BANKS Please enjoy our ranking and analysis from our 2018 edition Contents of Africa’s top 200 banks. For this year’s edition, please visit 02 Editorial Use tech to check your newsagent and ask for 03 Overview the October-December TAR109 Opportunity knocks again edition of The Africa Report, 07 Rankings or subscribe online to get it first! Our exclusive compilation 13 Nigeria A fragile recovery 15 Kenya New challenges on the horizon 17 South Africa Start-up shake-up 2018 19 Egypt Resilient and responsive REVIEW 21 Ethiopia Opening up: how far and how fast? GETTY IMAGES To download the 2019 ranking, follow the link www.webscribe.co.uk/magazine/theafricareport TOP 200 BANKS 2018 REVIEW 2 EDITORIAL By NICHOLAS NORBROOK Use tech to check year. The ASEAN grouping of 10 middling Asian countries received more than double that amount last year. Trust and transparency matter if Africa wants frica needs cash and quickly: econ- A to get serious long-term investors. Given the omies are not keeping up with booming popu- looming debt crisis on the continent, often lations, which is a shortcut to instability. The driven by opaque and corrupt government African Development Bank now estimates that spending, the pessimists may appear to be in the continent needs more than $100bn a year the ascendant. But new advances in technology just to finance and maintain its infrastructure are keeping the flame alive. needs. But, while there are investors from East The principles behind the crypto currency and West looking for bigger returns abroad due Bitcoin are distributed ledgers, where everyone to low interest rates at home, the difficulty of can see who owns what and data is difficult enforcing property rights is holding back serious to tamper with. Companies like Land Layby investment in the continent. and Bitland are already using that technology The Federal Palace Hotel, Lagos, is the Trust and for shared land registries in Africa. It is a way picture of potential. It has a prime lagoon-side of creating that very transparency that gives transparency spot, a casino, a renovated pool area and plenty comfort to private-sector lenders who may well of green space in a notoriously asphalted matter if be sitting on huge cushions of liquidity – see city. Despite this, the hotel is driving away most African banks – but are fearful of lending investors because of poisonous legal battles Africa wants due to identity opacity. amongst the owners, the Ibru family, over to get serious This is not science fiction. Letshego who owns what. Microfinance Bank, for example, is rolling out Drive in any direction out of the gates of the long-term its first loans facilitated by distributed ledgers Federal Palace, and it is not long before you will in October (see page 30). Kenyan telecoms investors find houses with ‘NOT FOR SALE’ written in red operators, too, are creating virtual financial his- paint. Elsewhere, whole communities have been tories for users of their mobile-money schemes, bulldozed out of waterfront areas because, which, despite requiring a regulatory fix, could despite living in an area for a generation, they provide the blueprint for far greater lending to cannot produce written land titles. the poorer segments of society. Certainty is needed when it comes to move- If Africa’s governments were able to provide able assets, too. A lack of clarity over beneficial similar levels of transparency – as some argue ownership of companies – who really owns it, is already starting to happen in Nigeria, with rather than a shell company registered in the the Treasury Single Account – then Africa Bahamas – means that responsible pension would start to turn heads among the largest funds from the US and Europe are staying away global fund managers. from investing in Africa. That has consequences. Africa’s 54 countries received just $43bn in foreign direct investment (FDI) in 2017, a 13% drop from the previous This PDF is free, and not for resale / Think green! Only print if necessary Only print / Think green! resale for and not This PDF is free, To download the 2019 ranking, follow the link www.webscribe.co.uk/magazine/theafricareport TOP 200 BANKS 2018 REVIEW 3 OVERVIEW OPPORTUNITY KNOCKS AGAIN Bank profits are growing as many of the big finance the private sector. But not all governments are up to that task. Many international financial institutions pull out of the pay lip service to the idea and then continent to reduce their risks. But as they grow, lean on domestic banks to fund their budget deficits. For banks in Ghana, will local banks be able to turn away from the for example, the choice is simple when easy money of buying government