

Ecobank Côte d’Ivoire has positioned itself well to exploit this economic buoyancy. Most significantly, it slashed its NPL ratio to 2.7% by the end of last year, as well as growing its assets to more than $1bn for the first time, while net profits rose 9% to CFA Fr8.5bn ($17m), equating to a return on equity of 30%.

The bank has focused on building its ties with the country’s biggest corporate entities. It has increased its business recently with Société Ivoirienne de Raffinage, the largest crude oil refinery in Côte d’Ivoire, and pitched to companies such as car distributor CFAO and industrial firm Bolloré.

Democratic Republic of Congo

Trust Merchant Bank

The Democratic Republic of Congo’s banking sector remains shallow, even by African standards. In a country of about 70 million people, there are fewer than 1 million active bank accounts. The top four lenders have just $1.4bn of assets between them, according to The Banker Database.

But the expansion of banks such as Trust Merchant Bank (TMB), the winner of this year’s award for the DRC, is slowly changing this. TMB has opened 12 new branches in the past year, including in the cities of Kamina and Uvira, which previously had no banks. It now has about 55 branches and is the only DRC bank operating in each of the vast country’s provinces.

At the same time as expanding physically, TMB has also focused on providing new products to customers. One of its major moves recently was to establish, in partnership with the United States Agency for International Development, an agricultural lending unit (ALU), the first of its type in the DRC. This has led to the bank providing cashflow loans to farmers who supply produce to companies and financing the acquisition of farm machinery.

“The ALU is an essential element of our strategy to offer comprehensive banking services to rural DRC economies,” says Robert Levi, the founder and chairman of TMB. “We are keenly aware of the difficulties of pricing risk in this sector given some of the unique challenges that we face in many parts of rural DRC, including political instability, acts of war and the resulting collateral consequences that are unpredictable. We are therefore very interested in working with specialised agencies to overcome these collateral constraints.”

To boost its lending to other small business, TMB has entered into a joint venture with a European private equity firm. Part of the attraction is that the risk is shared equally between the two parties. In the past 12 months or so, the bank has disbursed more than $15m in new loans to small and medium-sized businesses, equivalent to almost 15% of its lending book.

TMB’s expansion has been carried out profitably in the past few years. Its net profits rose to $877,000 in 2011, which was an increase from just $186,000 a year earlier.

Djibouti

International Commercial Bank Djibouti

International Commercial Bank Djibouti (ICB Djibouti) is not a big lender by any means. It had assets of just DFr5.8bn ($32.7m) and Tier 1 capital of DFr430m at the end of 2011. But it has grown quickly in recent years, more than doubling its balance sheet between 2009 and 2011. Moreover, it is solidly profitable. In 2011 it more than doubled its net earnings to DFr97m. This equated to a return on equity of 13%, compared to 3.7% in 2009 and 11% in 2010.

Its expansion has been carried out carefully. Gross non-performing loans equated to just 1.3% of the total credit portfolio at the end of last year. And expenses have been curbed. The bank had a cost-to-income ratio of 85% in 2009, but this decreased to 73% the following year and to 61% in 2011.

ICB Djibouti has put in a lot of effort to boost its business banking presence. Its loan-to-deposit ratio has been above 60% for the past five years. This compares to an industry average of about 30%, testifying to ICB Djibouti’s willingness to provide credit to the country’s economy. As part of this strategy, it has targeted Djibouti’s housing sector. It recently helped finance a social housing complex of DFr800m and an apartment complex of DFr756m in Djibouti city, the country’s capital.

“Housing needs a lot of investment and ICB has shown the way by financing a social housing project – the first time a commercial bank in Djibouti [has done that],” says Podila Phanindra, chief executive of ICB Djibouti.

In the past 18 months, the bank has started providing remittances services on a large scale. This part of its business has risen quickly. In 2009 it handled just $7m of remittances, but that rose to $32m last year. And in the first five months of 2012 alone, ICB processed more than $40m of remittances.

Most of ICB Djibouti’s loans go to the retail sector. This segment of its book expanded from DFr2bn in 2010 to DFr2.9bn in 2011. It expects this trend of growth to continue in 2013.

Egypt

HSBC Bank Egypt

Last year marked a historic turning point for Egypt with the resignation of former president Hosni Mubarak in February bringing an end to 30 years of autocratic rule.

The political unrest that followed caused real gross domestic product (GDP) growth to contract from 5.1% in 2010 to just 1.8% in 2011. Furthermore, Egypt’s GDP recorded negative growth of 4.2% in the first quarter of 2011, a contraction not seen since the Central Bank of Egypt began publishing quarterly data in 2001.

Against this backdrop, during 2011, HSBC Bank Egypt’s net profits rose by 13% to E£1.1bn ($180.2m), its Tier 1 capital by 14% to E£3.2bn, its total deposits by 6%, and it expanded its market share for both imports and exports. These strong results reflect the quality of the bank’s corporate book and the strength of the franchise.

In such uncertain times, the bank also made the bold move of expanding its small and medium-sized enterprises (SME) proposition. It established two new teams to serve mid-sized companies in Upper Egypt that were not previously within the bank’s scope.

In the second quarter of 2011, HSBC Egypt launched its Receivables Finance programme in order to strengthen the working capital proposition offered by the bank. This includes the discounting of past due cheques and invoices, which facilitates the funding of mid-market clients based on the quality of their receivables, rather than on their overall balance sheet strength.

In October 2011, the bank also signed an agreement with the US Agency for International Development to provide up to $34m in local currency financing to the SME sector. The nine-year partnership programme aims to enhance the access of SMEs to capital, making borrowing easier. Constituting more than 90% of the business sector in Egypt, the growth of SMEs is one of the main pillars of the country’s economic reform.

