South African banks lost R80 billion in the past year

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The Banker has released its annual ranking of the world’s top 1000 banks, showing how South African banks faced one of the toughest years.

“Tumbling commodity prices and volatile currency movements all contributed to the generally weak performance of most of the continent’s big hitters in the 2016 ranking,” it said.

In aggregate terms, the continent’s total Tier 1 capital fell by 12.77%, accompanied by similar hits to both profitability and asset growth.

South African banking wealth was hit particularly hard, with tier 1 capital dropping by a massive 20% over the past 12 months, from $27 billion in 2015, to $21.6 billion in 2016.

This amounts to a $5.4 billion loss – or just over R80 billion.

Three South African lenders, Standard Bank, FirstRand and Nedbank, secured the respective top three positions.

But a closer look at their performance reveals that all of these banks have suffered in the rankings largely as a result of the depreciating rand.

Standard Bank’s total Tier 1 capital in the 2016 edition is $7.48 billion, down from $10.19 billion in the 2015 ranking.

In the global rankings, Africa’s largest bank has now fallen from 123rd place to 160th.

Barclays Africa Group, previously known as Absa Group, would have come third in the African rankings but is excluded from the main ranking as it is still a subsidiary of the UK’s Barclays.

All six South African banks in this year’s Top 1000 World Banks ranking registered a fall in Tier 1 capital. In each case, this decline was by more than 10% year on year.

These are the biggest banks in South Africa

SA # World # Bank Tier 1 Capital 2015 ($m) Tier 1 Capital 2016 ($m) Change (%)
1 160 Standard Bank 10 187 7 475 -26.6%
2 172 FirstRand 7 983 7 177 -10.1%
3 256 Nedbank 4 760 3 864 -18.8%
4 386 Investec 2 518 2 236 -11.2%
5 752 Capitec 933 822 -11.9%
South Africa 27 011 21 574 -20.1%

Looking globally, Chinese banks continued to dominate the ranking, but they are showing signs of slowing down, The Banker said.

Chinese bank profits fell 3.5% – the first drop since 2004 – and bad loans are on the rise, reflecting a weaker Chinese economy.

Industrial and Commercial Bank of China (ICBC) remains number 1 and China Construction Bank number 2, with 4 out of the top 5 places held by Chinese banks.

US banks did well in the ranking with JP Morgan placing third, Bank of America 6th, Citigroup 7th and Wells Fargo 8th. French banks remained competitive, growing profits by 30% – while both UK and German banks lost ground, the report found.

Notably, UK bank profits fell 22% and HSBC is now the only British bank in the global top 10, placing 9th.

These are the top 10 banks in the world, according to the Banker’s Top 1000 ranking:

2016 2015 Bank Country Tier 1 Capital ($m)
1 1 ICBC China 274 432
2 2 China Construction Bank China 220 007
3 3 JPMorgan Chase USA 200 482
4 4 Bank of China China 198 068
5 6 Agricultural Bank of China China 185 607
6 5 Bank of America USA 180 778
7 7 Citigroup USA 176 420
8 8 Wells Fargo & Co USA 164 584
9 9 HSBC Holdings UK 153 303
10 10 Mitsubishi UFJ Japan 131 753

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