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Banking Industry 1 SOUTH AFRICAN BANKING SECTOR OVERVIEW TABLE OF CONTENTS Sections Page 1 Background 1 2. Financial services sector‘s contribution to the economy 2 3. Total Assets 2 4. Total liabilities 4 5. rofitability 5 6. Shareholding structure 5 7. Branches ,ATMs, OS 6 8. )sage of payment systems 6 9. ,mployment 8 10. .umber of customers 8 11. Repo and rime rate movements 8 12. Regulation 9 13. The Financial Sector 0harter 10 14. 0onclusion 11 Figures 1. .umber of banks in SA 2 2. Total banking sector assets 3 3. 1oans and advances 2September 20113 3 4. Market share of ma4or four banks 4 5. Total liabilities of the banking sector 4 6. 0omposition of deposits 5 7. Shareholding in the banking sector 6 Ta les 1. 1ist of banks in SA 1 2. .umber of ATMs, branches and OS 6 3. )sage of payment systems 7 4 ,mployment profile of banking sector 220093 8 5. Repo and rime rate movements 22005 to 20103 9 ,n5uiries6 .wabisa Matoti 2nwabisam8banking.org.9a3 1ast updated6 .ovember 2011 1 SOUTH AFRICAN BANKING SECTOR OVERVIEW 1. Background South Africa has a developed and well regulated banking system which compares favourably with those of industrialised countries. The sector has undergone a lot of changes in the past 20 years, with the early 1990s being characterised by a process of consolidation resulting from mergers of a number of banks including Allied, :olkskas and )nited to form ABSA and the proposed merger between .edcor and Stanbic which failed eventually. The promulgation of the Banks Act of 1990 led to a number of banking licenses being issued and by the end of 2001 there were 43 registered banks in South Africa. The announcement of Saambou‘s financial troubles in 2002, however, resulted in a run on BO, and other smaller banks which led to a number of banks not renewing their banking licenses and others seeking financial assistance from foreign shareholders. Other banks such as Regal Bank also experienced financial difficulties during that period and were placed under curatorship. Although the South African banking sector has been through a process of volatility and change in the past, it has attracted a lot of interest from abroad with a number of foreign banks establishing presence in the country and others ac5uiring stakes in ma4or banks, for example, the Barclays < ABSA and Industrial and 0ommercial Bank of 0hina < Standard Bank deals. There have been a number of changes in respect of the regulatory environment, product offerings, and number of participants resulting in a greater level of competition on the market from smaller banks such as 0apitec bank and African Bank, which have targeted the low- income and the previously unbanked market. The SA banking industry is currently made up of 17 registered banks, 2 mutual banks, 12 local branches of foreign banks, and 41 foreign banks with approved local representative offices. The banks are listed in Ta le 1 below. 1.1 Table 1- 1ist of banks in SA Category Bank Registered banks < ABSA Bank 1imited; African Bank 1imited; Bidvest Bank 1imited; 0apitec Bank 1imited; locally controlled FirstRand Bank 1imited; Grindrod Bank 1imited; Investec Bank 1imited; .edbank 1imited; Regal Treasury rivate Bank 1imited 2In li5uidation3; Sasfin Bank 1imited; )bank 1imited; The Standard Bank of South Africa 1imited. Registered banks < Albaraka Bank 1imited; Aabib Overseas Bank 1imited; ABB Bank 1imited; foreign controlled Islamic Bank 1imited 2In Final 1i5uidation3; Mercantile Bank 1imited; The South African Bank of Athens 1imited. Mutual banks GBS Mutual Bank; :BS Mutual Bank 1ocal branches of Bank of Baroda; Bank Of 0hina 1imited Cohannesburg Branch 2trading as Bank Of 0hina foreign banks Cohannesburg Branch3; Bank of Taiwan South Africa Branch; 0hina 0onstruction Bank 0orporation - Cohannesburg Branch; 0itibank ..A.; Deutsche Bank AG; C Morgan 0hase Bank ..A. 2Cohannesburg Branch3; SociEtE GEnErale; Standard 0hartered Bank - Cohannesburg Branch; State Bank of India; The Aongkong and Shanghai Banking 0orporation. Foreign banks with AfrAsia Bank 1imited; Banco B I, SA; Banco ,spirito Santo e 0omercial de 1isboa; Banco approved local rivado ortuguFs, S.A.; Banco Santander Totta S.A.; Bank 1eumi 1e-Israel BM; Bank of representative 0yprus Group; Bank of India; Barclays Bank lc; Barclays rivate 0lients International offices 1imited; B. aribas Cohannesburg; 0ommer9bank AG Cohannesburg; 0redit Suisse AG; 0redit Suisse Securities 2,urope3 1imited; ,cobank; ,xport-Import Bank of India; Fairbairn rivate Bank 2Isle of Man3 1imited; Fairbairn rivate Bank 2Cersey3 1imited; First Bank of 2 .igeria; Fortis Bank 2.ederland3 ..:.; Aellenic Bank ublic 0ompany 1imited; ASB0 Bank International 1imited; Icici Bank 1imited; GfH Ipex-Bank GmbA; 1loyds TSB