Botswana
Best foreign bank: Standard Chartered Bank
Best foreign securities house: Stockbrokers Botswana
In its quest to turn Botswana into an offshore banking centre the government has been busy reforming the financial sector. In the past two years new tax legislation has been passed and all foreign exchange controls have been abolished.
Foreign banks dominate financial intermediation in Botswana. Barclays, Standard Chartered Bank (SCB), and the South African banks First National and Stanbic effectively control both the small wholesale market and the retail market – a situation that is repeated elsewhere in the continent, as well as in many other emerging markets.
Standard Chartered Bank’s consumer banking business in Botswana is the bank’s largest retail operation in Africa, and accounts for 65% of its profits in Botswana. In an unsophisticated market SCB is unusual in offering unsecured loans to customers with salaries. It is also involved in a corporate loan scheme where company loans are offered to employees at preferential rates.
In previous years the banking sector had been under-lent, with liabilities often exceeding assets in the absence of bankable projects, but with an upsurge in consumer spending and, according to Standard Chartered, Botswanans “borrowing to the hilt”, lending opportunities have increased. There has been strong growth in consumer banking, credit cards and auto loans.
The bank’s corporate operations are growing, too, especially in lending to the para-statals. The Water Utilities Corporation opened a credit facility of around $50 million with SCB providing 30% of the financing. SCB also provided 30% of the Financing to the Debswana Diamond Company in a deal worth $75 million.
Stockbrokers Botswana Ltd, a subsidiary of Robert Fleming, soon to become Chase Manhattan, was the only firm in the brokerage market until two years ago. It dominates the market with an 80% market share in terms of volumes traded and has a monthly turnover of between $3 million and $4 million. It was recently involved in the IPO of the tourist and safari business, Chobi Holdings and was lead bookrunner in the $580,000 IPO of RPC Data, a software distribution company.
Cameroon
Best foreign bank: Standard Chartered Bank
Despite its oil reserves and a favourable agricultural climate, Cameroon is still a difficult country for business enterprise. At the start of this year Transparency International rated it the most corrupt country in Africa.
Five Cameroon banks survived the banking crisis of 1996, but analysts and foreign bankers still accuse all the existing local banks of mismanagement and lacking transparency. The rest of the banking sector is made up of small local co-operatives.
The principal foreign players are Société Générale de Banques au Cameroun, Crédit Lyonnais Cameroun, Standard Chartered Bank and Citibank. Société Générale is the largest; Standard Chartered Bank is the best in terms of performance and growth.
The bank’s main activities are foreign exchange and corporate banking and in 1999 it increased its overall market share from 10.31% to 12.73% and saw asset growth of 31%.
Expansion plans are under way and a consumer-banking arm will be launched this year focusing on the middle and upper markets. Four ATMs will be in place by July followed by a further eight before the end of the year.
Ghana
Best domestic bank: Ghana Commercial Bank
Best foreign bank: Standard Chartered Bank
Highly commended: Social Security Bank
It has been a difficult year for Ghana’s economy. The country’s currency continued to depreciate and the prices of Ghana’s main exports, gold and cocoa failed to recover from the low prices. Presidential elections are planned for December 2000 and there is concern in the market that government spending may increase as the present administration attempts to lure the voters. Despite this, Ghana Commercial Bank has experienced very strong growth in earnings. The bank’s net profits increased more than 90% on 1998’s figure. The increase was achieved mainly as a result of foreign exchange gains.
Realizing that the bank was losing customers to foreign competitors GCB has entered a restructuring programme aimed at duplicating foreign banks’ services. William Bray, the bank’s managing director, knows cuts have to be made to reduce costs and increase efficiency. Staffing will be reduced from 3,201 to 1,000 by the end of the year. The bank’s loans and deposits are still strong and management plans to maintain the present course.
During 1999 Standard Chartered Bank upgraded its technology as it continued to invest in its transaction processing infrastructure. By March of this year all customers had access to the bank’s real time online banking system. In terms of profitability Standard Chartered remains the leader – after tax profits increased 18%, and it is the largest retail lender and deposit taker in the country.
Corporate and investment banking opportunities are very limited but the bank was involved in a $25 million pre-Financing deal of Tema Oil Refinery’s future exports. The Ghanaian government also awarded it “Best Foreign Business of the Century”.
