Trading revenues at African banks outstrip the rest of the world as a proportion of total income, but North America remains the leader in fee and commission income.
The flow monsters of securities trading may be in the US, but African banks generate a higher proportion of their revenues from trading activities, including foreign exchange. Net trading income constituted more than 8% of total income for African banks in 2011, compared with 7.1% for North America, 5.6% for western Europe, and just 3.7% in Asia-Pacific.
North America remains the dominant market for fee and commission income, which accounts for almost 31% of total income. But Africa is a close second, at 27.8%. The strength of non-interest income in Africa may not be an entirely positive story, however. It could reflect a shortage of lending opportunities, with the balance sheet instead put to work trading government securities in particular. The Middle East is the lowest fee and commission earner, at just 19.5% of the total, while the greatest dependence on interest income is in central and eastern Europe – at 71.5%
In terms of costs, it is no surprise to find that western Europe, the epicentre of the sovereign crisis, has the highest impairment costs, at 27% of gross income. By contrast, central and eastern Europe, central and South America and the Middle East all have impairment costs fully 10 percentage points lower. Asia-Pacific has the lowest impairment costs, at just 10.2% of gross total income, and in a demonstration of the speed with which it has recovered from the 2008 subprime crisis, impairment costs in the US are only 10.22% of the total.
In fact, European banks suffer from a high cost base across all categories, with staff costs running at 34.9% of gross total income, and administration at 29.7%. However, North America is close behind, at about 33% of income each for staff and administration costs.
