Home Analysis Banking: South Africa dwarfs Nigeria in global ranking

Banking: South Africa dwarfs Nigeria in global ranking

by Business News Report

* Nigeria’s top 9 banks combined smaller than Standard Group
By Omoh Gabriel,

Nigeria’s top nine banks that featured in the Banker’s top global 1000 banks have a combined tier one capital of $11.332 billion. This is lower than the $12.6 billion of Standard Bank Group of South Africa which is by capital base classification the leading bank in Africa. This fact is contained in the 2011 edition of the Banker magazine a publication of Financial Times of London. Bank of America which occupies the first position in the global ranking has a capital base of $163.626 billion. It is followed closely by JPMorgan Chase with a capital of $142.450 billion. The third position is occupied by HSBC, a British bank with a capital base of $133.179 billion. China has three banks in the top ten positions while Japan has just one.

The banker magazine’s endorsement has become an instrument that Central Bankers and bankers sort after as a marketing tool. The low level of capitalization of Nigerian banks when compared to international standard is a challenge to regulators who are at the moment busy fragmenting the industry.

The Banker magazine in its benchmarking of the top 1000 global bank said that Zenith Bank PLC had, as at 2010, a total tier one capital of $2.405 billion. It is followed by the first generation bank First Bank with a total of $2.221 billion shareholders stake in the bank known as tier one capital. The third highly capitalized bank by the standard of Bank of International Settlement BIS is GTbank with a tier one capital of $1.362 billion. Access Bank followed closely with a capital of $1.149 billion.

The United Bank for Africa (UBA), one of the oldest banks in the country, had $1.037 billion capital as capital making it one of the internationally recognized strong banks in the country. Fidelity is next with $904 million tier one capital. First City Monument Bank followed closely with $854 million capital base. Diamond had $705 million while Skye bank has $695 million to feature among the 1000 top banks in the world.

However, the Nigerian banks do not rank among the top five in Africa. Zenith which is the most capitalized bank in the country ranks sixth in the continent. The top three banks in Africa are those from South Africa. Standard Bank Group topped the Africa chart with a capital base of $12.062 billion and is in the 94th position globally. The second in Africa is the FirstRand Bank Holdings, South Africa with a capital base of $6.036 billion. The Needbank Group limited also of South Africa came third in the top 25 banks in Africa with a capital of $5.716 billion.

Attjariwafabank of Morocco, an Islamic Bank, is fourth with a capital base of $2.786 billion. Investec of South Africa came fifth in the Banker ranking of the top 25 banks in Africa with a capital base of $2.519 billion. According to the Banker two Nigeria banks featured in the capital adequacy ratio measurement. Fidelity Bank, the Banker said has a capital to asset ratio of 28.8 per cent making it the soundest bank in the country. The report also said that First City Monument Bank with capital to asset ratio of 23.89 made it to the 1000 soundest capital to asset ratio banks in the world.
According to the Banker, going by the Bank of International Settlement measure, Zenith was the only Nigeria bank that attained the 1000 soundest BIS ratio of 36.

The Banker report stated: “The banking landscape in Africa remains a case of potential unrealised, as its financial institutions’ share of the Top 1000’s overall assets and Tier 1 capital dipped slightly. However, the lowering of the average cost-to-income ratio in the continent did provide some good news.
“Africa’s banks have never constituted a significant share of the Top 1000 ranking, but with about 15 per cent of the world’s population, low levels of bank account penetration and vast natural resources, there should be no question over the continent’s banking potential. However, this scope for growth is not reflected in this year’s Top 1000 ranking, which featured just 30 African banks. The continent’s institutions accounted for 0.72 per cent of total assets and 1.01 per cent of total Tier 1 capital from the overall Top 1000 World Banks ranking. Both figures are fractionally down from last year. Africa offers huge returns on investment for foreign institutions; A step in the right direction; The Gulf’s Islamic banks are targeting Africa’s opportunities”

It further said “South African banks continued to dominate the upper echelons of the African representatives in this year’s “Top 1000 World Banks”, holding four of the top five regional slots and accounting for four of the 10 highest movers. Standard Bank is once again Africa’s top bank. The Johannesburg-based bank increased its Tier 1 capital to $12.06bn, an increase of 26.15 per cent from last year, and a total almost twice as much as the second ranked FirstRand Bank Holdings’ $6.04bn. This was enough to place Standard Bank in at seventh in the regional highest movers table.

“For the most part, Nigerian banks halted the dramatic fall through the regional and overall rankings noted in 2010, following the implementation of much-needed reforms by The Banker’s Central Bank Governor of the Year 2011, Lamido Sanusi. Nevertheless, the country’s financial institutions certainly did not exhibit dramatic growth. Some, such as Zenith Bank and Guaranty Trust Bank, boosted Tier 1 capital, but others, including Mr Sanusi’s former employer, First Bank of Nigeria, saw a decline. None of the five new entrants made it into the African top 25, which showed little major movement. Notably absent was Libyan Foreign Bank, which was ranked ninth regionally in 2010 but did not submit data this year.

“There are some positive signs, however. The average cost-to-income ratio among African banks was 49.70 per cent, down from 61.87 per cent last year, despite an average increase in operating costs of 19.11 per cent, indicating a healthy increase in profits. Two Kenyan banks entered the lower reaches of the Top 1000 this year; Kenya Commercial Bank, which was the second highest mover among African institutions, thanks to 87.11 per cent Tier 1 capital growth, and Nairobi-based Equity Bank.

“It was a mixed bag for the Egyptian banking sector, one of the African success stories of 2010. The country’s institutions boosted their presence in the regional top 25 to five, but only National Bank of Egypt, Commercial International Bank and Banque Misr actually increased Tier 1 capital year on year. Arab African International Bank and Banque du

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