South Africa keeps African banking's top spots

South African banks still dominate their continental peers, according to The Banker’s latest Africa ranking. This year’s ranking, which places lenders based on their Tier 1 capital, contains 300 institutions, the most yet.

The five biggest banks on the continent are all from South Africa, while six of the 10 with the highest profits are too. The other four most profitable institutions are from Morocco, with two, Algeria and Nigeria.

Yet other countries are catching up, even if they still have a long way to go. South African banks had $518bn of assets at the end of 2011, according to the rankings, while those from Egypt – home of the next largest banking sector in Africa – had just $169bn.

Small but strong

Another country closing in on the top spots is Angola. The country’s banks have grown spectacularly in the past decade and are also highly profitable. Between them, they made pre-tax profits of $1.4bn in 2011, which was far more than the $500m made by banks in Nigeria, despite the latter having a banking industry more than double the size of Angola’s in terms of assets.

Kenya’s lenders were also very profitable. The 24 of them in the top 300 made huge aggregate returns on assets of 4.38% compared with 1.8% for South Africa. Ethiopia’s banks also made profits equivalent to 4% of their assets.

Nigeria’s banks continued to suffer in 2011 from the country’s banking crisis of 2009. This was reflected by several of the biggest ones being in the red, including Union Bank, which lost $773m before tax, more than any other lender in Africa. Next year’s rankings should look better for Nigeria’s banks, however, as they have now seemingly completed their clean-up following the crisis and most had a profitable first nine months of 2012.

Another country that should do well next year is Mozambique, which has one of the most underdeveloped banking sectors in Africa, with a large unbanked population, but its lenders are growing rapidly. The biggest of those, Millennium Bank, saw its balance sheet expand by 33% in 2011 and its pre-tax profits by 80%.

Banks from Côte d'Ivoire will also likely continue their revival following the country’s brush with civil war. This caused asset growth among them to be subdued in 2011. But with the economy recovering quickly and rising by more than 8% in 2012, expect the banks to be among the companies to benefit the most.