SSB, formerly known as Social Security Bank, should also be noted. It is the second largest bank in terms of assets, and has a reputation for innovation. A majority shareholding was bought by Blakeney Management in 1997 and divided among Morgan Stanley Asset Management, Soros Fund Management and JP Morgan. SSB’s after tax profits decreased 8% on 1998 but its non-interest income increased 37%. The increase was in part due to SSB’s agreement with Moneygram, an electronic funds transfer service that helps Ghanaian nationals living abroad to send home their foreign currency earnings.
Kenya
Best domestic bank: Commercial Bank of Africa
Best foreign bank: Standard Chartered Bank
Best domestic securities house: Dyer&Blair
In the past few years, steps have been taken to remove import licensing, price controls, foreign exchange controls and fiscal and monetary constraints. But despite these measures economic growth remains slow. The Kenyan government is back in negotiation with the IMF and is desperate for the funds tap to be turned back on.
Controlled by the Kenyatta family, headed by Mama Ngina, Commercial Bank of Africa is the country’s best domestic financial institution.
CBA’s chief executive and former Standard Chartered Bank employee, Isaac Awuondo, has presided over the bank’s rapid growth over the past three years.
The seventh-largest bank in terms of assets, it outperformed its local peers, posting a 20.7% return on equity for 1999. Its asset quality is very strong with a low NPL to total loans ratio of 3.3%. By targeting niche markets and making it easier to open an account it has successfully grown its deposit base in a contracting economy.
In terms of assets and number of branches Barclays is the largest foreign player in the Kenyan market. However in terms of modernization and innovation Standard Chartered Bank leads the way. The domestic lending market shrank, but Standard Chartered still managed to achieve a 12% increase in net profits, and a 13% increase in deposits.
It puts some of its success down to the attraction of greater security at its ATMs.
The tightened security has allowed Standard Chartered’s customers to withdraw money in relative safety and this is considered a luxury in many parts of Kenya. The bank’s return on average equity stands at over 40%.
The securities market is moribund. With daily turnover of $38,000 in the equity market, divided among more than 100 brokerages, times are lean with many firms downsizing. Last year’s winner, Shah Munge, has let go most of its top and middle management. Foreign bankers describe Dyer&Blair, owned by the chairman of the stock exchange, Jim Mbaru, as competent. The Firm is particularly well established in the local debt market. Of an annual market turnover of around KS8.2 billion, D&B has a KS6.2 billion share.
Nigeria
Best domestic bank: United Bank for Africa
Best foreign bank: Citibank
Best domestic securities house: Investment Banking&Trust Company
The Nigerian banking sector has been through numerous restructurings in recent years. Since 1995, with the relaxation of foreign exchange regulations, 30 banks have been closed, many hit by the loss of the lucrative arbitrage between the official and unofficial foreign currency exchange rates.
Three banks control 70% of the domestic banking sector, United Bank for Africa, First Bank and Union Bank. UBA has made dramatic progress in the past year. With new owners and Citigroup-trained management, the bank has targeted blue-chip corporates in the energy sector. Although these offer lower returns than the high-risk, politically motivated lending of the past, in the last nine months of 1999 there was a 91% rise in the bank’s net profits. The Figure was, however, boosted by the government as it transferred parastatal funds from the Central Bank into the commercial banking sector.
The bank has attacked its high cost to income ratio – 77% – by cutting 40% of its staff. IT investment has been substantial, with 100 of its branches now fully computerized and many of its back-office functions fully automated.
It has also substantially tightened its credit management. NPLs have been slashed from 40.5% of total loans in 1996 to 13.4% in 1999, with 93% coverage.
Citibank has successfully established itself in the Nigerian market with a branch network of 11. The bank offers a full range of corporate and investment products to its multinational and local corporate customers.
It has played a pivotal role in the development of the Nigerian Financial sector and was the first to introduce many basic products including foreign exchange forwards, electronic funds transfers and structured trade finance instruments. Its financial results have been impressive when compared with the rest of the sector. It reports an 80.6% ROE – the sector average is 40.9%.
Revenues rose 36%.
Led by Atedo Peterside, Investment Banking&Trust Company Limited is a securities house with a capitalization of $84 million. IBTC has been at the forefront of the government’s efforts to sell off parastatals and other state-owned enterprises.
