Industry survey: Banks jostle for top 5
The banking industry grew by 32 per cent in operating assets from GH¢25.76 billion in 2012 to GH¢34.29 billion in 2013, amid keen competition among the top seven banks jostling for bigger chunks.
Not surprisingly, the collective feat was powered by a 30 per cent growth in deposits and borrowings in a year which saw a lot of deposit mobilisation drive by industry members. Once they mobilised, they increased their lending activities.
Loans and advances, therefore, accounted for 43 per cent of the assets, and remain the largest component of the industry’s operating assets, according to the latest survey by PwC Ghana, the country office of the global accounting and assurance firm.
The GRAPHIC BUSINESS has managed to obtain a copy of the 2014 edition of the annual Ghana Banking Survey conducted by the accounting firm. The survey data are based on figures from the previous year.
The report will be released to industry players, stakeholders and a section of the business community at a meeting in Accra today.
The survey indicated that Ecobank’s 12.9 per cent holding of the industry’s operating assets is the single largest, followed by GCB with 9.4 per cent, a drop from the 11 per cent of industry assets it held the previous year.
Stanbic Bank improved its fifth rank by two places with 8.2 per cent of the share of industry assets, up from 6.5 per cent in 2012.
During that period, Stanbic’s operating assets more than doubled from GH¢1.12 billion in 2012 to GH¢2.82 billion in 2013, making it the fastest growing bank in the industry.
“Stanbic shows tremendous success from its strategy to become a top tier bank. The strategy to stem loan losses and leverage on its corporate and investment banking to target the international clients is yielding results,” the PwC report stated.
Standard Chartered became the third bank with the largest assets with 8.1 per cent of the market share in 2013, down from 8.7 per cent in 2012, with Barclays Bank of Ghana also ceding its fourth place to become the fifth, as its share of industry assets reduced from 7.3 per cent in 2012 to 6.4 per cent in 2013.
Zenith Bank improved its share of industry assets from 3.6 per cent in 2012 to 5.5 per cent last year, thereby improving its rankings from the 10th place to the sixth.
Fidelity Bank, which entered the first quartile in 2010, has maintained its seventh rank of the share of industry assets since 2011. However, its share dropped slightly from five per cent in 2012 to 4.7 per cent in 2013
According to the 2014 Ghana Banking survey, loans and advances continue to constitute the chunk of the banking industry’s operating assets (accounting for 43 per cent), the same as the previous year because of the limited opportunities for banks to extend credit to customers.
“The general industry perception is that the risk profile of customers has not improved. This condition is further aggravated by the unfavourable macro-economic environment which is creating constraints for profitable business,” it said.
It said the prevailing high lending rates also continued to deter borrowers because of the inability to service the loans.
The average base rates charged on lending during the year ranged between 10.6 per cent by Baroda to 28.9 per cent by BSIC.
This sticky credit regime has increased cash holdings by 16 per cent from GH¢6.27 billion in 2012 to GH¢7.24 billion in 2013. Investment holdings in money market instruments as liquid assets increased by 47 per cent from GH¢7.28 billion in 2012 to GH¢10.72 billion in 2013.
That the industry kept 87 per cent of its liquid assets (money market instruments) in government treasury bills and bonds underscores the fact that the banks in general are risk averse.
“The favourable yield and less risky government of Ghana securities make it the most attractive investment option in the light of the challenging economic condition,” the report states.
The gap between the Ecobank and GCB market share of operating assets continues to widen; though the leading player in the industry with the widest branch network, GCB’s market share eroded from 11 per cent as at end of 2012 to 9.4 per cent as at end of 2013.
The decline is an outcome of the intense competition in the industry as other banks are building their capacity and continue to target customers in the same market segment.
UBA’s and ZBL’s operating assets grew by 121 per cent and 104 per cent respectively in 2013. The strong growth is an outcome of placements made by foreign banks. UBA’s improved market share may not be sustained because funding from most of the placements are expected to be settled by the end of 2014.
