South Africa’s stagnant economy was dragging the banks down before the pandemic began, and the economic woes have been worsened by successive waves of Covid-19, matched with economic and other restrictions.
A disastrous week of riots in July 2021 caused damage worth $1.7bn, put 150,000 jobs at risk and cost $3.4bn in lost output, according to the government. The comparative ranking of South African banks on the top 100 list was also affected by a 4.6% decline in the exchange rate for the rand against the US dollar over the year to December 2020.
South Africa’s economy rebounded well towards the end of 2020, boosted by commodity prices, although this slowed in the first half of 2021 due to a second and third wave of the virus, lockdowns, and the violence.
However, the OECD predicts the second half will be stronger, boosted by domestic demand and commodity exports. It forecasts that the economy will rebound by 3.8% in 2021 and 2.5% in 2022 as private investment strengthens. Standard Bank said the same in its March results presentation, foreseeing a recovery in household spending in the second part of 2021 and capital investment in 2022.
Big four still dominate top rankings
South Africa’s giant banks were already cautious before the pandemic and had strong risk positions. The “big four”, Standard Bank (#1), Absa (#3), Nedbank (#4) and FirstRand (#6), are all in the top six of Africa’s ranking – last year they were four out of the top five.
The most profitable, FirstRand, is ranked on results to June 2020, compared to December 2020 for the others. It shows declining tier 1 capital down 9% to $5bn in US dollars, compared to rises of 6% each for Absa (up to $6.3bn) and Nedbank (to $5.5bn). Standard Bank alone makes up 12.5% of the total tier 1 capital for the 100 banks and at $13.8bn has more than double the capital of its nearest rival.
Other leading South African banks are Investec at #14 and the fast-moving Capitec Bank, which climbs the rankings from last year’s #24 to #20 with a 37% increase in tier 1 capital to $1.7bn in the results at the end of February 2021.
Mauritius Commercial Bank is the first bank from another country in southern Africa in the top 100 ranking at #25 (up from #28), with capital up 23% to $1.3bn. Angola’s Banco de Poupança e Crédito also climbs the rankings with tier 1 capital up 41% to $941m in its results to December 2020. This is even more impressive when considered against the 14.6% decline in the Angolan kwanza.
Angola and Mauritius each have five banks in the top 100, Namibia scores two (Bank Windhoek slipping back to #90 from #76) and Botswana and Mozambique have one bank each – First National Bank of Botswana (#89) and Standard Bank Mozambique (#80).