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Profits take a hit at African banks

Eight out of the nine African countries represented within the Top 1000 World Banks ranking saw aggregate pre-tax profits decrease year on year.
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Africa, which had been enjoying steady, if slow, growth in the pre-tax profits earned by its banks, has seen profits fall by 35% year-on-year to $14.7bn, the lowest total since 2012, according to The Banker’s 2021 Top 1000 World Banks ranking.

Eight out of the nine African countries represented within the Top 1000 saw aggregate pre-tax profits decrease year-on-year. This includes South Africa, the region’s largest banking economy, where aggregate pre-tax profits fell by 56.1% in 2020 to just $4.4bn – its lowest total since 2004.

The one exception is Egypt, which saw a 3.2% increase in pre-tax profits. Though this is significantly down on the 55.9% aggregate increase seen in 2020’s ranking, it remains a positive outcome under current circumstances. Egypt has also maintained its strong growth in Tier 1 capital, increasing by 31.5% year on year. As a whole, the region has been able to maintain its steady growth, with aggregate Tier 1 capital increasing by 7.4%.

Egyptian lenders continue to account for the bulk of Tier 1 capital growth across the continent. All seven Egyptian banks in this year’s Top 1000 registered an improvement in their Tier 1 capital base, and all improved their positions in the overall rankings.

While South African lenders continue to dominate the top African positions in The Banker’s Top 1000 World Banks ranking, domestic economic pressures, combined with the worst outbreak of Covid-19 on the continent, have hit the country’s lenders hard. After posting gains across the board in 2019, just three of the country’s seven lenders in this year’s rankings saw an increase in their Tier 1 capital position over the course of 2020, as higher impairments took their toll on balance sheets.

Lenders in Nigeria suffered a similar fate, as the continent’s largest economy briefly entered recession in late 2020, ahead of a recovery in oil revenues towards the end of that year. Zenith Bank, the country’s largest lender, exits the continent’s top 10 for the first time, following a 5.4% decrease in its Tier 1 capital base. First Bank of Nigeria, the country’s fifth largest lender, was the only one of six Nigerian banks in this year’s Top 1000 to improve its Tier 1 capital position.

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