2023YE Assessment of Zambia’s Top Banks
Let us assess the top banks for FY2023 using different financial metrics, considering that these results reflect last year’s performance and the landscape has shifted since then.
1. By Revenue/Market Share:
Top performer: Zanaco
Zanaco dominated in revenue, capturing 22.29% of the market share, followed by ABSA at 17.00% and Stanbic at 16.08%. Zanaco also held the largest balance sheet, with average total assets of ZMW 41.7bn, compared to ABSA’s ZMW 28.4bn and Stanbic’s ZMW 35.6bn, showing Zanaco’s ability to generate and maintain a significant market presence.
2. By Return on Equity (ROE):
Top performer: Stanchart (52.52%)
Stanchart posted an impressive 52.52% ROE, followed by Atlas Mara at 50.84%, Zanaco at 45.82%, and First Capital Bank at 38.71%. These banks demonstrated strong profitability relative to equity. However, their high leverage ratios—Stanchart (13.25), Atlas Mara (14.92), Zanaco (10.16), and FCB (11.57)—suggest heightened sensitivity to SRR (Statutory Reserve Ratio) changes and potentially, the directive to transfer government deposits to the central bank, where compliance remains low.
3. By Return on Assets (ROA):
Top performer: FNB (5.29%)
FNB led in ROA, reflecting the bank’s efficient use of assets to generate profit. ABSA (5.04%) and Citi (4.51%) followed closely, with all three banks maintaining lower-than-average leverage ratios, showing a conservative approach to risk while maximizing returns.
4. By Profitability (Net Income/Operating Income):
Top performer: Bank of China
Bank of China achieved the highest profitability ratio at 48.21%, followed by ABSA at 41.32% and Citi at 37.47%. These banks efficiently turned revenue into profit, indicating strong cost management. ABSA was the most cost-efficient bank, with a CIR of -39.63%, followed by Citi (-40.38%) and Bank of China (-40.54%), reflecting their ability to generate income while keeping costs low.
5. By Efficiency (Operating Income / Average Total Assets):
Top performer: Bank AB
Bank AB displayed exceptional efficiency, with a ratio of 28.32%, well above the market average. However, high costs significantly impacted its net income. FNB (15.60%) and Zanaco (14.03%) were also efficient but managed their costs more effectively.
6. Provisions for Loan Losses:
Critical Insight: Stanchart’s provision ratio of 13.25% was significant, highlighting the bank’s risk management in addressing potential loan defaults, impacting their bottom line.
7. Leverage:
Critical Insight: Leverage played a crucial role in amplifying returns, but it also increased sensitivity to regulatory changes. Stanchart, Atlas Mara, First Capital Bank, and Zanaco had high leverage, likely making them vulnerable to this year’s SRR hikes and potentially non-compliance with the directive to transfer government deposits to the central bank. As of the end of July, compliance with the directive remained low, with only ZMW 3.4bn transferred from the expected ZMW 12bn. Conversely, FNB, ABSA, Stanbic, and Citi maintained lower leverage ratios, signaling a more conservative approach and better preparedness for regulatory shifts at the end of 2023.
Summary
1. Most Balanced Banks: ABSA, FNB, and Zanaco emerge as the most balanced banks across different metrics. ABSA performs well in revenue, efficiency, ROA, ROE, and profitability while maintaining relatively conservative leverage. With conservative leverage, FNB performs well in ROA, ROE, and efficiency but is not as cost-efficient. Zanaco has strong revenue performance with the highest market share (Zanaco also has the most extensive balance sheet), good ROE, ROA, and efficiency, but operates with higher leverage.
2. Strong Performers with Higher Risk: Stanchart and Atlas Mara are standout performers, particularly in ROE, but they carry higher leverage, which increases their sensitivity to regulatory risks such as SRR hikes and potentially the transfer of government deposits to the central bank.
3. Efficiency and Profitability Leaders: Bank of China and Citi are highly efficient and profitable but are less balanced across all other metrics like leverage and equity management (ROE).
These metrics provide a snapshot of bank performance in FY2023, offering a balanced view of how different banks excelled across critical indicators. Remember, these results reflect past performance and current market conditions have evolved since then. These are just a few metrics to evaluate performance. Other factors, such as asset quality, transformative deals, and innovation, should also be considered when determining the best bank overall. Nonetheless, the above criteria provide a transparent and quantitative framework for comparison.
#zambia #banking
Dean N Onyambu is the Founder and Chief Editor of Canary Compass, a co-author of Unlocking African Prosperity, and the Executive Head of Treasury and Trading at Opportunik Global Fund (OGF), a CIMA-licensed fund for Africans and diasporans (Opportunik). Passion and mentorship have fueled his 15-year journey in financial markets. He is a proud former VP of ACI Zambia FMA (@ACIZambiaFMA) and founder of mentorship programs that have shaped and continue to shape 63 financial pros and counting! When he is not knee-deep in charts, he is all about rugby. His motto is exceeding limits, abounding in opportunities, and achieving greatness. #ExceedAboundAchieve
