“Banks are being forced to innovate,” says Joshua Oigara, chief executive at KCB Group, Kenya’s biggest bank by asset value, at just over $8 billion, a substantial chunk of which it amassed through the acquisition of the National Bank of Kenya last year. The shifting dynamics among African banks includes a growing belief that bigger is better. In South Africa, cloud-based TymeBank had attracted 1 million customers by last November, after less than a year of operation. In reflecting on the decade since we produced our first SA Major Banks Analysis, it becomes clear that the industry is always in the midst of change. The combined annualised cost-to-income ratio amounted to 55.6% (FY18 55.9%). Regulators, meanwhile, are becoming more stringent. Regulators are struggling to keep up with industry trends like cybersecurity, open banking, green financing, and lack of consumer protection in digital financial services and processing of consumer data. In South Africa, there are 36 South African banking institutions and 30 foreign banks with approved representative offices in South Africa registered with the South Africa Reserve Bank. Reflecting on the major banks results for the period to 31 December 2019, Costa Natsas, PwC Africa's Financial Services Leader noted: “Against difficult trading conditions over the past year, both domestically and at the macro level, we continue to observe the major banks remaining focused on making strategic and operational progress in their efforts to put customer experience at the centre of their strategies in a competitive environment.”. Capitec Bank’s customer base and market capitalisation continue to grow ahead of its large competitors. Responding to the potential business impacts of COVID-19, COVID-19: South African Government Resource Portal. Banks need to choose what posture they want to adopt - to lead the change, to follow fast, or to manage for the present. With the downgrade, the future of African banking is shaping up as a rollercoaster ride that will yield a condensed and solid sector favoring size, tolerating niches and annihilating laggards. Africa is in the midst of a historic acceleration that is lifting millions of people out of poverty, creating an emerging consumer class, and propelling growth in many economies. The Deloitte Center for Financial Services estimates that the US banking industry may have to provision for a total of US$318 billion in net loan losses from 2020 to 2022, representing 3.2% of loans. Traditionally, credit, liquidity and market risks have been the main torment. Research by McKinsey found that banks in Africa that reset their strategy face vast opportunities. With the South African economy on its knees and posting flat returns, operations outside its home market were responsible for the 5% growth in profitability that Standard posted in the first half of 2019, according to the bank. South Africa Retail Banking: Opportunities and Risk… $ 2000 March 2020. Growth in East Africa remained somewhat buoyant - aiding banking group earnings for those with strong regional diversification - and a modest recovery in Nigeria supported West African growth. For African banks, strategically crafting the future involves choosing the right geographic presence and the right market segment or segments, and creating compelling product offering: leaner, simpler banking; digital adoption; and innovation in risk profiles. We also observe ongoing focus on optimising business models which include focusing on being leaner and more agile in terms of structure and IT architecture, launches of low-cost and no-cost digital transactional accounts and partnering with technology companies to speed up innovation cycles and develop faster, broader and more personalised financial services. Morocco Cards and Payments - Opportunities and Risks to 2023 $ 2750 July 2020. Growth is also projected from drawing more people in the formal banking sector, segments that for instance Trust Merchant Bank (TMB) has successfully exploited in the Democratic Republic of Congo. For the past five years it averaged around 1% and has slowed every year since 2013. The South Africa Chapter to Global Legal Insights - Banking Regulation 2020, 7th Ed. New and emerging threats–including anti-money laundering requirements, fraud and cyberattacks–will demand greater investment in systems and personnel. Driven by a migration to digital channels which aided transaction volumes, fee and commission income supported overall annual growth in non-interest revenue of 2.4%. Classeditori, Digital Imperative: Q&A With IBM's Likhit Wagle, Best Treasury & Cash Management Providers 2021, African Banking: Opportunity, Rapid Growth And Risk. The consulting firm projects that the number of banked Africans will hit 450 million by 2022, up from 300 million in 2017, spurred by new retail customers. South Africa Mobile Wallet and Payment Market Oppor… $ … Banking in Sub-Saharan Africa to 2020: Promising frontiers. South African economic activity in 2019 slowed to 0.2%, the lowest level since the global financial crisis. In Africa, the answer comes in a shade of grey. “Customers believe bigger is safer,” says Gachora, and this contributes to the urge to merge. Some of the banking industry's largest threats of substitution are not from rival banks but from non-financial competitors. In Nigeria, fintechs are on the rise as mainstream banks struggle to recover from a confidence crisis. February 2020. Senior Manager, Media Relations, PwC South Africa. Regionally, 2019 Sub-Saharan Africa’s growth forecasts were consecutively revised downwards. Political developments once again dominated the South African economic landscape in the first quarter of the year, with revelations on ‘state capture’ and the Constitutional Court ruling opening national and ruling-party debate over whether the president should serve out his second term of office. It’s not all gloom and doom, however. Fintechs have been able todisrupt a core “banking”service andoffer simpler, faster solutions. Given the pressure to pursue growth, African banks cannot afford to drop their guard regarding risk, either. Weak demand across developed nations coupled with geopolitical risks and protracted US-China trade disputes dampened growth prospects. Millennials in South Africa account for 51% of the workforce and by 2020, 24% of the working population will be made up of Generation Z, according to Momentum. Highlights from the major banks’ results include: Francois