“This year has continued to be successful for HSBC in Egypt,” says Andrew Long, chief executive of HSBC Bank Egypt. “The HSBC Group sees Egypt as one of its top 20 priority markets. We have been in Egypt for the past 30 years and we are constantly growing and expanding our business. We are looking to grow our business in the middle-market segment of SMEs and in wealth management for the upper end of the retail banking market.”

Ethiopia

Dashen Bank

Ethiopia’s banking sector remains one of the least developed in Africa and one of the few on the continent not to allow foreign ownership. Moreover, the state has a far reach, with the government-owned Commercial Bank of Ethiopia (CBE) easily being the biggest lender by assets.

Nonetheless, the private sector’s influence is rising, and it is to the financial industry’s benefit. Dashen Bank, the second largest lender in the country, has led the way. It is widely regarded as being the most technologically savvy Ethiopian bank, having been the first to introduce payment cards. And despite having a balance sheet one-fifth of the size of CBE’s, it has almost 50% more ATMs, with 105, which, while not many for a country of 85 million people, is still far more than any other lender.

Dashen has also been expanding its branch network. It opened eight new branches in the year to the end of June 2012, and intends to continue adding to its network of about 80 in 2013. “The plan for next year is very big,” says Berhanu Woldeselassie, Dashen Bank’s president.

Such expansion by Dashen and other banks will be necessary if Ethiopia is to reduce its unbanked population (only about 8 million Ethiopians are thought to have bank accounts). “The unbanked population is huge,” says Mr Woldeselassie. “The majority of people don’t get banking services, particularly in rural areas.”

Despite Ethiopia’s strong growth of 10%, its economy has been under strain with inflation proving stubbornly high and a shortage of foreign currency hampering matters further. Dashen also had a shake-up earlier this year when its long-standing president, Lulseged Teferi, was forced to retire in February.

Nonetheless, Mr Woldeselassie is confident the bank can continue growing its earnings in a similar manner to the past few years. Its net profits rose 45% to 654m birr ($36.01m) in the 12 months to the end of June this year.

Gambia

International Commercial Bank Gambia

Gambia may be a tiny west African country of 1.8 million people with a gross domestic product of $1.1bn, but it has 13 banks, making it a very competitive market.

International Commercial Bank Gambia (ICB Gambia) has been among the best performers in Gambia’s financial industry in recent times. Its numbers alone bear testament to this. It increased its net profits from 1.6m dalasis ($52,000) in 2010 to 8.7m dalasis in 2011. Its assets grew 25% to 592m dalasis in that period as it managed to boost its lending to businesses and consumers. This came about partly as a result of it creating a dedicated marketing unit and saw its loan book expand by 36% in 2011, compared with just 3% a year earlier. Its deposits, having risen by 10% in 2010, did so by a much more robust 33% in 2011. This enabled the bank to take a greater market share in both deposits and loans than had previously been the case.

One of ICB Gambia’s main moves recently was to become the first bank in Gambia to offer mortgages. Described by ICB Gambia as one of its “unique selling points”, it believes this is a big step in the development of the country’s financial sector.

Another success has been the slashing of non-performing loans (NPLs). ICB Gambia’s gross NPL ratio stood at 20% in early 2011. “It was not possible to boost the profit and profitability without making a dent in NPLs,” says Ravinder Parhar, the bank’s chief executive. “Hence the task of reduction in NPLs was taken up on a war footing.”

Thanks to closer monitoring of loans on a day-to-day basis and court cases, gross NPLs were cut to 11.5% at the end of 2011 and now stand at under 7%. Mr Parhar thinks they will fall to about 2% of total loans by the end of 2012.

Ghana

Barclays Bank of Ghana

In the middle of the previous decade, several Ghanaian banks – which at the time were going through a period of rapid expansion – let costs escalate more than they would have liked. Efficiency and reining in expenses became secondary to growing the balance sheet.

Barclays Bank Ghana, the winner of this year’s award, was one of those. In 2010 and 2011 it spent much of its time reversing this trend. Between 2008 and end of last year, it reduced its headcount from 2300 to less than 1300. Its branch network was cut from 80 to 60. “It was really about driving efficiency,” says Benjamin Dabrah, the bank’s managing director. “We wanted to make sure we were lean and mean.”

The results were impressive. Barclays Bank Ghana’s cost-to-income ratio was slashed from 81% in 2009 to 47% last year. Net profits in 2011, during which it made a high return on equity (ROE) of 26%, were 115m cedis ($69m), up 35% from the previous year. And the bank now has among the lowest funding costs in the Ghanaian financial sector.

The drive to make Barclays Bank Ghana more efficient has continued to pay dividends this year and has allowed it once again to prioritise revenue expansion. “This year has really been about top-line revenue growth,” says Mr Dabrah. “We set out to increase revenues by 30% in 2012, and we are on track to deliver that.”

He is similarly optimistic about 2013, believing that Ghana’s buoyant economy (gross domestic product is expected to climb 8.5% this year) will positively affect banking. “The operational environment is very robust,” he says. “We now have the confidence to begin to grow the balance sheet. We intend to continue doing that next year.”

As for profitability, Mr Dabrah thinks Barclays Bank Ghana has positioned itself in such a way that ROEs of between 25% and 30% will be sustainable for a while yet.

Guinea

Ecobank Guinea

Guinea has been a far from easy place in which to do business over the past few years. The west African country suffered a military coup in 2008 and has been volatile since – gunmen even attempted to assassinate the president in an attack on his compound in July last year.

