African Bank Rankings

8 more banks have been assessed and added to the ranking bringing the total number of Africa domiciled banks ranked to seventy.  These are the key takeaways after reviewing the output from the model.  Rankings are attached to this email.

1. Only GT Bank Nigeria made the top 10 in the final ranking while simultaneously paying its employees within the top 20% of all seventy banks ranked. This feat was achieved after reducing its workforce during fiscal year 2014 in excess of 25%.  While this may appear draconian on the surface, the CEO got it right in hindsight.  In addition, during the fourth quarter of 2014, GT Bank was the most profitable bank in Nigeria.  Apparently, the bank’s remaining employees stepped up another notch when they were faced with collective adversity.  Americans call it running a lean and mean shop while pursuing an up or out policy.

2. Three of the top 10% (first 7) banks are from Ghana and Malawi.  Both countries are dealing with high inflation and lending rates in excess of 20% coupled with rapid currency depreciation which is finally showing some semblance of stability in recent months.   The lesson here is that banks can thrive in tough macroeconomic environments with the right people making the right decisions while cutting out leakages in the system.

3. Six of the top seven banks in the final ranking are located in countries in East or Southern Africa.  The only exception is Cal Bank, Ghana.

4.  Kenya has the most banks (3) in the top 20% (first 14) of banks ranked.  As I have mentioned in previous articles, Kenyan banks have started lending to ideas (not just assets) for quite awhile and it is paying off.

5. Eleven banks achieved single-digit rankings in at least 2 of the four quantitative criteria utilized to rank the banks.  They are as follows:

Letshego, Cal Bank Ghana, National Bank of Malawi, Bank of Baroda Uganda, Commercial Bank Ethiopia, I & M Holdings Kenya, Standard Bank Malawi, GT Bank Nigeria, Commercial International Bank Egypt, Standard Chartered Bank Ghana and Ecobank Ghana.

6. Botswana and South African banks invest more in loans on their balance sheet relative to other banks in Africa.  Aside from Letshego ( a retail bank), none of the top 10 banks in the ranking have this characteristic.  This did not factor into the rankings computation; it is just an observation worth noting.  Bank employees that make the decision to overextend themselves on lending as an asset may never rise to the top from a human capital perspective and beyond.  Sounds surreal but it is true.

7. Two strictly retail banks (Capitec Bank SA and Letshego Botswana) were among the top 5 banks out of 70 ranked when assessed in terms of highest return on loans disbursed.  How many banks in Africa possess the human capital to maximize value from the retail sector in Africa which is the most lucrative sector in my opinion?  Capitec Bank SA does; African Bank SA apparently did not.

8. Five of the top 7 banks with the most financially productive employees in Africa are also among the top 8 banks with the most efficient employees.  This clearly reflects a direct relationship between employee efficiency and financial productivity.  Commercial Bank Ethiopia had the most efficient employees in Africa while Commercial International Bank Egypt had the most financially productive employees.  Both banks made the top 9 in the final rankings and had RoEs in excess of 30%.

9. 5 of the top 7 banks in the rankings have RoEs in excess of 20%.  Meanwhile, ROE was not a factor in this ranking model.

10. Ecobank Ghana came 15th in the overall rankings while Ecobank Nigeria came 63rd .  Additional analyses revealed that Ecobank Nigeria achieved 30% of the group’s pre-tax income in 2014 utilizing 39% of the group’s assets while Ecobank Ghana achieved 27% of the group’s pre-tax income utilizing just 7% of the group’s assets.  Ecobank Nigeria’s pre-tax income was just 12% higher than that of Ghana.  The 48 places between them in the human capital ranking is valid and deserved.  This model and ranking does tell a lot from whichever way you look at it…

 

Bank CEOs should carefully note that collectively paying your employees top dollar does not imply you will get the best out of them.  Most likely you will have diminishing returns and wastage within the system further sending your bank south instead of north when the numbers are crunched.  The most expensive bank employees in Africa among the 70 assessed (Standard Chartered Bank Nigeria) came in 26th in the final ranking of banks.  The least expensive bank employees (Dashen Bank Ethiopia) came in 10th.  Ethiopia has the largest expenditure on infrastructure as a % of GDP in Africa.

The bank that came 70th (last) in terms of labor costs had the 10th most financially productive employees while the bank ranked first (1st) in terms of labor costs had the 20th most financially productive employees in Africa.

