The end of the third quarter is always an interesting time of year for the financial sector. From a bankers perspective in particular, the third quarter is when you seriously assess your strategies and your execution of that strategy. Are you on target? How well are your competition doing? What can we do differently? These are probably the most common questions directors and their various boards will often ask of their management teams.
Zambia’s economy is currently in a healthy place right now. In the recently released World Bank’s Ease of doing business; Zambia is now ranked 85th in the world and 6th in Africa, jumping 12 positions from last year. Further to that, Zambia’s GDP growth is currently at 4.6% with inflation standing at 6.4%. In addition, with the base lending rate currently at 11% makes these exciting times for the financial sector.
The 2017 third quarter results have been published and we can now scrutinise the numbers of the top 5 banks.
#1 Standard Chartered Bank
- Standard Chartered Bank leap frogged Barclays Bank to take back number one position as the most profitable back in Q3. StanChart’s net income grew 48% from their H1 results representing an actual year to date income actualisation of ZMW 239.18m vs their H1 income of ZMW 123.84m. StanChart was ranked 4th in both their Deposits (ZMW 6.6m) and Loans & Advances (ZMW 2.5m), despite this fact, how did they manage to top the lot? It’s simple, by keeping their cost low with a cost to income ratio of only 52% and booking smart assets (loans).
- Strategy-wise StanChart have been one of the most consistent banks in the market. They are always amongst the top 3 best performing banks in the country. StanChart aren’t big in the mass market segment but what they lack in this segment they make it up in their corporate banking excellence. They also have the highest ROE (Return on Equity) of the top banks in this quarter at 35%.
#2 Barclays Bank PLC
- Barclays bank lost their H1 championship title to StanChart in Q3. Barclay’s net income was ZMW 191, 15m, only ZMW 66, 333m more than their H1 results. ZMW 48.03m less than their top rivals and only ZMW 1.18m more than the very close number 3 (Stanbic Bank Zambia). All in all Barclays Bank Zambia had a solid Q3 performance, despite Barclays being 4th in terms of revenue @ ZMW 788.8m comprising of strong FX income (ZMW 200.5m), Net interest income (ZMW 460.1m) and fee income of ZMW 328.6m and yet they managed to climb all the way to second position thanks to a fairly low cost to income ratio of 57% coupled with low impairments of only ZMW (15.78m). This proves that Barclays are here to prosper.
- Barclays Bank has seen a few significant changes from 2016, from the Barclays London PLC sell down to having Mizinga Melu appointed MD in April 2017. Top on Mizinga’s agenda is to get the bank back to number one. So far I think she’s on the right track, but with only a few weeks to go before the end of the year, she has a lot of work to do. With a ROE of 28% her shareholders should be fairly happy.
#3 Stanbic Bank Zambia
- Stanbic Bank came in at 3rd place in Q3 with a year to date net profit of ZMW 189.97m. Stanbic have always been known as the “kings of FX”, and it’s no surprised that they were the market leaders in Foreign exchange fees @ (ZMW 181. 37m). Stanbic’s NII and NIR numbers were pretty impressive @ ZMW 420.77m and 502.6 respectively. Stanbic’s revenue was second the market at ZMW 923.37m, on the downside their expenses (ZMW -569.3m), impairment (ZMW -42.01) and a Cost income ratio (CIR) of 62% cost them the top spot.
- Stanbic bank Zambia has continued to be the preferred bank for the mines and hence they enjoy relatively good FX income in comparison to the rest of the market. Stanbic have benefited on their strategy to maintain customer relations in their different countries of operation.
#4 Citibank Zambia
- The exclusive corporate bank ended their third quarter at number 4, realising profit after tax (PAT) of ZMW 130.62 year to date. Citi remains the most efficient bank in the market with the lowest CIR (cost to income ratio) of 25% and a reasonable ROE of 23.7%.
- Keep it Corporate and keep it lean, that’s the winning strategy that CITI bank live and breathe. They have the leanest and most efficient structures in the market, enabling them to keep their overhead cost low and turn out decent net income with only a work force of approx. 60 people and only two branches across the country.
#5 Zambia National Commercial bank
- ZANACO had a decent Q3, though they were the highest revenue earning bank in Q3 (ZMW 958.62m YTD) this was offset by their high net operating expenses of (ZMW 860.1m). ZANACO have the highest cost to income ratio in comparison to the rest of the market at 72%.
- ZANACO have gone through a restructuring phase, they have revamped their FX markets, CIB and Retail functions. Their shareholders wouldn’t be too happy with their ROE of 18%. ZANACO should have a more profitable 2018 if their restructuring results in a reduction in operating costs.
The 4th quarter will be the last stretch for our financial institutions with tough executive meetings taking place and strategies being revised or reinforced. The aim is to be profitable and to be the top bank at the end of the day. Have a FIZ day!