The National Council on Privatization has appointed IBTC as lead issuing house for the privatization of National Oil and Chemical Marketing (Nolchem). The local public issue, worth $57.5 million, is the largest in the history of the Nigerian capital markets. IBTC had already acted as lead issuing house in the previous largest public rights issue in a deal worth $35.5million for the Nigerian Bottling Company PLC.
South Africa
Best domestic bank: Nedcor and Standard Bank of South Africa
Best foreign bank: Commerzbank
Best domestic securities houses: Barnard Jacobs&Mellet and Investec
Best foreign securities house: Deutsche Bank Securities
The battle in South Africa’s domestic market is between Nedcor and Standard Bank of South Africa. With CEO Richard Laubscher leading the way, Nedcor has improved dramatically over the past seven years. Now the fourth-largest bank in terms of assets, it has reported an impressive 25.3% return on average equity. It is a universal bank with a large distribution network and is more technologically advanced than its peers.
A hostile takeover bid from Nedcor has spurred Standard Bank of South Africa. Realizing that wealthy whites and corporates will not guarantee future growth, the bank is moving aggressively into the under-banked mass market. It is also investing heavily in e-banking.
Commerzbank is the best foreign bank. It entered the market on the back of German-South African trade links, it specializes in foreign currency denominated corporate loans, and private sector loans and advances. It is also strong in origination and has a wider distribution network than its rivals.
Barnard Jacobs&Mellet is the only large independent JSE-listed securities house. Since listing in early 1998, results have been impressive. It is regarded by the banking industry as second only to Deutsche in terms of research on the equity sector.
It is also the only South African Firm ranked in the top five in equity trading, coming fourth ahead of HSBC. Its corporate side, though developing, is still small. Investec has a stronger corporate Finance side and is more active in the primary market. It lies third among all banks in fixed-interest securities and second in terms of derivative products.
Having bought the stockbroker Ivor Jones, Roy and Co, Deutsche Bank Securities has developed into a highly regarded operation. The South African banking industry has recently rated its research team, headed by Steven Nathan, as the best. It is a market maker in RSA government bonds and comes only second to Merrill Lynch in equity dealing. Its advisory capabilities are also well regarded – it was on Stanbic’s team in the Nedcor-Stanbic takeover bid.
Recently Deutsche completed the market’s largest ever portfolio trade – 160 stocks worth R7billion ($1 billion).
Zimbabwe
Best domestic bank: Commercial Bank of Zimbabwe
Best foreign bank: Standard Chartered Bank
Commercial Bank of Zimbabwe is one of the oldest banks in the country. Receiving technical support and guidance from the International Finance Corporation and South Africa’s ABSA, which both hold minority strategic stakes, the bank is improving. CBZ is now one of the more transparent banks in Zimbabwe and is less motivated by political lending. Its asset quality is relatively good.
The bank’s non-performing loans are 7.7%, but higher provisions will be needed as a result of the political turmoil that has engulfed the country. At 12.8% its statutory capital ratio is adequate rather then strong, but superior to that of its rivals.
Standard Chartered Bank still leads the foreign banks. It has 30% of the consumer retail-banking sector, with plans for further expansion. It has 40 branches, the same as Barclays, but over 70 ATMs. Alongside retail banking is a strong corporate side. This year the bank has been involved in structured financings for the major utilities in oil and power. It also holds a strong position in lending to large agricultural borrowers. With this year’s upheavals, it could turn into a problematic position. But all banks in Zimbabwe have significant exposures to the agricultural sector, because the economy depends on the export of its products.
Regional award
Best bank: Standard Chartered Bank
Only recently described on the cover of the Economist as the lost continent, and battered by the turmoil in Sierra Leone and Zimbabwe, Africa is not generally regarded by banks as even belonging to the group of countries they regard as emerging markets.
Standard Chartered Bank is one of very few foreign institutions willing to operate on the ground and one of even fewer that make money doing it. Despite operating in a number of exceptionally volatile countries its returns from Africa last year were £100 million – a quarter of the group’s profits. It continues to invest heavily in its African operations.
The bank has modernized branch networks to international standards and upgraded technology. Involved heavily in retail banking it offers many of the products more sophisticated markets take for granted, for example debit cards, personal loans, and ATMs.
Its recent investments in Cameroon will mean the number of ATMs in the country is doubled and the added luxury of increased security surrounding its ATMs in Kenya has increased its customer base. Standard Chartered’s old rival, Barclays, is starting to invest more heavily in its African operations, and SCB may find the competition tougher in the future.