The country has yet to complete a shift back to civilian rule, having delayed elections that initially were meant to be held in 2011. Until that happens, the EU, a big donor, has said it will not restart millions of dollars of frozen aid.

Given such conditions, Ecobank Guinea, winner of this year’s award, has performed impressively. It has managed to keep on expanding its balance sheet throughout the recent volatile period. Its assets rose 56% to $492m in 2011, while its Tier 1 capital was boosted by 160% to reach $15m. Even more significantly, its profits have increased in tandem. Net earnings for the bank were $10m in 2011, up from $5m a year earlier and equating to a return on equity of more than 40%.

Expenses and non-performing loans have also been addressed. The bank’s cost-to-income ratio was a low 48% in 2011, having been 66% two years before. And bad loans were cut substantially from almost 10% of the lender’s book in 2009 to less than 2% in 2011.

Ecobank Guinea, a subsidiary of the eponymous Togo-based lender, was even able to pay out a dividend of GFr64bn ($8.8m) in 2011.

This success has been a result of the bank continuing to lend, despite the political volatility. Its disbursement of loans to small businesses went up from GFr163bn in 2010 to GFr280bn a year later.

It has also been able to grow its customer base, from 90,150 people in 2010 to 102,000 in 2011. Ecobank Guinea’s attraction to the local population is down to it being present in more towns than any other local bank and having more ATMs than its rivals. Moreover, its remittances services have been developed significantly in the past year.

Kenya

Equity Bank

Equity Bank has, for the past few years, been a pioneer. More than any other bank in east Africa, and perhaps more widely, it has gone about targeting the masses. It now has almost 8 million customers in Kenya, a bigger number than any other lender in the region.

It has not done this, however, simply by building its branch network, which tends to be a very expensive exercise. Instead, it has made good use of technology and alternative delivery channels, chiefly mobile and agency banking. Its account holders can now carry out almost all of their banking needs – including depositing money, withdrawing cash, paying utility bills, applying for loans and even participating in initial public offerings – via their mobiles or agents used across the country, be they corner shops or petrol stations.

The advantage to Equity Bank is the cost. It is far cheaper to bring into the banking system people, often very poor, who live in rural areas this way than via full-service branch networks – which, however extensive, are never going to be within easy reach for all Kenyans.

Equity Bank’s results make clear that such ‘bottom of the pyramid’ banking can be profitable. In 2011, it made net earnings of Ks10.3bn ($118m), up 45% from 2010 and amounting to a hefty return on equity of 34%.

The bank has grown quickly in the past few years and now ranks as the second biggest in Kenya by assets and Tier 1 capital, according to The Banker Database. Its balance sheet grew 37% to Ks196bn in 2011. But it has so far managed this growth carefully, with its cost-to-income ratio a fairly low 50% in 2011 and a non-performing loans ratio of less than 3%.

This solid platform and Kenya’s still-large unbanked population of about 50% give it plenty of scope to continue its rise in the coming years.

Lesotho

Standard Bank Lesotho

Banks in Lesotho, a small enclave in South Africa, have long been highly profitable, some of them managing to make returns on equity (ROEs) of more than 40% in recent years. But attempts by the government and monetary authorities to rejuvenate the economy, not least a reduction in interest rates to all-time lows, have put pressure on lenders’ interest revenues, from which they derive the bulk of their earnings.

“The main challenges faced by the bank in the past year revolved around the tough operating environment, where interest rates were reduced to lower levels, as monetary authorities took such decisions with a view to boost general economic activity,” says Mpho Vumbukani, chief executive of Standard Bank Lesotho, winner of this year’s award for the country.

Nonetheless, Standard Lesotho has managed to retain high profits. Its net profits rose 17% in 2011, a year in which it recorded an ROE of 45%. Expenses were also kept firmly under control, with the cost-to-income ratio falling from 49% in 2010 to 46% a year later. High levels of capital were also maintained, with the Tier 1 capital ratio increasing 18% in 2011, while assets grew by a smaller amount, 7%.

To boost non-interest revenues, Standard Lesotho has made a push to increase cross-selling and yield better returns from customers, as well as making an attempt to cultivate stronger loyalty among them. And in a bid to keep up the growth in its loan book, in May this year the bank launched QuickLoan, a product designed for small and medium-sized enterprises. It is now offering loans from as little as 5000 maloti ($565) to 150,000 to businesses looking to grow.

Mr Vumbukani is confident such measures will ensure that Standard Lesotho retains its place as the biggest lender in the country by both assets and earnings.

Liberia

Ecobank Liberia

The past two years have been good for Ecobank Liberia. Having only just broken even in 2010, the lender made a net profit of $1.2m in 2011. This was still far below the net earnings it made in 2009 – just before Liberia’s economy slowed – of $5.3m, equating to a big return on equity of 35%. But it is confident that such profit levels can be attained again over the coming few years.

It has laid itself a strong foundation to achieve that. Not only are profits growing, but its efforts to boost its market share are starting to yield results. The bank, which has 42% of deposits in the country and 43% of banking assets, has managed this partly by introducing new services. One of these was mobile money, which did not previously exist in Liberia. “This has made money transfers easier for everybody, especially those in locations without banking facilities, and has enhanced financial inclusion,” says Kola Adeleke, Ecobank Liberia’s managing director.

Upgrades to its IT platform were a big part of the reason, adds Mr Adeleke, that Ecobank Liberia was able to increase its number of customers from 143,000 in June 2011 to about 200,000 by June this year. “As a result of the customer market share gains, we were able to serve more households and small businesses,” he says.

