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SOUTH AFRICAN BANKING SECTOR OVERVIEW

TABLE OF CONTENTS Sections1 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Background Financial services sectors contribution to the economy Total Assets Total liabilities Profitability Shareholding structure Branches ,ATMs, POS Usage of payment systems Employment Number of customers Repo and Prime rate movements Regulation The Financial Sector Charter Conclusion

Page1 2 2 4 5 5 6 6 8 8 8 9 10 11

Figures 1. 2. 3. 4. 5. 6. 7.Number of banks in SA Total banking sector assets Loans and advances (September 2011) Market share of major four banks Total liabilities of the banking sector Composition of deposits Shareholding in the banking sector

2 3 3 4 4 5 6

Tables1. 2. 3. 4 5. List of banks in SA Number of ATMs, branches and POS Usage of payment systems Employment profile of banking sector (2009) Repo and Prime rate movements (2005 to 2010) 1 6 7 8 9

Enquiries: Nwabisa Matoti (nwabisam@banking.org.za) Last updated: November 2011

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SOUTH AFRICAN BANKING SECTOR OVERVIEW 1. Background

South Africa has a developed and well regulated banking system which compares favourably with those of industrialised countries. The sector has undergone a lot of changes in the past 20 years, with the early 1990s being characterised by a process of consolidation resulting from mergers of a number of banks including Allied, Volkskas and United to form ABSA and the proposed merger between Nedcor and Stanbic which failed eventually. The promulgation of the Banks Act of 1990 led to a number of banking licenses being issued and by the end of 2001 there were 43 registered banks in South Africa. The announcement of Saambous financial troubles in 2002, however, resulted in a run on BOE and other smaller banks which led to a number of banks not renewing their banking licenses and others seeking financial assistance from foreign shareholders. Other banks such as Regal Bank also experienced financial difficulties during that period and were placed under curatorship. Although the South African banking sector has been through a process of volatility and change in the past, it has attracted a lot of interest from abroad with a number of foreign banks establishing presence in the country and others acquiring stakes in major banks, for example, the Barclays ABSA and Industrial and Commercial Bank of China Standard Bank deals. There have been a number of changes in respect of the regulatory environment, product offerings, and number of participants resulting in a greater level of competition on the market from smaller banks such as Capitec bank and African Bank, which have targeted the lowincome and the previously unbanked market. The SA banking industry is currently made up of 17 registered banks, 2 mutual banks, 12 local branches of foreign banks, and 41 foreign banks with approved local representative offices. The banks are listed in Table 1 below. 1.1 Table 1- List of banks in SABank ABSA Bank Limited; African Bank Limited; Bidvest Bank Limited; Capitec Bank Limited; FirstRand Bank Limited; Grindrod Bank Limited; Investec Bank Limited; Nedbank Limited; Regal Treasury Private Bank Limited (In liquidation); Sasfin Bank Limited; Ubank Limited; The Standard Bank of South Africa Limited. Albaraka Bank Limited; Habib Overseas Bank Limited; HBZ Bank Limited; Islamic Bank Limited (In Final Liquidation); Mercantile Bank Limited; The South African Bank of Athens Limited. GBS Mutual Bank; VBS Mutual Bank Bank of Baroda; Bank Of China Limited Johannesburg Branch (trading as Bank Of China Johannesburg Branch); Bank of Taiwan South Africa Branch; China Construction Bank Corporation - Johannesburg Branch; Citibank N.A.; Deutsche Bank AG; JPMorgan Chase Bank N.A. (Johannesburg Branch); Socit Gnrale; Standard Chartered Bank Johannesburg Branch; State Bank of India; The Hongkong and Shanghai Banking Corporation. AfrAsia Bank Limited; Banco BPI, SA; Banco Espirito Santo e Comercial de Lisboa; Banco Privado Portugus, S.A.; Banco Santander Totta S.A.; Bank Leumi Le-Israel BM; Bank of Cyprus Group; Bank of India; Barclays Bank Plc; Barclays Private Clients International Limited; BNP Paribas Johannesburg; Commerzbank AG Johannesburg; Credit Suisse AG; Credit Suisse Securities (Europe) Limited; Ecobank; Export-Import Bank of India; Fairbairn Private Bank (Isle of Man) Limited; Fairbairn Private Bank (Jersey) Limited; First Bank of

