Africa’s top banks: a dominant ‘Big Three’

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While global banks command a major share of Africa’s financial services market, South Africa’s Standard Bank is providing keen competition.

by Graham Buck

Updated: April 24, 2019

Citi’s strong credentials as a global bank makes it a favourite with corporate treasury departments of companies operating across Africa, a EuroFinance survey finds.

Three banks emerge as front runners based on responses from 80 senior corporate treasury professionals polled at EuroFinance’s recent Effective Finance and Treasury in Africa conference in London and online. Collectively Citi (36.5%), Johannesburg-headquartered Standard Bank (18.4%) and Standard Chartered (17.0%) account for a majority of votes for best bank in Africa. The trio are some distance ahead of fourth-placed HSBC (8.0%).

Citi’s engagement in Africa dates from the 1950s and it has clients in nearly 40 countries across the region with a physical branch presence and clearing membership in 15 countries. The group has 4,000 clients across Africa spanning the corporate, public sector and financial institution sectors and processes nearly 40% of its transactional value through host-to-host (H2H) and application programming interface (API) connectivity – a testament to the growing level of sophistication in Africa. Rival Standard Chartered, operating out of more than 60 countries worldwide, is present in 16 African countries.

Survey respondents ranked more than 25 global and local banks in Africa across a total of 11 offerings: service and responsiveness; FX management advisory; FX hedging product offerings and funding solutions; payments innovation; cross-border transactions; fraud mitigation; mobile solutions; supply chain finance; trade finance advisory; and commodity risk management.

Citi leads in each category, its performance particularly strong in FX management advisory services where it was chosen by 42.4% of respondents, followed by Standard Bank (25.8%), Standard Chartered (10.5%) and HSBC (4.5%). FX hedging for Africa remains an area where multinational corporations rely on their banks for risk management solutions, says Desiree Pires, Standard Chartered’s co-head, UK corporate sales: “Complex regulation, illiquidity, trapped cash, high cost of hedging and limited product choice makes FX risk management in Africa a key pain point for clients and one where banks can differentiate themselves through service and innovation.”

Rapid developments

While not reflected in the survey results, global banks operating across Africa must still work with its central banks to keep abreast of regulatory developments, which “have a knock-on effect on how you do business in each country,” says Geoffrey Gursel, Citi’s head of corporate and public sector sales and implementation, Sub-Saharan Africa.

“We endeavour to inform customers on just where each country appears to be heading from a banking and specifically payment progression perspective, but policy and local regulations can change quite quickly,” he admits.

While that might appear to give local banks an advantage over bigger international rivals, Standard Bank, whose origins in South Africa date from 1862 is the only serious competitor. Standard has developed a presence across 20 African countries since separating from Standard Chartered in 1987 and building a sub-Saharan Africa franchise. Rivals Ecobank, ranked sixth-favourite by survey respondents and Absa in eighth place, lag with scores of 4.6% and 3.3% respectively.

Standard Bank ranks strongest in the categories of best bank for service/responsiveness, where its 23.9% score is beaten only by Citi (29.6%); FX advisory services (25.8% versus Citi’s 42.4%); funding solutions (23.9%); cross-border transactions (22.7%) and mobile solutions (22.4%). Standard Chartered takes second place after Citi in three categories: fraud mitigation (21.9% versus Citi’s 32.8%); payments innovation (19.4%) and commodity risk management (15.1%).

Competition has been accompanied by consolidation. Sub-Saharan Africa’s banking community is steadily shrinking, although as global banks reduce their exposure local banks often fill the service gap.“The region has emerged as a hub of innovation with initiatives such as electronification of cash, instant payments, mobile money channels, digitisation and open banking initiatives becoming widespread,” says Viplav Rathore, regional head of cash products and treasury solutions, Africa & Middle East at Standard Chartered Bank.

Regulatory variations and currency volatility mean that banks’ expertise in providing FX management advice, hedging products and funding solutions is crucial. “Many markets will at some point experience a liquidity crisis, whether it’s triggered by a drop in the oil price or other reason.” notes Jason Marsden, Standard Bank’s head of TPS sales Europe.

South Africa’s rand (ZAR) is frequently been the world’s most volatile currency in recent years, while Angola’s currency, the kwanza (AOA) nearly halved against the USD last year and fell sharply against the euro.

“Most companies want to use intercompany funding as it’s cost-effective, but this form of lending must be structured correctly or you risk ending up with trapped cash,” says Marsden.