Another step taken by the bank has been its development of a value chain business support unit. Through this, Ecobank Liberia targets small businesses that work with its bigger corporate clients. It recently provided eight loans of about $1m each to firms that distribute the petroleum products of oil group Total in Liberia. This enabled the trucking companies to import new vehicles.

“This initiative has resulted in steep growth in our financing of small businesses and also ensured that we insulate the bank from the risk of doing business with small firms by creating the chain between the client, its suppliers, contractors and distributors,” says Mr Adeleke.

Malawi

Standard Bank Malawi

Malawi has experienced a torrid past two and a half years. A dire shortage of foreign currency – resulting from falling exports of tobacco and donors cutting aid in response to governance concerns – led to food and fuel shortages, as well as riots. A new president, Joyce Banda, came to power following the sudden death from a heart attack of the increasingly unpopular Bingu wa Mutharika in April this year.

One of the new government’s first moves was to end the kwacha’s peg to the dollar, which had left it severely overvalued. This resulted in the currency falling from 160 to the dollar to 270 within eight weeks. Despite donors unfreezing aid, the slide has continued, with the kwacha valued at 312 to the dollar by mid-November.

“[This year has been] a tough year for Malawi as a whole,” says Charles Mudiwa, chief executive of Standard Bank Malawi, winner of this year’s award. “The country faced a devaluation of about 75% during the first eight months of 2012 and this, coupled with rising inflation of up to 28.3%, made the cost of living and doing business in Malawi extremely high.”

Nonetheless, Standard Bank has performed strongly in spite these conditions. Perhaps its main achievement was to overtake its main rival, National Bank of Malawi, to become the most profitable lender in the country in 2011. In that year, it made a pre-tax profit of $34m and a return on equity of almost 30%. Its cost-to-income ratio, having been 58% in 2010, fell to 43%, testifying to its greater efficiency.

The bank’s success in the past two years has partly been down to the strength of its corporate banking arm. Through that, it has worked with the government as the leading financier of its maize and fertiliser subsidy programmes and has also, by boosting its investment banking capabilities, been a key player in facilitating Chinese investments in Malawi.

Mauritius

Mauritius Commercial Bank

Mauritius is particularly vulnerable to a slowdown in Europe, given its reliance on exports to the continent and tourist arrivals from the region. Mauritian banks have already started to feel the effects this is having on their own economy.

“[Mauritius Commercial Bank] was confronted by heightened competitive pressures and testing economic conditions [in the past year],” says Antony Withers, chief executive of the bank, which has won this year’s award. “Specifically, while remaining generally resilient, its revenue-generating ability was affected by restrained expansion of the Mauritian economy in the face of the global slowdown in economic growth and subdued private investment.”

Nonetheless, MCB has performed well in the face of such tough conditions. Net profits fell to MRs4.1bn ($127m) in the year to the end of June 2012, compared with a net profit of MRs4.5bn in the previous year. But net interest income rose 8.5% to MRs6.4bn, a testament to the bank’s ability to maintain robust growth of its loan book. “MCB posted a satisfactory financial performance, following headway made in terms of market diversification and increased organisational effectiveness, supported by enhanced capacity at various levels,” says Mr Withers.

As a result, MCB, the biggest bank in Mauritius by assets, has been able to increase its market share in critical areas. Its market share of credit to the economy in March this year stood at 43%, which was higher than it was at the beginning of 2011. Its market share of local currency deposits has also increased in that time, to 41%.

Moreover, the bank has made a lot of progress in achieving its goal of becoming a prominent regional entity. Its subsidiaries in countries such as Mozambique, Madagascar and the Seychelles have been growing. As such, the share of foreign-sourced income to MCB stood at a hefty 43% in the 12 months to the end of June this year.

Morocco

Attijariwafa Bank

The Arab Spring protests wrought considerable political upheaval in Morocco in 2011, prompting the introduction of a new constitution in July and parliamentary elections in November 2011.
Against this backdrop, Attijariwafa Bank recorded impressive growth across all key financial indicators, demonstrating its resilience and strong fundamentals in a challenging environment. Its net profits rose by 11.8% to Dh5.3bn ($610.5m), largely on the back of strong growth in loans, while its assets grew 12% to Dh343.45bn and Tier 1 capital rose by 11.5% to Dh21.92bn.

Attijariwafa’s net operating income rose 8.3% to Dh15.9bn and outperformed the banking sector in terms of both deposit and loan growth. The bank also recorded a 38.5% fall in the cost of risk as a result of a 0.4% reduction in its non-performing loans ratio from 5.3% to 4.9%.

Financials aside, Attijariwafa is also far ahead of its domestic competition when it comes to strategy and implementation of new initiatives. During 2011, the bank continued to reach out to its small and medium-sized enterprise (SME) customers through the launch of its Pacte Rasmali offering. The recipients of which receive: a deferred debit card, a multi-line insurance covering the business activity, as well as leasing products.

Attijariwafa also made impressive strides in the field of innovation. It has pioneered a new product called Hissab Bikhir, which is dedicated to providing financing to low-earning and unbanked Moroccans. It also launched Dar Assafaa, which targets both individuals and corporate entities wishing to finance their real estate projects and acquire consumer goods through the use of alternative products. Meanwhile, in December 2011 it launched its investment banking platform,

Attijariwafa Bank Middle East Limited, in the Dubai International Financial Centre in the United Arab Emirates.

With a roughly 40% market share, Attijariwafa remains the largest bank in Morocco and still generates the majority of its revenues from its home market, but it has also been using income from domestic operations to expand in the rest of Africa over the past decade. It plans to increase its presence in the continent from 12 to 20 countries by 2015. Attijariwafa’s international presence now spans 23 countries worldwide.

