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The South African Banking Sector
The South African banking sector which has total assets of R5.14-trillion, remains highly concentrated with the five largest banks holding 91% of total assets as of 31 December 2017. While the country’s big banks dominate, the sector is also diversified with 36 South African banking institutions registered with the Reserve Bank and 30 foreign banks with approved representative offices in South Africa. There are over 6,000 credit providers registered with the National Credit Regulator.
Sector Disruption and Competition
The banking landscape is changing rapidly as banks face increasing competition from technology-based financial services - from newly established banks to retailers offering mobile transactional banking accounts. Competition coming from newly-licensed commercial banks and growing credit granting from other credit providers is likely to encourage the big four banks to place increasing emphasis on growing customer numbers with innovative product offerings, especially to attract lower-income earners. Competition from newly established Discovery Bank, Bank Zero and TymeDigital, which aim to disrupt the sector, may force big banks to intensify efforts to modernise technology platforms to satisfy customers’ demands.
While the resignation of Jacob Zuma as president and his succession by Cyril Ramaphosa resulted in the hope for political and economic stability and policy certainty, the issue of land expropriation without compensation has resulted in some pressure on the banking sector. In addition to agricultural land bonds, banks also provide extensive loans to the agricultural sector hedged against crop yields and other assets. Bank exposure to struggling state-owned entities and troubled companies like Steinhoff International have also weighed heavily on the sector, which has nevertheless retained its ability to cope with challenging economic conditions.
As well as focusing on developments in the commercial banking sector, the detailed Banking Industry report includes information on Other Credit Granting, Lease Financing, and Loyalty and Reward Programmes. The report includes details on 90 organisations, fintech, digital banking, cryptocurrencies and other new technologies influencing the sector, as well as recent corporate actions and developments such as the demise of VBS Bank and the Competition Commission’s ongoing investigation into 17 banks relating to price fixing and market allocation in the trading of foreign currency. It includes details on the restructuring of overseas shareholdings in local commercial banks, resulting in the reorganisation of the Old Mutual Group and sell-down by Barclays of its stake in Barclays Africa with implications for two of the big banks, Nedbank and Absa.