bonds in presented with the options of a risk-free loan to government that pays 17% in- order to finance factories, farmers and fintech? terest or a tricky manufacturing project where the returns will come far later down the track. Some governments have tried By Nicholas Norbrook to legislate problems away. In 2016 Kenya placed a cap on loan interest ome gentle teasing went arrival of ever more entrants driven by rates – at 4% above the central bank’s awry when Nigeria’s technology, and the rise of regulators main rate – to try to spur lending by Sterling Bank (#93) driving change. lowering its costs. Despite the uproar, launched an advert Opportunity has returned in the which led to a substantial drop in the in July that showed African financial sector. Our ranking amount of lending, the cap has not hit itself heading towards of Africa’s Top 200 banks shows that the profitability of Kenya’s big banks: the stars and its peers banks got back to business in 2017, Equity Bank Group (#59), for example, resolutely stuck on the after two years during which more posted 2018 Q1 profits up 21.7%. ground. This kicked off a vicious Twitter than a decade of asset growth stalled. Meanwhile, for many borrowers this Swar and the Central Bank of Nigeria In 2017, the top banks reported total has meant being forced into the arms of eventually waded in to force an apology assets of $1.74trn, compared to $1.47trn app-based microfinance lenders, despite from Sterling Bank on the grounds of in 2016. That was matched by a similar “these platforms [being] worse than the ‘demarketing’. But, by squabbling over jump in profitability: total Top 200 bank village shylocks”, according to Kenya’s small beer, the elephants of Nigeria’s profits grew from $21.6bn in 2016 to central bank governor, Patrick Njoroge. financial sector may miss a new set of $25.2bn in 2017. Other governments, including that challenges and opportunities set to Of course, while African regulators of Ethiopia, have tried a more Asian- reshape Africa’s banking landscape: are happy to see banks return to growth, style channelling of money to industry the exit of large international banks, the they are even keener for them to help through policy banks. And although if necessary Only print / Think green! resale for and not This PDF is free, To download the 2019 ranking, follow the link www.webscribe.co.uk/magazine/theafricareport TOP 200 BANKS 2018 REVIEW 4 Prime Minister Abiy Ahmed has already The shape of Africa’s Top 200 banks pointed to abuses in the system he does not appear to want to change the Top 200 asset breakdown Total loans ($bn) current model radically. But he may be 500 open to greater liberalisation of a very Southern Africa North Africa West Africa Central Africa East Africa 400 attractive sector – pricking ears in bank $1.391trn $1.508trn $1.491trn $1.465trn $1.739trn 300 boardrooms across East Africa. Many 200 of the country’s privately owned banks 100 0 are recording strong growth. Awash 2013 2014 2015 2016 2017 Bank (#152), for example, saw profits North Africa Central Africa Southern Africa rise 44% in 2017 (see page 88). West Africa East Africa A GRACIOUS MOVE 2013 2014 2015 2016 2017 Nigeria, too, wants to use the strength Number of banks of the public balance sheet to offer cheap loans to economically produc- Top 5 for asset growth % US$bn 55 52 7 28 58 tive sectors like agriculture and man- 155% ufacturing, according to new central bank guidance. Under the scheme, Total profits ($bn) 30 launched in August, some of the money 25.2 25 22 22.4 21.5 21.6 commercial banks are required to 19.8 20 keep in the central bank – under the 15 cash reserve requirement – can now 98% 2012 2013 2014 2015 2016 2017 be used to finance building factories, 87% a move that Segun Agbaje, the chief Africa’s deposits ($bn) executive of Guaranty Trust Bank 500 400 (#37), called “gracious”. 66% Finally, the most effective way to en- 300 51% 200 courage lending at low rates is through 100 tougher macroeconomic discipline 0 – less wasteful borrowing and a better- 2013 2014 2015 2016 2017 organised tax base. But all that also 1.2 76.6 44.2 1.4 2.8 requires much higher savings rates. FIRST MERCHANT NATIONAL BANK BANQUE STANBIC BANK HOUSING AND Top 10 most profitable BANK OF EGYPT MISR ZIMBABWE DEVELOPMENT BANK Morocco is a bright spot, having National Bank Standard Bank Group combined all three strategies. As a re- (Malawi) (Egypt) (Egypt) (Zimbabwe) (Egypt) $2.48bn of Egypt $760m South Africa Egypt sult, its private sector banks are riding FirstRand Banking high: witness their steady rise in our Group Attijariwafa Bank $2.11bn Morocco $700m Top 200 over the past decade.