Mozambique

Millennium BIM

Life has been good for Mozambican banks in the past few years. The country’s economy, which has been boosted recently by the start of coal exports and the discovery of huge offshore natural gas fields, is rising rapidly, albeit from a low base. Gross domestic product has been expanding at well over 6% each year since 2007, and few economists expect a slowdown any time soon.

It is because of this environment that Mozambique’s banks are among the most profitable in the world, let alone Africa. Millennium BIM, the biggest lender in the southern African country by assets, has been able to exploit the conditions in an impressive manner. Its net profits climbed by 52% in 2011 to reach 3.4bn meticais ($127m). This equated to a record-high return on equity for the bank of 39%. Results this year look set to be similarly impressive, based on half-year numbers.

But Millennium BIM has not just focused on revenues. Cutting expenses and boosting productivity have also been a priority. As such, the bank’s cost-to-income ratio has decreased significantly in recent years. Having been an already low 46% in 2009, it was 39% in 2011. Non-performing loans have also been kept under control and comprised less than 2% of the total credit portfolio at the end of last year.

A key area for Millennium BIM has been its delivery channels. To make life easier for its retail customers, it recently launched a mobile banking service that about 10% of its 1.1 million account holders have so far taken up, making more than 700,000 transactions each month.

Mobile banking should help to reduce Mozambique’s vast unbanked population. Given the large land area of the country and its poor transport links, banks do not have a wide physical presence. But mobile banking offers a way of reaching people living in rural areas without having to build expensive branch networks, as Millennium BIM has found out since it introduced such a product.

Namibia

First National Bank of Namibia

First National Bank of Namibia, the biggest bank by assets in the southern African country and the largest company on the local stock exchange, has long been the dominant player in the retail market. But much of its focus in the past 18 months has been on boosting its business banking unit. As such, it has made a push to build relationships with both small enterprises and multinational firms.

One of the main parts of this strategy was the opening of an office of Rand Merchant Bank (which, like FNB Namibia, is a subsidiary of South African lender FirstRand) in the country. Rand Merchant Bank, the investment banking arm of FirstRand, has been particularly helpful in FNB’s attempts to win business from larger entities in Namibia, by providing them a more diverse and sophisticated range of services.

Moreover, the fixed-income arm of Rand Merchant Bank has already started to boost revenues with its strong performance in trading local debt instruments. In time, the bank foresees opportunities originating local bonds.

Despite the build up of its corporate banking presence, FNB Namibia has not neglected its retail arm. It has also worked hard to gain more clients in this area. Most of its attention has been turned to developing low-cost, simple products. Some have targeted Namibia’s unbanked population. One of these, mobile phone banking, which no other lender in the country offers, has been growing very rapidly, with both customer numbers and value of transactions rising.

Next year the focus will be much the same. “While we continue to introduce innovative services to the retail sector, FNB Namibia will step up its strategy to improve our service delivery to the business community,” says Ian Leyenaar, the bank’s chief executive. “[In the past year] we continued to show a good return to our shareholders, largely because our strategic plan is kept current and is supported by the whole business.”

Niger

Ecobank Niger

Running a bank in Niger, a vast but sparsely populated country mostly covered by the Sahara desert, is no easy task. Niger’s 16 million people are among the world’s poorest, the country coming second to last in the United Nations’ latest human development index. Its economy is volatile, with growth patterns depending to a large extent on how rainfall affects agricultural output.

But Ecobank Niger, the fourth largest bank by assets in a country dominated by five lenders, has managed to run its business very profitably in the past few years. Its assets grew by a fairly small 3% in 2011 to CFA Fr119bn ($231m), but its net profits rose 39% to CFA Fr2.5bn. This amounted to a high return on equity (ROE) of 29%.

The bank has also kept a close eye on efficiency. Its cost-to-income ratio fell from 62% in 2010 to 57% a year later. Non-performing loans are still large, having made up between 11% and 12% of the total lending book between 2009 and 2011. But the bank is confident they can be reduced.

Ecobank has made a lot of effort in the past 18 months building up its customer base by growing its branch and ATM network. “We have achieved strong growth in assets over the past two years through deposit mobilisation via our growing network of branches,” says Ibrahim Bagarama, head of Ecobank Niger. “Despite challenging market conditions, we’ve increased profitability and dividend payouts.

“We focused on cost discipline while increasing revenues to better drive efficiency and shareholder returns. In this regard we were able to improve our efficiency ratio and improve our ROE.”

Another priority for Ecobank Niger has been developing its small business arm. Having traditionally focused on larger corporate clients in the country, it wants to broaden it reach. As such, it has partnered with the United States Agency for International Development, which has close ties to such firms, to help ensure it can make a success of it.
“Ecobank’s objective is to be one of the top banks servicing the retail segment and [small businesses] in Niger,” says Mr Bagarama.

Nigeria

First Bank of Nigeria

First Bank of Nigeria has long prided itself on being the biggest lender in the country by assets. “Size matters,” says Bisi Onasanya, the bank’s chief executive.

In the past few years, First Bank has managed to consolidate this position. Its balance sheet, which at the end of September this year stood just shy of $20bn, grew 23% in 2011. Its net profits rose a particularly impressive 95% to N66bn ($410m). This year looks even better, based on interim results.

But First Bank has also begun to focus more on costs and efficiency in the past two years. Plenty of emphasis has been placed on cross-selling to generate non-interest revenues, which grew 36% in 2011 to N75bn. During the same year, it halved its average cost of funds from 3.2% to 1.6% by attracting more low-cost deposits. And while it has continued to build its already large network of branches, its recent focus has been on mini-branches, which are cheaper than full-service ones. The results so far have been good, with First Bank seeing its cost-to-income ratio fall from 67% in 2010 to 57% last year.