Prinsloo, Banking and Capital Markets Leader for PwC Africa says: “Overall, the major banks continue to work on combining technological change and adapting their workforces to be future-ready. Across the continent, policymakers have come under intense pressure to reign in banks’ push for super profits, generating new laws like the capping of interest rates in Kenya. The extent of this concern is reflected in central bank actions, in particular the US Federal Reserve’s implementation of an emergency rate cut between monetary policy meetings to halt rising risk sentiment. Mobile banking, in particular, is revolutionizing sub-Saharan Africa, serving 21% of adults the market, according to the World Bank. From all sides, then, African banks face challenges, but a dynamic and fast-growing business is at their fingertips. Growth expectations in the major economies, meanwhile, are being re-measured in light of downside risks and in particular the impacts of the COVID-19 outbreak which is expected to severely disrupt supply chains and aggregate global demand. The banking industry is in a much healthier place now than it was after the financial crisis of 2008. Given weak demand, inflation rates trended downwards - with the exception of the hyperinflationary environment in Zimbabwe which negatively impacted bank results - providing scope for interest rate cuts in Ghana, Nigeria, Mozambique and Namibia. In Kenya, telecom-giant Safaricom, in partnership with Commercial Bank of Africa, is revolutionizing financial inclusion by offering easy access via mobile-phone app without need for an account, credit access and now savings. This article appeared in issue PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. The culture in investment banking in South Africa is quite diverse. The South African Reserve Bank (SARB) manages the banking services industry while the Financial Service Board (FSB) oversees the non-banking financial services industry. 2020 deals with issues relating to Provides essential insights into the current legal issues, readers with expert analysis of legal, economic and policy developments with the world's leading lawyers. South African Banking Sector. For the past quarter-century, banks have endured despite Bill Gates’ famous dictum “Banking is necessary; banks are not.” Can they do it for another 25 years? Critically, 65% of consumers in East Africa prefer a local bank branch, and 25% say they would not open an account with a bank that does not have at least one. During the pandemic it rose to historical highs everywhere. In line with global trends, the growth of fintechs in South Africa (SA) has mainly been in the payments segment. Our offices locations - view the complete listing of our South African offices. The growth of unexpected players emerging in the financial services industry has created what has been called a ‘marketplace without boundaries’. But banks, in the form of well-regulated, governed and managed entities that foster trust, are here to stay, he adds. Learn more about our ethics and business conduct. The industry does not suffer any real threat of substitutes as far as deposits or withdrawals, however insurances, mutual funds, and fixed income securities are some of the many banking services that are also offered by non-banking companies. Most banks, however, retain sound funding and liquidity. This set of bank results should be analysed against the challenging conditions within which they were achieved. Cost management was supported by a push to self-service digital offerings, branch reconfigurations and tight corporate cost control. A few watchdogs, like the South African Reserve Bank, are willing to ease their rigid stance and obsession with risk-based supervision. South Africa's banking sector is still highly concentrated with the five largest banks holding over 90% of total assets in February 2019. The Future of South Africa Banking Markets to 2020- Trends, Outlook, Economic and Profitability Analysis, Key Ratios, Market Structure ... 4 OUTLOOK OF COMMERCIAL BANKING INDUSTRY IN SOUTH AFRICA 4.1 Total Assets and Liabilities Forecast, 2005-2020 4.2 Aggregate Loans Forecast, 2005- 2020 (Image: Brand South Africa) The National Credit Regulator is responsible for regulating the South African credit industry, including the registration of credit providers, credit bureaux and debt counsellors. Depending on the teams you are working in, you would enjoy a greater/lesser work-life balance. In a challenging economic context and an increasingly competitive domestic banking market, we maintain our view that leading banks will be those that dynamically calibrate their strategies in a customer-centric manner, responsive to demographic shifts, rapid technological change and evolving customer expectations. All rights reserved. Demand for both digital solutions and secure work-from-home systems exploded. Combined headline earnings up 2.1% against FY18, combined ROE of 17.8% (18.8% at FY18), net interest margin of 4.26% (4.38% at FY18), credit loss ratio of 80 bps (66 bps at FY18) and cost-to-income ratio of 55.6% (55.9% at FY18). These conditions render meaningful progress to addressing South Africa’s unemployment levels difficult to achieve and, from a banking perspective slow transactional activity, result in heightened credit risk indicators and negatively impact on real flows. With our African network, our people and experience, we’re ready to help you achieve that value wherever you do business. South African inflation ended 2019 at 4%. Global news and insight for corporate financial professionals. South Africa International Remittance Business and … $ 2400 February 2019. Kenya has seen 10 completed M&A deals and two collapses since 2016. Standard Bank plans to increase its presence in francophone West Africa, reckoning that its representation across the sub-Saharan region puts it in a good position to benefit from the continental free trade agreement that came into force last May, creating a borderless market of more than $3 trillion. While global policymakers respond to this trend in terms of how to fund future health and social care, the African continent stands to benefit from a relatively younger populace and favourable demographic trends. Has the “Asian Century” just begun? Bureau information from the National Credit Regulator notes that the number of consumers with impaired credit records increased by 5.6% year-on-year as at the end of Q3-19 (by 567,939 to 10.8 million).