As a new entrant in 2013, FCPB has made significant inroads in comparison with its peers with regard to market share.
Share of industry deposits
Deposits in the banking sector grew by 27 per cent from GH¢20.7 billion at the end of 2012 to GH¢26.34 billion as at end of 2013.
Competition for deposits during the year was intense as banks were further challenged by the attractive yield from government securities.
The current account deposits constitute 46 per cent of total industry deposits, growing by only 11 per cent, although this serves as the cheapest source of funds for banks. The industry now has to rely on more expensive alternative sources of funds.
Savings and time deposits grew by 26 per cent, while deposits from other banks constituted 12 per cent of industry deposits as of the end of 2013.
According to the survey, the market share of the industry’s deposits has not changed significantly because there is limited differentiation in the products offered by banks to give any bank a strong edge over the others.
“All banks have made quality customer services their priority giving the banking industry a unique transformation,” it pointed out.
Ecobank and GCB led the industry in the first and second positions holding 14 per cent and 10 per cent share respectively of the industry’s deposits. GCB, however, lost market share of deposits from 11.3 per cent in 2012.
Again, Stanbic Bank continues to dazzle as it notched up two places, moving its share of deposits from 6.7 per cent in fifth position in 2012 to third position in 2013 with 9.3 per cent share. The bank’s deposits grew by 75 per cent with the period under review.
Stanchart also displaced Barclays Bank from the third position when in the area of deposits, improving its share by 0.1 percentage points from 8.2 per cent in 2012 to 8.3 per cent in 2013.
Barclays, Fidelity and UBA followed in that order with ADB displaced to the 10th rank in deposits from its previous seventh position; blame it on competition.
Deposits from other banks
The survey indicated that deposits from other banks increased three fold from GH¢956 million in 2012 to GH¢3.09 billion in 2013.
The market share of deposits of the top five banks; GCB, Ecobank, Barclays, Stanchart and Stanbic, accounts for 48 per cent.
The survey observed that the placements of short term funds between overnight and one month that came from the regional and multinational banks accounted for an unusual chunk of 86 per cent of the placements.
“This may suggest that group treasury activities by some of these banks considered it profitable to take positions in Ghana’s money market because of the gains it can derive from both interest and changes in the foreign currency rates,” the reported indicated.
Share of industry advances
Growth of loans and advances in the industry slowed down between end of 2012 and end of 2013. Compared to the 41 per cent increase in industry loans and advances to GH¢12.82 billion at end of 2012, there was only 31 per cent growth in industry loans to GH16.85 billion.
The slowdown is an outcome of a more risk adverse industry as the risk profile of customers in a challenging economic condition is not considered favourable.
The services sector was the largest beneficiary of credit as it absorbed 27 per cent of the industry’s loan book.
The manufacturing sector’s attraction of lending remained unchanged at 11 per cent, with lending to electricity, gas and water sectors doubling from GH¢687 million in 2012 to GH¢1.45 billion in 2013, a change that could be attributed to the impact of the cedi depreciation on imported crude and refined fuel product.
Agriculture and mining, which for a long time remained the mainstay of the economy, accounted for a small proportion of lending by banks.
Loans and advances extended to agriculture dipped from six per cent at the end of 2011 to only five per cent at the end of 2013, as mining attracted only three per cent.
Ecobank, which leads the ranks of loans and advances, grew its portfolio by 53 per cent from GH¢820 million in 2012 to GH¢1.56 billion in 2013.
Stanbic grew its loans book by 48 per cent, to move ahead of GCB and SCB to hold 7.4 per cent of industry lending.
The future of banking in Ghana
The survey identified four factors would be most influential in transforming and shaping the banking sector going forward. These are competition, legislation and regulations, technology, and the performance of the domestic economy.
Chief executives of banks interviewed during the survey were optimistic that the industry was on the brink of significant transformation to be driven by those key factors over the next five years.
The executives felt that the most effective means to relate to telecom companies was to partner and collaborate rather than compete.