This will give the lender a solid platform as it attempts to reach a return on equity (ROE) target of 25%. It will probably come close to achieving that in 2012, which would mark an improvement from a 10% ROE in 2010 and one of 18% in 2011.

Next year, it will try especially hard to win greater market share from retail and small business customers. “We plan to grow in priority segments, especially the retail and emerging corporates,” says Mr Onasanya. “We also intend to continue strengthening our service proposition, including through optimising our distribution mix. [Leaner branches] along with our traditional brick-and-mortar branches and the ATMs will sit at the heart of our plan to optimally reach every bankable Nigerian where he or she needs financial services.”

Rwanda

Bank of Kigali

Bank of Kigali (BK) has long been the dominant player in Rwanda’s financial sector. Based on 2011 results, it holds 32% of the east African country’s banking assets and 28% of deposits.

But this clear lead has not seen the bank become complacent. If anything, it has managed to extend the gap between itself and the other eight commercial lenders in Rwanda over the past two years.

Last year, BK, which saw its profits rise 41% to RwFr8.7bn ($14m), became the first bank to list on the Rwanda Stock Exchange, selling 45% of its shares for $65m. It is already reaping the benefits of the move, which made it the best capitalised bank in the country and allowed it to extend to its clients bigger credit lines than was the case before. In one example, BK is currently the lead arranger for a syndicated loan involving local and regional banks that will help fund a big cement plant and wean Rwanda off costly imports of the building material.

In the past 18 months, BK has made an aggressive push to take on more retail clients. Not only has it built its branch network – today it has about 60 outlets, having had less than 20 in 2009 – but it also developed its mobile banking business to try and reach the 70% or so of Rwandans that are unbanked.

It expects to carry on building branches in 2013. It believes that having the largest network in the country and moving into areas that no other banks have entered gives it a crucial advantage. “When we are the first to build a branch in a rural area, we essentially [make it very difficult] for the next guy who comes along,” Lado Gurgenidze, BK’s chairman, said at a recent conference in London.

He added that BK might eventually float all its shares. If so, the Rwandan economy will likely benefit as a consequence of the lender being able to take on even bigger business than it can today.

Senegal

UBA Senegal

UBA Senegal, a subsidiary of Nigeria’s United Bank for Africa, only started operating in the French-speaking west African country in May 2009. In that year and the following one it made losses. But 2011 marked the year that it became profitable for the first time, making net earnings of CFA Fr1.4bn ($2.74m), with a return on equity of 23%.

It also drastically reduced its operating costs in 2011, bringing its cost-to-income ratio down to 77%.

Given its profitability, more normal cost base and low non-performing loans ratio (which stood at less than 1% at the end of 2011), UBA is well-positioned for the future. While it is today about the 10th largest lender in Senegal by assets, its intention is to be in the top five by 2015. Its asset growth is propelling it towards that target quickly. In 2011, the bank’s balance sheet expanded by 87% to CFA Fr85bn, making it the fastest rising lender in the country by this measure.

UBA Senegal believes its future expansion will hinge on its lending to businesses and consumers in the country. As such, it has spent much of the past 18 months identifying the key sectors of Senegal’s economy and creating teams to target those with offers of products.

When it comes to the retail banking arm, one of UBA’s main initiatives has been to introduce UBA Africard, a reloadable cash card. Users do not have to have bank accounts, which makes sense given Senegal’s large unbanked population. But UBA believes that by offering people this product, it will draw them eventually in to the formal banking sector.

UBA also realises that a wide physical presence across the country will be vital if it is to break in to the top tier of Senegal’s banking sector. At the moment it has nine branches, but it has partnerships with sub-agents that give it an indirect presence in almost 150 sites. It will in time, however, look to expand its network of full-service branches.

Sierra Leone

International Commercial Bank

Sierra Leone is hardly an easy place to run a bank. The west African country, which only came out of a devastating civil war a decade ago, remains impoverished – its gross domestic product is just $2.2bn – and has a severe infrastructure deficit. Added to that, its banking sector is highly competitive – 13 lenders operate there, with many of them struggling to make a profit.

International Commercial Bank has been one of the most successful in recent years, managing to grow rapidly while at the same time reining in costs and maintaining high capital ratios. Its net profits rose 115% to 2.3bn leone ($524,000) in 2011.

Its return on equity (ROE) increased from 5.4% in 2010 to 9.1% in 2011. This year looks even better, with ROE rising to 16% in the first six months. “Highly improved customer service was the major contributor to such a success,” says Viswanathan Sundaram, ICB’s chief executive. “We strongly believe that if, and only if, the customer is happy and satisfied, can any success be achieved in any service industry.”

ICB has controlled its expenses impressively recently, with its cost-to-income ratio falling from 65% in 2010 to 47% last year. And its non-performing loans ratio has dropped to almost zero, having been close to 10% in 2009.

Sierra Leone’s economy is expected to grow a huge 30% this year, thanks to iron ore exports taking off. While local banks are too small to benefit directly from doing business with mining companies, Mr Sundaram believes the rest of the economy is also buoyant. “Services may continue to see healthy growth, mainly as a result of reconstruction efforts to improve roads, power, water supply and sanitation, while growth in telecommunications is expected to continue its upward trend,” he says. “We see opportunities in all these sectors.”

