Zenith Bank Nigeria, Standard Bank SA, Kenya Commercial Bank & Commercial International Bank, Egypt: How are the biggest faring?

Dear Africa interested individuals:

                                                        I took a quick look at the biggest bank in Egypt, Kenya, Nigeria and South Africa.  Size (asset base and market capitalization) are key drivers of first-line attention when seeking alpha across the banking industry.  How have these banks performed relative to each other given their size domination in their respective countries?  How much profit could each bank eke out given the abundance of assets available to them relative to the local competition?  As at December 31st, 2014, this is what I have.  

Commercial International Bank, Egypt:  

Asset Size: $20.1 Billion   

ROE:  32.7%

 Pre-tax income/Assets:  3.8%

Year-to-date performance: 7% (as at July 14th, 2015)

Human Capital as an Asset Ranking:  9th  (See article on this blog for details)


Kenya Commercial Bank:

Asset Size:  $5.45 Billion

ROE:  22.3%

Pre-tax income/Assets:  4.85%

Year-to-date performance:  -(3.5%)

Human Capital as an Asset Ranking:  19th 


Standard Bank Group, South Africa:

Asset Size:  $164 Billion

ROE:  11.1%

Pre-tax income/Assets:  1.9%

Year-to-date performance:  10.9%

Human Capital as an Asset Ranking:  51st 


Zenith Bank, Nigeria:

Asset Size:  $20.5 Billion

ROE: 18%

Pre-tax income/Assets:  3.2%  

Year-to-date performance:  -(1.5%)

Human Capital as an Asset Ranking:  39th 

As I have mentioned in the past, I do not know the outcome of my analysis until it is completed. 

Kenyan banks have been lending to ideas for awhile and this knowledge reflected in the ability of the bank to generate the most profit from the assets available to it among these four big African banks.  The second-placed bank was more than 100 basis points behind.  

Commercial International Bank was able to give its shareholders the most return on their investment in the form of ROE.  It is also the highest ranked bank from a human capital as an asset perspective among these four big African banks. 

Standard Bank is the biggest bank in Africa and no surprise it came first here also.  This is the only variable that the bank led from the front.  It took the fourth (last) position across all three other variables.  

Year-to-date price performance is not among the variables used to assess the banks.  It is included here for reference purposes only.  Kindly take note.  

The two frontier market banks have negative year-to-date price performances while the two emerging market banks have positive year-to-date price performances.  I guess, so far into 2015, this is not looking like the year for the frontier markets.  For the first two trading days of this week, Zenith Bank has traded $25.2 million and closed on both days nearer to its day low than its day high which is a subtle sign of sell pressure.  

Based on thee four variables, ROE, Human Capital Ranking, Pre-tax income/Assets & Asset Size, the first (1st) among these big four African banks is Commercial International Bank (CIB), Egypt,  Kenya Commercial Bank (KCB) came 2nd, Zenith Bank Nigeria came 3rd and Standard Bank Group came 4th. 

CIB scored 7 points in the ranking.  KCB scored 9 points, Zenith scored 11 points and Standard Bank scored 13 points.    The lower the score the better.  The best possible points tally is 4 and the worst is 16.  CIB was three points away from the best possible score while Standard Bank was three points away from the worst possible score.  The points were obtained by ranking the four banks against the four variables and summing up the ranks for each bank.   

I am very pleased to note that the same way these banks ranked in this four-variable assessment is the same way the banks ranked against themselves in the Human Capital as an Asset Ranking. 

Commercial International Bank is the best bank among these biggest African Banks.  Old Mutual got it right investing 9% of their portfolio in the stock.  Banks should remember that the bigger they get, the more is expected from them.  It is all about optimal big and not absolute big.  Make sure you find your own efficient frontier and stay there.  Stepping away from it may send the bank reeling.