Picture: THE TIMES
Picture: THE TIMES

SOUTH Africa’s big four banks are increasingly finding ways to solidify their retail and business banking operations in the rest of Africa as part of a bid to diversify revenue.

Competition is expected to intensify in countries such as Nigeria, Ghana, Angola and Kenya.

Ghana’s gross domestic product (GDP) is forecast to grow at about 7% this year. Nigeria’s GDP has been growing at more than 6%.

Another factor is population. Sub-Saharan Africa had a population of 874.8-million last year, according to World Bank figures.

World Bank financial inclusion data released this year showed that the percentage of adults (15 years and over) with an account at a formal financial institution was 24% in 2011. Only about 5% of adults received a loan from a financial institution. About 15% of adults had debit cards and 3% credit cards.

A Bank of America Merrill Lynch report published at the end of September said Nigeria, Angola, Ghana and Kenya were key over the next five years. It said Standard Bank, due to its African expansion and early-mover advantage, had "strong potential".

Standard Bank arguably has the widest footprint among South Africa’s banks, operating in 17 countries outside South Africa, including Ghana, Nigeria, Kenya and Angola.

In the six months to the end of June, Standard Bank posted headline earnings of R7.4bn, with the rest of Africa contributing R844m. In October it said it aimed to increase its revenue and earnings contribution in the rest of Africa to about 25% over the next five years. Standard Bank’s Africa operations outside South Africa had 514 branches and 977 automated teller machines.

However, Standard Bank still needs to further improve its return on equity in the rest of Africa, which is 10.6%.

Nedbank, with operations in Swaziland, Namibia, Lesotho, Malawi and Zimbabwe, is in an alliance with Togo-headquartered Ecobank. Last year Nedbank offered Ecobank a loan of $285m, giving it an opportunity to expand. In the loan agreement Nedbank has an option to take a 20% stake in Ecobank, which has a presence in about 32 African countries.

Nedbank’s operations in the rest of Africa posted headline earnings of R124m. The entire group had headline earnings of R3.5bn in the six months to end-June.

Absa Group, or Barclays Africa Group as it will be known, will also become a formidable force. Last week it announced it bought Barclays’ operations in the Seychelles, Botswana, Ghana, Kenya, Mauritius, Tanzania, Uganda, Zambia and the regional office in Johannesburg for about R18bn.

This will add to Absa’s retail banking operations in Mozambique and Tanzania and its insurance businesses in Botswana, Zambia and Mozambique.

In the third quarter to end-September, Barclays’ Africa Retail and Business Banking, which includes Absa, reported a profit before tax of £330m, compared to the group’s total profit before tax of £5.9bn.

FirstRand, which is targeting African countries with above average domestic growth, has always said it not does plan to "plant a flag" in every African country. It has been focusing on growing organically in Mozambique, Zambia and Tanzania.

In Ghana, FirstRand offered to buy a 75% stake in Merchant Bank Ghana for R746.2m this year and also wants to buy a retail bank in Nigeria. It has a representative office in Kenya, which is in a region FirstRand regards as a priority.

"Our aim is not to have the largest network in Africa but to have profitable operations in the high growth economies," FirstRand spokeswoman Sam Moss said.

"First National Bank (FNB) has a strong competitive advantage in that it can quickly introduce to its African subsidiaries the innovative products and channels it offers in South Africa," she said.

But Ms Moss noted that despite the appetite of South Africa’s banks for growth, "capital levels and the cost of funding will be challenging in some jurisdictions".