In this year’s The Asian Banker Strongest Banks By Balance Sheet evaluation, National Bank of Egypt has emerged as the strongest bank in Africa. This is based on a detailed and transparent scorecard that ranks banks on six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality and liquidity. National Bank of Egypt registered strong balance sheet growth and demonstrated good asset quality and a strong liquidity position.
The top 10 strongest banks in Africa comprise three Nigerian banks, three South African banks and two each from Egypt and Mauritius. The weighted average strength score of African banks on the list declined to 3 from 3.13 in last year’s evaluation, while Egyptian and South African banks continued to outperform.
The profitability of African banks on the list weakened in 2020, with average return on assets (ROA) down from 1.74% in 2019 to 1.07% and average cost-to-income ratio up to 51.7% from 50%. South African banks had the biggest fall in average ROA, from 1.71% to 0.74%, and Kenyan banks also witnessed a significant drop in average ROA from 2.8% to 1.85%. Banks in Morocco recorded the lowest average ROA at 0.45%, while Ghanaian and Nigerian banks reported the highest, at 3.34% and 1.96% respectively.
Egyptian banks demonstrated the strongest asset quality with a 3.5% average gross non-performing loan (NPL) ratio in 2020, lower than the average for all African banks on the list at 5.9%. Kenyan banks saw average gross NPL ratio weaken from 10.1% to 12.6%, the worst in the region. In addition, the average LLRs to gross NPLs ratio of Egyptian banks reached 259%, much higher than 68.6% for South African banks and 72.4% for Kenyan banks. The average gross NPL ratio of Ghanaian banks remained high at 10.9%, albeit seeing some improvement in 2020.
African banks performed strongly in terms of liquidity, with average liquid assets to total deposits and borrowings ratio up from 41.7% to 46.2%. Banks in Egypt maintained the highest liquid assets to total deposits and borrowings ratio at 59.4%, followed by Nigeria with 57.9% and Mauritius with 50.1%. Meanwhile, African banks maintained sufficient capital buffers as most banking sectors experienced an improvement in the level of capitalisation.
For a full explanation of the evaluation criteria please click here.
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Notes: (1) 5 = Highest score, 0 = Lowest score. Scores are only shown to one decimal place, but rankings reflect full information.