Nigeria’s top five banks in the ranking of the African 70 are:

1. GT Bank    2. SCB   3.  Zenith Bank  4.  Stanbic IBTC   5.  Access Bank

Only GT Bank and SCB Nigeria are in the top half of the overall ranking.  Nigeria has 8 of the top 14 (top 20%) most expensive bank employees in Africa.  South Africa has three of the top 14 most expensive bank employees.  I see a lot of wastage in the Nigerian banking space.  Most of them are generating returns way below their capacity and this shows up in this ranking focused on human capital and in their below 5 PEs in most instances.

Only two (2) of the top 10 most expensive bank employees in Africa made the top half (top 35) of this human capital as an asset bank ranking.  Interestingly enough, both are subsidiaries of Standard Chartered U.K. (Nigeria & Zambia).  I suggest other bank CEOs should look at Standard Chartered to learn how to get decent return from relatively expensive employees.

Five of the top seven banks in this ranking are among the bottom 20% (last 14) when it comes to how much they spend on labor costs.  Human Capital as an asset will never be about how much you give employees but how much you get from them.  Finding that optimal balance point is the key to everything including this ranking.  Good luck in finding it…

Overall on a country basis, I am impressed with banks based in Ghana, Egypt, Malawi and Kenya. 

 RANK       BANK NAME

1              LETSHEGO BOTSWANA

2              CAL BANK GHANA

3              NATIONAL BANK OF MALAWI

4              BANK OF BARODA UGANDA

5              COMMERCIAL BANK OF ETHIOPIA

6              I&M (HOLDINGS) KENYA

7              STD. BANK MALAWI

 

8              GUARANTY TRUST BANK NIGERIA

9              COMMERCIAL INT. BANK EGYPT

10             DASHEN BANK ETHIOPIA

11             EQUITY GROUP HOLDINGS KENYA

12             SCB GHANA

13             SCB KENYA

14             FNB BOTSWANA

 

15             ECOBANK GHANA

16             CAPITEC BANK SOUTH AFRICA

17             DIAMOND TRUST BANK KENYA

18             SBM HOLDINGS MAURITIUS

19             KCB KENYA

20             CREDIT AGRICOLE EGYPT

21             BANK OF KIGALI RWANDA

22             ENAT BANK ETHIOPIA

23             FNB NAMIBIA HOLDINGS

24             GHANA COMMERCIAL BANK

25             STANBIC BANK UGANDA

26             SCB NIGERIA

27             NATIONAL BANK OF KUWAIT, EGYPT

28             BANK OF WINDHOEK HLDS.

29             HFC BANK GHANA

30             NBS BANK MALAWI

31             BARCLAYS KENYA

32             CFC STANBIC KENYA

33             SCB ZAMBIA

34             HBZ (HABIB) BANK SOUTH AFRICA

35             MCB GROUP MAURITIUS

 

36             CO-OPERATIVE BANK KENYA

37             SCB BOTSWANA

38             SOCIETE GENERALE GHANA

39             ZENITH BANK NIGERIA

40             STANBIC IBTC NIGERIA

41             ACCESS BANK NIGERIA

42             CRDB BANK TANZANIA

43             UNITY BANK NIGERIA

44             BANK OF ALEXANDRIA EGYPT

45             DCB COMMERCIAL BANK TANZANIA

46             ZAMBIA NAT. COMM. BANK

47             UBA GROUP NIGERIA

48             FIRST RAND BANK GROUP SA

49             FIRST BANK HOLDINGS NIGERIA

50             UNION BANK NIGERIA

51             STANDARD BANK GROUP SA

52             ETI GROUP

53             FCMB NIGERIA

54             STERLING BANK NIGERIA

55             BARCLAYS AFRICA SA

56             NEDBANK SA

 

57             CBZ HOLDINGS ZIMBABWE

58             DIAMOND BANK NIGERIA

59             AFRASIA BANK MAURITIUS

60             STD. BANK SOUTH AFRICA

61             SASFIN BANK SA

62             NATIONAL BANK KENYA

63             ECOBANK NIGERIA

64             MAENDELEO BANK TANZANIA

65             FIDELITY BANK NIGERIA

66             BANK ONE MAURITIUS

67             SKYE BANK NIGERIA

68             SUEZ CANAL BANK

69             NMBZ HOLDINGS ZIMBABWE

70             WEMA BANK NIGERIA

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