South Africa

African Bank Investments

Not many banks would be satisfied with a non-performing loan (NPL) ratio of 30%. But African Bank Investments (Abil) is far from your typical lender. It provides unsecured loans to people who have typically been too poor to access mortgages and other collateralised debt from the four banks that dominate such lending in South Africa – Standard Bank, FirstRand, Absa and Nedbank.

“There is a dichotomy in South Africa,” says Leon Kirkinis, Abil’s chief executive. “You’ve got a very well-developed financial sector that serves the needs of a minority of the population. Then you’ve got another sector, which we’ve been involved in pioneering, that provides credit to the majority of the population.”

Abil’s rise has been rapid. Despite only existing in its current form for about 15 years, it now has a balance sheet of more than $6bn, making it one of Africa’s biggest banks. Its profits rose 22% to R2.4bn ($295m) in 2011, while it made hefty returns on assets of 5% or more between 2009 and 2011.

Much of its success is down to it being highly capitalised and having good risk management. Thanks to the latter and to a large collections team, it recovers the bulk of NPLs (which are classified as loans for which there have been three missed payments). As such, its delinquent loans ratio is a far smaller 10%.

Another of Abil’s strengths is its unique funding strategy. Instead of taking deposits, it finances itself almost entirely with long-term bonds. “Our wholesale funding is structured on the basis that the duration of our liabilities exceeds that of our assets,” says Mr Kirkinis. “We do this to enable the business to operate in all cycles, so that it’s robust and non-volatile.”
It is this solid foundation that Mr Kirkinis believes will ensure Abil comes through any near-term problems in South Africa’s unsecured market, which some analysts have said needs to slow down.

Swaziland

First National Bank of Swaziland

The rapid economic growth experienced by much of sub-Saharan Africa in recent years has passed Swaziland by. The landlocked, impoverished southern African kingdom of just 1.4 million people has been suffering from a severe financial and fiscal crisis in the past 18 months. The government has built up plenty of arrears to the private sector, which has forced some small businesses to cut their operations, while dissent on the streets against the monarchy has been rising. The International Monetary Fund expects real gross domestic product to fall 1.5% this year.

Local banks have been among the businesses in the country affected. “Trading conditions in Swaziland have not been easy over the past 18 months,” says David Wright, chief executive of First National Bank of Swaziland, a subsidiary of South Africa’s First­Rand and winner of this year’s award.

Despite such a tough environment, FNB Swaziland has performed strongly. Its net profits increased 12% to 82m emalangeni ($9.2m) in 2011. A high capital ratio was also maintained, with the bank’s Tier 1 ratio rising 17% during the year, even though assets did so by just 3%.

A focus on maintaining liquidity meant that in 2011 the bank did not pay a dividend. Yet it has agreed to pay one again this year, when it expects its return on equity to be a hefty 24% or 25%.

FNB Swaziland has managed this largely by concentrating on boosting non-interest revenues. This saw it become the first bank in the country to offer mobile phone banking (less than 18 months after being launched it already makes up for 17% of the bank’s transactions) and a digital wallet product that enables people without an account to transfer funds. “As a result of the tough conditions, FNB Swaziland has had to provide the market with innovative solutions to traditional banking needs,” says Mr Wright. “Our strength has been our innovative electronic solutions.”

Tanzania

Barclays Tanzania

Tanzania’s banking sector remains far smaller than that of Kenya, its northern neighbour. But it is catching up as the private sector in the east African country rises and amid rapid economic growth.

Barclays Tanzania may not be as big as lenders such as National Microfinance Bank and CRDB Bank, the biggest two in the country by assets, but it has proved itself nimble in the past two years, a period in which it has both increased its balance sheet substantially and made itself profitable again. Following two years of losses, Barclays Tanzania made a net profit of TSh170m ($105,000) in 2011. While small and amounting to a return on equity (ROE) of less than 1%, it places the bank in a good position for the next few years. Among its targets is to achieve an ROE of 13% in 2013.

Barclays Tanzania has done much to boost its revenues and customer base, which will be necessary for it to achieve its ROE targets. It recently became the first Tanzanian lender to offer free use of ATMs to its account holders and in February introduced free internet banking. It has also boosted its corporate banking fee income and increased its lending to small and medium-sized businesses from TSh7bn in 2010 to TSh40bn by the middle of this year.

It has improved its IT systems too, in a bid to boost efficiency and cut costs. Part of its attempt to control costs has involved reducing its branch network this year. “Branch rationalisation will strip out up to 10% of current annualised costs going forward, while improving efficiency and productivity,” says Kihara Maina, Barclays Tanzania’s managing director.
The problem of bad loans, which afflicts most banks in Tanzania, has also started to be addressed. Barclays Tanzania’s non-performing loans ratio fell from 25% to 12% between 2010 and 2011.

Togo

Ecobank Togo

Ecobank Togo, the oldest bank within the eponymous pan-African group, has made good strides in the past 18 months.
It grew its assets 25% to $499m in 2011, while its net profits, having dipped in 2010, increased 51% last year to $10.6m, equating to a high return on equity of 36%. This was largely down to the bank increasing its lending to small and medium-sized enterprises (SMEs) and larger businesses. Its loan book expanded from CFA Fr94bn ($182m) in 2010 to CFA Fr125bn at the end of last year.

“This increase in the volume of credit distributed contributed to [a rise] in revenues of 30% [during the year],” says Didier Correa, managing director of Ecobank Togo.

It also enabled the lender to pay out a much higher dividend than it did in 2010.

The bank improved by other measures, too. Its cost-to-income ratio was 60% in 2011, having fallen from 67% in 2009. Management is confident that it can be reduced further in the coming few years.

