Both Nedbank and Barclays Africa are counting on growth in the rest of Africa, as SA’s recovery from years of political wrangling and state capture will take time to fix.
Nedbank expects the SA economy to grow 1.6% in 2018, while Barclays Africa predicts growth of 1.4%.
But prospects across the continent are more compelling. Nedbank expects the economic recovery in sub-Saharan Africa to gather pace as commodity prices rise and government finances improve. The IMF forecasts average growth of 3.4% in these countries.
Last week, Nedbank announced that its combined earnings with pan-African associate Ecobank Transnational Inc for 2017 rose 2.8% to R11.8bn. But excluding the chronically loss-making Ecobank, Nedbank clocked 7.8% growth to R12.8bn.
Still, Nedbank CEO Mike Brown says he expects Ecobank to be "the single largest driver of profit growth in 2018". This is partly because Nedbank has cleaned up Ecobank, and its board now includes Nedbank’s corporate and investment bank head Brian Kennedy.
"The new management has arrived," says Brown. "The Nigerian economy is expected to grow. [It] also has much better risk appetite."
After champagne corks popped over Ecobank’s stellar performance in 2015, its first full year on Nedbank’s books, the mood soured the following year as oil prices fell and Nigeria’s economy slumped.
For 2016 as a whole, the loss from Ecobank in Nedbank’s income amounted to R125m. Unfortunately for Brown’s bank, that pattern repeated itself in 2017.
Nedbank is now betting that pattern reverses.
Barclays Africa is projecting growth of 5.8% in its rest-of-Africa markets as central banks ease monetary policy.
FirstRand, with a presence in just nine African countries, eased past Standard Bank as Africa’s largest bank by assets, with 19.07% ($88.2bn) of all continental loans issued.
Bradley Preston, chief investment officer at Mergence Investment Managers, says Barclays Africa would need to reverse "multiple years" of market share losses at its SA retail bank, along with growing the rest-of-Africa business, if it wanted to double its share of African banking revenues. "SA retail market share has declined from 29% to 22% over the past decade," says Preston.
"Barclays Africa will need to reverse this and increase corporate market share in SA. SA is still so big in their lives that they have to get SA moving in the right direction to meet their goals.
"The big challenge here is Nigeria. It is difficult to see Barclays Africa doubling market share across the continent without having a full presence in Nigeria, but as we have seen from many of their competitors, that is a big challenge to get right," Preston says.
"FirstRand seems to have all but given up on finding something to acquire in Nigeria, and Standard Bank and Nedbank have both faced their fair share of challenges there."
Barclays Africa’s loan book, along with the bank’s other businesses, brought in R72.9bn in revenue for the year to December.
More than R53bn of this came from the group’s operations in SA, with the rest of Africa contributing R15.6bn.
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