Economic Difficulties Weigh Down Nigerian Banks As 9 Banks made Top 1000 Global Banks

By Omoh Gabriel, Business Editor & Emeka Anaeto, Economy Editor
Nine Nigerian banks made this year’s top 1000 global banks even as  some of the banks dropped from their former rankings due to the challenges of significant slump in oil prices and general decline in economic activities in the second half of 2014.

The list of top 1000 global banks was released, yesterday, by The Banker magazine in London. The banks that made the top 1000 global banks, which are the top 25 banks in Africa are Zenith, Ecobank, FirstBank, GTbank and Access Banks, Diamond Bank, UBA, Fidelity and FCMB.

None of the banks made the top five in Africa. GTB dropped from 415th to 449th just as Access Bank, Fidelity Bank and UBA all slipped from their positions in the previous year.
Diamond Bank joined the list of top 25 banks in Africa while it also made top fast movers on the list alongside Union Bank and Sterling Bank. Sterling Bank was the only new entrant from Nigeria in the global list in 2014.

Ecobank Nigeria’s parent company, Ecobank Transnational, based in Togo, also made a strong showing amongst fast movers, jumping 90 places to place 306th in the global ranking.

According to The Banker, Zenith Bank placed first among Nigerian top banks in terms of Tier 1 capital but 6th in Africa with a capital of $3.162 billion. It was followed by Eco Transnational which is second in Nigeria and 7th in Africa with a capital base of $3.030 billion. FirstBank ranked 3rd in Nigeria and 10th in Africa with a capital of $2.327 billion.

Next in the ranking is GTbank which came 4th in Nigeria and 13th in Africa. The Banker report said Access Bank is 5th in Nigeria but 15th in Africa with a capital base of $1.398 billion.

Others are Diamond which is 6th in Nigeria and 17th in Africa, UBA ranked 7th in Nigeria and 17th in Africa while Fidelity ranked 8th in Nigeria and 21 in Africa. FCMB on its part was the 9th bank from Nigeria to make the top 25 banks in Africa.

Banks that slip  down the rankings

The Bankers report said: “Nigeria’s banks endured a difficult close to 2014, as the significant slump in oil prices caused havoc with the country’s economy.

“Zenith Bank has held its position as the sixth largest bank in Africa, and FirstBank of Nigeria has risen from 424th to 371st on the global list. However, Nigeria’s Guaranty Trust Bank has dropped from 415th to 449th, with its capital base decreasing from $1.95bn to $1.78bn. Access Bank, Fidelity Bank and United Bank for Africa have also slipped down the rankings, though Diamond Bank joins the African top 25 at 579th in the global rankings.

South Africa

“The difficulties of the South African economy are reflected in its banks’ performances in the 2015 Top 1000 ranking, but elsewhere there is good news for Togo’s Ecobank and FirstBank of Nigeria.

“For South Africa’s banking sector, the largest in Africa, 2014 passed in a similar vein to 2013 – both years were dominated by the weak performance of the national economy and the ensuing volatility of the rand.

“In 2013, the rand lost 13 per cent of its value against the dollar, and though 2014 did not see another rapid depreciation, rand volatility remained high. This hampered the ability of South Africa’s banks to improve their capital adequacy. Four out of its top five lenders have fallen in the Top 1000 World Banks 2015 ranking, with a sixth, African Bank, dropping out of the table entirely.

“Standard Bank remains the continent’s largest bank, though it has dropped from 116th to 123rd in the overall ranking and its Tier 1 capital has fallen slightly from $10.56bn to $10.18bn. FirstRand has held its regional ranking position and increased its capital slightly, but Nedbank Group has dropped from 195th position to 216th and has seen its capital base drop to $4.76bn, from $5.11bn. Barclays Africa Group, previously known as Absa Group, would have come third in the African rankings with a Tier 1 capital base of $6.09bn, but is excluded from the main ranking as it is a subsidiary of the UK’s Barclays.

Ecobank improves significantly

“Elsewhere, Togo-based pan-African lender, Ecobank, has improved significantly on its 2013 performance, climbing 90 places to 306th and increasing its capital adequacy by “The world’s biggest banks continue to lose ground to Chinese rivals, according to The Banker’s latest ranking of Top 1000 banks.

“This year HSBC – which has restructured significantly and increased its focus on Asia – slipped from fifth place to ninth. Citigroup – which has also curbed its overseas presence – fell from sixth to seventh place. Royal Bank of Scotland (RBS) fell to 18th place after the UK government bailout thwarted its international ambitions. Before the financial crisis in 2008, HSBC topped the list, Citi placed second and RBS third, measured by capital strength.

Chinese banks powering ahead in ranking

“Meanwhile, Chinese banks are powering ahead in the ranking. China now has three banks in the top five places, with Bank of China moving from seventh place to fourth, and China Construction Bank staying in second place. Agricultural Bank of China moved up from ninth place to sixth.”

The top four Chinese banks are also the world’s most profitable. Combined profits from all Chinese banks in the ranking are almost double those of US rivals and 10 times bigger than those of UK banks. In 2008, both UK and US banks were more profitable than their Chinese counterparts.

“However, Chinese banks are not taking as much global market share as their predecessors. ICBC, which tops the ranking for the third year in a row, is aiming to have 10 per cent of its assets outside China in five years’ time. But this is small in comparison with the global banks in their heyday.

Brian Caplen, editor of The Banker, said: “At one time the ambition of the largest banks was to have operations in all parts of the world and across all business sectors. Now they are focussing on a few areas in a bid to restore profitability. We may have seen the end of the global bank.”

While global banks are cutting back on employees – Citigroup has reduced staff by 12 per cent since 2011 and HSBC by nearly 8 per cent with further losses to come – China’s ICBC and in contrast China Construction Bank have each increased staff by 13% over the same period. China’s big four banks now employ 1.6 million – 1.5 times more than the number employed by the big four US banks.

In most areas of the world, banks increased their profits. Suffering heavy losses in 2012 and 2013, eurozone banks have increased their profits by 123 per cent from a low base. African banks increased profits by 18%, Latin American banks by 17 per cent and Asian banks by 7.5 per cent.

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