One of the lender’s main initiatives recently has been to develop its value chain financing arm. This has seen it boost its lending to distributors and other SMEs that are sub-contracted or do work for the bank’s biggest clients.

Significantly, Ecobank Togo also opened a new branch, its 23rd, in the town of Atakpamé in August. The bank, having expanded its network rapidly up to 2008, then stopped. But it felt a resumption of its expansion was necessary to reach new customers in a country where only about 3% of people are believed to be banked.

“This is a strong signal of our commitment to increase the size of our network to be closer to the population,” said Mr Correa at the opening of the branch.

Tunisia

Banque de Tunisie

While Tunisia experienced the shortest-lived uprising of all the Arab Spring countries in 2011, the political upheaval that followed created a difficult economic climate. With former president Zine El Abidine fleeing the country after a 23-year autocratic rule, the subsequent instability in the country led Tunisia’s real gross domestic product to contract by 1.8% during 2011 while unemployment soared to 19%.

In the face of these challenges, Banque de Tunisie – the country’s oldest bank, established in 1884 – continued to record growth across all key financial indicators. During 2011, total assets grew by 7.82% to TD3.4m ($2.14m), net profits by 3.53% to TD57,666 and Tier 1 capital by 6.36% to TD471,193. It is the fourth largest commercial lender in Tunisia by Tier 1 capital.

In spite of the difficult operating environment, Banque de Tunisie’s cost-to-income ratio remained at a low 30.06%, while non-performing loans comprised a fairly small 5.08% of its total portfolio. Its net banking income structure has remained relatively stable. Interest margin represents an average 61.3% of net banking income, while commission income stands at 21.7%.

“Going forward, we see growing the retail activity of the bank as a key opportunity as we are forecasting a significant evolution in the country’s development and the growth of incomes. Therefore, we are looking to introduce new savings and insurance products, as well as credit cards,” says Mohamed Habib Ben Saad, the bank’s chief executive

In this way, Banque de Tunisie aims to increase its market share of deposits and loans. It believes it will be able to entice customers by having one of the best technology platforms across Tunisia’s banking sector. In line with boosting its retail activity, the bank is looking to develop its network by opening eight to 10 new branches in the coming years.

“In 2013, we want to continue our efforts to strengthen the funding and equity profile of the bank, as well as preserve our policy of risk control and continue to monitor risks – specifically relating to the interest rate, credit and liquidity,” says Mr Habib Ben Saad.

Zambia

Barclays Bank Zambia

Despite Zambia’s robust economic growth of 7% or more in the past few years, its banks have had a challenging time. Not only has competition increased with the entry of new banks, but the global economic slowdown has put pressure on exporters, while regulatory changes have led to higher capital requirements.

Barclays Bank Zambia, winner of this year’s award, has been cautious as a result. To avoid any spike in non-performing loans (NPLs), it cut back its disbursement of credit to certain sectors, including mining. It also tried to reduce expenses, something which led to its cost-to-income ratio falling from 74% in 2010 to 67% last year.

Better risk management and a greater effort on the part of its retail collections unit, meanwhile, have seen its NPL ratio fall. Having been as high as 17% in 2010, it was slashed to 8% last year.

Thanks to such measures, Barclays made a hefty return on equity of 35% in 2011, despite its assets rising just 7% to $900m.

Yet despite its focus on costs and reining in bad loans, the bank has continued to try and gain more market share, in both retail and corporate banking. With regards to the former, Barclays has launched several products in the past 18 months, including mobile banking and a service for high-net-worth individuals.

“We intensified our rollout of more customer-friendly, efficient and cost-effective digital channels that have radically enhanced the banking landscape,” says Saviour Chibiya, the bank’s managing director. “Simplified banking and our investment in new products and digital channels will position us well with the emerging middle class in the country while channels such as mobile banking are proving to be a very cost-effective way to increase financial inclusion for Zambia’s large unbanked population.”

Zimbabwe

Standard Chartered Zimbabwe

Zimbabwe is once again facing economic hardships. After nearly a decade of decline following president Robert Mugabe’s land expropriations in 2000, its prospects looked brighter with three years of robust growth between 2009 and 2011. Gross domestic product expanded by about 9.5% in each of the latter two years.

But the government, having initially expected similar growth this year, recently had to revise its forecast to 4%, thanks to a poor harvest and continuing political wrangling putting off investment. An auction of treasury bills failed for the third time in quick succession in early November, with local banks wary of funding a highly indebted government still far from clearing its arrears with external lenders.

“Economic recovery has been slower than anticipated due to tight liquidity and inconclusive debate on key national policy issues,” says Ralph Watungwa, head of Standard Chartered Zimbabwe, winner of this year’s award. “Although deposits grew, they remained largely transitory in nature, thereby limiting our ability to extend longer term financing.”

Nonetheless, Standard Chartered Zimbabwe has made the best of the tough conditions, managing to grow while at the same time maintaining plenty of liquidity, a necessity given the lack of an interbank market or lender of last resort in the country (like the government, the central bank is cash-strapped). To boost revenues, it has developed its distribution channels in the past year, which have included the introduction of mobile banking. It has also boosted its presence in agriculture through the arrangement of offshore credit lines.

Such measures saw its net profits rise from $8.4m in 2010 to $22m in 2011. The bank’s cost-to-income ratio fell from 72% to 59% in that time.

This, along with a non-performing loans ratio of less than 2% and a core Tier 1 ratio of 17%, will stand Standard Chartered Zimbabwe in good stead should there be any economic pick-up in the near term. “We are well positioned to take advantage of market opportunities as they present themselves,” says Mr Watungwa.