Category Registered banks locally controlled

Registered banks foreign controlled Mutual banks Local branches of foreign banks

Foreign banks with approved local representative offices

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Nigeria; Fortis Bank (Nederland) N.V.; Hellenic Bank Public Company Limited; HSBC Bank International Limited; Icici Bank Limited; KfW Ipex-Bank GmbH; Lloyds TSB Offshore Limited; Millenium BCP; National Bank of Egypt; NATIXIS Southern Africa Representative Office; Royal Bank of Scotland International Limited; Socit Gnrale Representative Office for Southern Africa; Sumitomo Mitsui Banking Corporation; The Bank of New York Mellon; The Bank of Tokyo-Mitsubishi UFJ, Ltd; The Mauritius Commercial Bank Limited; The Rep. Off. for Southern and Eastern Africa of The Export-Import Bank of China; UBS AG; Unicredit Bank AG; Union Bank of Nigeria Plc; Vnesheconombank,; Wells Fargo Bank, National Association; Zenith Bank Plc Source: SA Reserve Bank

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Figure 1 - Number of banks in SANumber of banks in SANumber60 50 41 40 30 30 22 20 15 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 14 15 20 15 19 15 19 14 19 14 19 14 18 13 17 13 56 52 44 43 47 43 46 43 42 41

Registered banks Banks

Mutual banks

Branches of international banks

Representative offices

2.

Financial services sectors contribution to the economy

The financial services sector contributes about 10,5 percent to gross domestic product (GDP), with assets to the value of over R6 trillion. Taxes amount to over 15 percent of GDP, whilst employment represents about 4 percent. The banking sector assets represent just over 50 percent of total financial services sector assets. 3. Total Assets The assets of the banking sector improved to a level of R3,4 trillion after some moderate increases between December 2008 and June 2011 (Figure 2). There was a 9 percent increase in the total value of assets during the quarter ended September 2011.

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3.1

Figure 2 Total banking sector assets

Figure 3 below depicts the composition of loans and advances as at end September 2011. Home loans represented the largest component at 34 percent, followed by term loans at 16 percent. 3.2 Figure 3 Loans and advances (September 2011)Composition of loans and advances (Sep 2011)

23% 34%

16%

5% 10% Homeloans Credit cards Overdrafts Other 2%

10%

Commercial mortgages Lease and instalment debtors Term loans

Source: SA Reserve Bank

Figure 4 below illustrates the market share of the four major banks as at end September 2011. The four major banks represented about 84 percent of total banking assets. Standard Bank, the largest bank in terms of assets, had a market share of 31 percent, followed by

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ABSA with 25 percent. FirstRand and Nedbank had a market share of about 24 percent and 20 percent respectively. 3.3 Figure 4 Market share of the major four banks (Sep 2011)

Source: SA Reserve Bank

4. Total liabilities After a sharp decline in the first quarter of 2011, total liabilities of the banking sector increased by 3 percent between the second and third quarters of 2011 reaching a level of about R2,6 trillion (Figure 5). 4.1 Figure 5 Total liabilities of the banking sectorTotal liabilitiesR'bn 3 500 3 131 3 000 2 500 2 000 2% 1 500 0% 1 000 500 0 Sep 2008 Dec 2008 Mar 2009 Jun 2009 Sep 2009 Dec 2009 Mar 2010 Jun 2010 Dec 2010 Mar 2011 Jun 2011 Sep 2011 -2% -4% -6% 2 996 2 964 2 768 2 834 2 809 2 769 2 821 2 801 2 904 2 848 2 885 8% 6% 4% Percent 10%

Liabilities (LHS)

Growth (RHS)

5

Deposits represented about 77 percent of total liabilities at the end of September 2011. The composition of deposits is illustrated in Figure 6 below. Fixed and notice deposits constituted the largest part at 32 percent, followed by current and call deposits both at 17 percent. 4.2 Figure 6 Composition of depositsComposition of deposits (Sep 2011)10% 4% 17%

15%

5%

17%

32% Current Savings Call Fixed and notice NCDs Repos Other

Source: SA Reserve Bank

5. Profitability The Return on Equity (RoE) and the Return on Assets (RoA) for the banking sector improved to 15,9 percent and 1,12 percent respectively in September 2011 (September 2010: 15,2 percent and 0,99 percent respectively). The efficiency of the banking sector, however, deteriorated as the cost-to-income ratio increased from 54,6 percent in September 2010 to 55,9 percent in September 2011. Operating expenses increased from R83,8 billion in September 2010 to R93,1 billion in September 2011. 6. Shareholding in the banking sector By end of December 2010, shareholding by foreigners in the sector represented about 43 percent of total nominal banking shares in issue, whilst domestic and minority (those with a shareholding less than 1 percent) represented about 27 percent and 30 percent respectively (Figure 7). The large portion of foreign shareholding can be mainly attributed to the large stake that Barclays Plc has in ABSA.

6

6.1 Figure 7 Shareholding in the banking sector

7. Branches, ATMs, and Points of Sale By the end of December 2010, the total number of ATMs and branches of banks stood at 26 439 and when points of sale were included, this number increased to (179 319) (Table 2). 7.1 Table 2 Number of ATMs, branches and points of sale (Dec 2010)Category Number of branch