Offshore 1imited; Millenium B0 ; .ational Bank of ,gypt; .ATIIIS Southern Africa Representative Office; Royal Bank of Scotland International 1imited; SociEtE GEnErale Representative Office for Southern Africa; Sumitomo Mitsui Banking 0orporation; The Bank of .ew York Mellon; The Bank of Tokyo-Mitsubishi )FC, 1td; The Mauritius 0ommercial Bank 1imited; The Rep. Off. for Southern and ,astern Africa of The ,xport-Import Bank of 0hina; )BS AG; )nicredit Bank AG; )nion Bank of .igeria lc; :nesheconombank,; Hells Fargo Bank, .ational Association; Benith Bank lc Source6 SA Reserve Bank 1.2 Figure 1 - .umber of banks in SA Num er of anks in SA Num er 60 56 52 50 47 44 43 43 46 43 41 42 41 40 30 30 22 20 19 19 19 19 18 20 17 15 15 15 14 14 14 15 14 13 13 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Registered banks Banks Mutual banks Branches of international banks Representative offices 2. Financial services sector+s contri ution to the economy The financial services sector contributes about 10,5 percent to gross domestic product 2GD 3, with assets to the value of over R6 trillion. Taxes amount to over 15 percent of GD , whilst employment represents about 4 percent. The banking sector assets represent 4ust over 50 percent of total financial services sector assets. 3. Total Assets The assets of the banking sector improved to a level of R3,4 trillion after some moderate increases between December 2008 and Cune 2011 2Figure 23. There was a 9 percent increase in the total value of assets during the 5uarter ended September 2011. 3 3.1 Figure 2 < Total banking sector assets Figure 3 below depicts the composition of loans and advances as at end September 2011. Aome loans represented the largest component at 34 percent, followed by term loans at 16 percent. 3.2 Figure 3 < 1oans and advances 2September 20113 Composition of loans and advances /Sep 20111 23% 34% 16% 10% 5% 10% 2% Aomeloans 0ommercial mortgages 0redit cards 1ease and instalment debtors Overdrafts Term loans Other Source6 SA Reserve Bank Figure 2 below illustrates the market share of the four ma4or banks as at end September 2011. The four ma4or banks represented about 84 percent of total banking assets. Standard Bank, the largest bank in terms of assets, had a market share of 31 percent, followed by 4 ABSA with 25 percent. FirstRand and .edbank had a market share of about 24 percent and 20 percent respectively. 3.3 Figure 4 < Market share of the ma4or four banks 2Sep 20113 Source6 SA Reserve Bank 2. Total lia ilities After a sharp decline in the first 5uarter of 2011, total liabilities of the banking sector increased by 3 percent between the second and third 5uarters of 2011 reaching a level of about R2,6 trillion 2Figure 33. 4.1 Figure 5 < Total liabilities of the banking sector Total lia ilities R4 n Percent 3 500 10% 3 131 2 996 2 964 2 904 3 000 2 885 8% 2 768 2 834 2 809 2 769 2 821 2 801 2 848 6% 2 500 4% 2 000 2% 1 500 0% 1 000 -2% 500 -4% 0 -6% Sep Dec Mar Cun Sep Dec Mar Cun Dec Mar Cun Sep 2008 2008 2009 2009 2009 2009 2010 2010 2010 2011 2011 2011 1iabilities 21AS3 Growth 2RAS3 5 Deposits represented about 77 percent of total liabilities at the end of September 2011. The composition of deposits is illustrated in Figure 5 below. Fixed and notice deposits constituted the largest part at 32 percent, followed by current and call deposits both at 17 percent. 4.2 Figure 6 < 0omposition of deposits Com.osition of de.osits /Se. 20111 10% 17% 4% 5% 15% 17% 32% 0urrent Savings 0all Fixed and notice .0Ds Repos Other Source6 SA Reserve Bank 3. Profita ility The Return on ,5uity 2Ro,3 and the Return on Assets 2RoA3 for the banking sector improved to 15,9 percent and 1,12 percent respectively in September 2011 2September 20106 15,2 percent and 0,99 percent respectively3. The efficiency of the banking sector, however, deteriorated as the cost-to-income ratio increased from 54,6 percent in September 2010 to 55,9 percent in September 2011. Operating expenses increased from R83,8 billion in September 2010 to R93,1 billion in September 2011. 5. Shareholding in the anking sector By end of December 2010, shareholding by foreigners in the sector represented about 43 percent of total nominal banking shares in issue, whilst domestic and minority 2those with a shareholding less than 1 percent3 represented about 27 percent and 30 percent respectively 2Figure 73. The large portion of foreign shareholding can be mainly attributed to the large stake that Barclays lc has in ABSA. 6 6.1 Figure 7 < Shareholding in the banking sector 7. Branches, AT8s, and Points of Sale By the end of December 2010, the total number of ATMs and branches of banks stood at 26 439 and when points of sale were included, this number increased to 2179 3193 2Ta le 23.
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