After the banks had witnessed their operations and books ripped apart by Covid-19, 2021 not only marked a return to near normalcy, but also a bumper crop of mindboggling results.
From a global perspective, 2021 can be summarized as a recovery year, according to Sim Tshabalala, CEO of the Standard Bank Group.
For the banking industry, the easing of pandemic restrictions and increased access to vaccines fueled the economic resurgence.
In South Africa, a PwC performance analysis of Absa, FirstRand, Nedbank and Standard Bank shows an average of 99 percent increase in headline earnings compared to 2020, attributed by the analysts to a 59.6 percent decline in the combined credit impairment charges.
As a result, the combined return on equity (ROE) rose to 15.9 percent compared to 8.3 percent in 2020.
“Having consistently maintained robust balance sheet metrics across capital, liquidity and credit provisions, the results reflect a rebound on the back of a more supportive operating environment and the focused execution of their digitally led strategies,” says Francois Prinsloo, Africa Banking and Capital Markets leader at PwC.
In East Africa, CAC International Bank, whose balance sheet stands at $472.8 million, posted $4 million in profits and 18 percent ROE and is the winner in Djibouti. The bank’s Cacpay Banki offers contactless services.
The best bank in Tanzania, CRDB, enjoys a strong market presence with 228 branches, 3 million customers and $3.7 billion in assets. The bank cut down NPLs to 3 percent in 2022 from 8.6 percent in 2018.
Awash Bank, best bank in Ethiopia, is a leader in profitability, and posted $75 million in profits last year. The bank’s strength stems from its network of 566 branches, 5 million customers, and more than $2.7 billion in assets.
Bank of Kigali, the best bank in Rwanda, posted $35.6 million in profits in the first three quarters of 2021. Serving 350,000 retail clients and 26,000 businesses, the bank launched a product designed for women to further financial inclusion.
In Uganda, Centenary Bank won the country’s best bank designation. With 2 million clients and 77 branches, it has been at the forefront of driving financial inclusion, mainly through mobile banking.
Kenya witnessed a similar situation where Central Bank of Kenya data shows that the banking industry’s pretax profits for 2021 rose 72.7 percent to a record $1.6 billion, resulting in mouthwatering dividends for shareholders.
“When we don’t need capital, we give it back to shareholders,” says Kariuki Ngari, CEO of Standard Chartered Bank of Kenya. The increased dividends came after the bank posted a 66% jump in net profits to $77.5 million.
NCBA, the winner for Kenya, has witnessed unprecedented growth in just a few years. With $4.9 billion in assets, the bank posted 159 percent growth in profits for the first nine-month period of 2021 to $96.8 million. As the market leader in asset finance, it opened nine branches to grow its retail market.
Across Africa, banks are optimistic that the tough season is behind them. Measures taken in 2020 to build up capital buffers to ensure sound footing and preserve credit strength are now paying off.
Besides, the problems of provisions for nonperforming loans (NPLs) and forced holdback in lending are no longer necessary.
Notably, banks expressed cautious optimism even with the threat of a pandemic relapse. However, Russia’s invasion of Ukraine casts a dark shadow on economic recovery.
The prices of commodities, particularly oil, wheat and fertilizer, already have risen sharply due to supply disruptions and inflation.
In late March, South Africa’s central bank increased its benchmark rate by 25 basis points to 4.25 percet, the third such move since November, to counter inflationary pressures stemming from the war. The country imports 10 percent of its wheat from Russia and Ukraine.
Although Africa’s banks are alert to threats, they see a growth opportunity from the 2021 rebound. Specifically, improving and strengthening digital platforms that were central in the swift recovery will undoubtedly define the bank of the future.
Among the big-four banks in South Africa, the number of digitally active clients increased by 8 percent in 2021 to stand at 14.4 million against 11.8 million in 2019.
“The total number of digitally active clients has been on a steady growth path since the onset of the pandemic in 2020 accelerated by changing customer expectations,” notes the PwC analysis.