Finance

Standard Bank dominates R11 trillion industry

Data from the South African Reserve Bank (SARB) revealed that Standard Bank dominates almost a quarter of South Africa’s R11 trillion banking sector, followed by FirstRand, Absa and Nedbank.

The Reserve Bank revealed that, at the end of 2023, the banking sector had R5.1 trillion in advances and R5.7 trillion in deposits. 

Standard Bank has a 24.9% market share of these advances in the banking sector. It is followed by FirstRand (21.9%), Absa (21.8%), and Nedbank (16.5%).

Denker Capital banking analyst Kokkie Kooyman told Business Day TV that a bank needs three things to do well in South Africa, all of which Standard Bank has achieved.

He said the most important factor needed is good management and skills in employees like bankers who can effectively assist clients.

Secondly, a bank needs a big balance sheet, particularly if a bank deals with corporate clients.

“When you deal with big corporates, they want to do transactions on a big scale, especially if we’re going to Africa or overseas with Hong Kong, so you must have a big balance sheet,” he explained.

He said it often happens in instances like these that size begets size, “so the bigger you are, the more chance you have” to attract big corporate clients.

In addition to a big balance sheet, a bank needs deposits. Kooyman said the importance of deposit gathering is often underestimated in banking.

“For deposits, you need trust in the franchise, so Standard Bank has done very well over the years because it’s just always been very stable, consistent, and trustworthy,” he said.

Asset management

When it comes to South Africa’s Big Four banks, Standard Bank is the dominant financial institution in Africa.

Standard Bank’s trading revenue on the continent eclipses that of its three biggest competitors – FirstRand, Nedbank, and Absa – combined. 

This was revealed by a research analyst at Private Clients by Old Mutual Wealth, Tasneem Samodien, who outlined the reasons behind the bank’s strong performance in 2023 and its dominant position in Africa. 

Standard Bank’s 2023 financial results showcased robust growth, with headline earnings surging by 27%. 

This performance was fueled by the sustained momentum within the group’s African operations. 

Notably, Standard Bank’s Africa Regions, representing only 27% of Standard Bank’s net asset value, delivered a significant 42% contribution to group headline earnings. 

This achievement underscores remarkable growth from a decade prior, when Africa’s contribution to profits stood at a modest 12%.

One of the key drivers of Standard Bank’s success in Africa has been the development of its Global Markets division, which bridges the gap between African businesses and international markets. 

Through this division, the bank assists clients in trading foreign currencies, commodities, fixed-income securities and equities. 

This division generates trading income, which is included in the group’s non-interest revenue and is unaffected by interest rate changes or the pressures on traditional banking fees and commissions. 

In this way, it provides a valuable source of income diversification. 

While trading income is inherently volatile due to its dependence on client trading activity, it has exhibited significant growth, with a compound annual average of 14% over the past five years, surpassing the traditional fee and commission income growth of 2% over the same period. 

Consequently, Standard Bank’s trading revenue for 2023 eclipsed the combined trading revenue generated by peers FirstRand, Absa and Nedbank, as shown in the graph below. 

Newsletter

Comments