Citibank has also continued to expand throughout the continent. The bank is now the one true pan-African bank and is playing an important part in the development of some countries’ financial systems, introducing long-needed products for multinationals and local corporates. In Kenya it helped install an electronic banking payment system to replace the previous entirely manual system. In Senegal it is the only bank to offer foreign exchange forwards and was the first to provide online electronic banking. In Tanzania it is the second largest bank overall and the only bank to arrange commercial paper issues for customers.
Central Asia
Azerbaijan
Best domestic bank: International Bank of Azerbaijan
Best foreign bank: HSBC Bank Middle East
International Bank of Azerbaijan (IBA) is the largest bank in Azerbaijan. The banks assets account for $300 million out of the country’s total banking assets of $650 million. IBA’s excellent relationship with the National Bank of Azerbaijan and other government entities gives the bank a competitive advantage over its peers — the majority of state and government business is directed towards it.
Last year the bank was awarded the mandate to act as agent for all government-guaranteed credit lines.
Its asset quality is stable since the loan portfolio is concentrated on the higher-profile, more stable Azeri companies. It is dominant in foreign currency operations in the country dealing with 85% of all transactions and is the only bank with a licence to issue credit cards. Its IT systems have been described by Thomson Bankwatch as some of the most advanced in the CIS and the bank continues to invest heavily in them.
HSBC Bank Middle East is the largest established foreign bank in Azerbaijan. However the Turkish group Koç has just received a banking licence, so HSBC’s position as the premier foreign bank may soon be challenged. HSBC has positioned itself very early in the market in the hope that there will soon be greater development of the country’s oil and gas resources. The economy at present is fragile, GDP decreased 7%, but HSBC’s balance sheet has been growing. It has an estimated 20% to 30% share of the $50 million personal deposits market.
Kazakhstan
Best bank: Kazkommertsbank
Best foreign bank: ABN Amro
There are 55 banks in the Kazakhstan banking sector with five making up 60% of the country’s total banking assets. The largest is Kazkommertsbank with total assets of $521 million. It is Kazakhstan’s premier bank and is the country’s most active bank internationally. It has issued Eurobonds and established credit lines with international banks for money market transactions. Its products are innovative and the bank offers a higher quality of service than its rivals. In 1999 the bank reported a consolidated profit of $25.1 million and a return on average assets of 4.6%. Kazkommertsbank’s corporate banking side is strong. It has a 32% share of bhe corporate loan market. The bank is developing its retail arm in an effort to increase its 12% market share of customer deposits.
ABN Amro is the most active foreign bank within the market. In terms of assets it is ranked as the fourth-largest bank in the country. It entered Kazakhstan’s market six years ago, giving it a four-year head start over other foreign banks. It focuses on trade finance and foreign exchange. In project Finance it is adviser to Krachakanak, a consortium of Agip, British Gas, Texaco and Luk-Oil, on the development of properties in the country and also on the various pipeline projects under discussion in the region. In September last year it was lead arranger with Deutsche in a $350 million deal for the sovereign. The bank’s return on average equity is 50% and the bank’s capital adequacy ratio is 21%.
Kyrgyz Republic
Best foreign bank:Turkish Demir International Bank
Established in 1997, Turkish Demir International Bank is held up as an example for the rest of the Kyrgyz Republic’s banking sector. Now one of the largest banks in the country it employs around 78 people. The country’s low income per capita means retail opportunities are low, leading the bank to focus on its corporate side. However because of instability and the risk of lending in the Kyrgyz Republic it concentrates mainly on fee and commission income. The bank has just completed the First stage of its IT investment which involved upgrading systems and automating the bank’s processing operations.
Foreign competition will soon increase as National Bank of Pakistan and The Bank of Asia enter the market.
Uzbekistan
Best bank:National Bank of Uzbekistan
State-owned National Bank of Uzbekistan operates as a universal commercial bank within Uzbekistan and as a government agent in international markets. NBU accounts for over 60% of the country’s total banking assets. The recent decision to privatize may bring in a foreign strategic partner to help expansion in central Asia. Its non-performing loans are very low – 0.1% – as many of the largest are new.
If government loans are excluded, this figure rises to 13%. But with government guarantees, its high level of liquidity and a capital adequacy ratio of 52%, the bank is secure.
