Increased customer base, reduced cost of funds and increased trade finance activities drove net operating income of pan African banks operating in Zimbabwe to the top when compared to the broader sector.

Stanbic, a local unit of the Standard Bank Group of South Africa and Ecobank a local unit of the Ecobank Group are the major two pan-African banks operating in the country. These two banks have cemented their dominance in the competitive banking sector in terms of profitability scoring first and third for Stanbic and Ecobank respectively. Of particular importance is the quality of their earnings which was driven by growth in both interest and non-interest income as a result of increased customer base, reduced cost of funds and increased trade finance activities. The comparative ability of these banks to facilitate cross border payments capitalising on their geographical spread and sheer size attracted most banking customers involved in cross border activities. Standard Bank, which trades as Stanbic, is the largest pan African bank in terms of the size of its balance sheet whilst Ecobank has the most widespread presence, operating in 33 African countries.

Ecobank which acquired struggling Premier Bank here in Zimbabwe as an entry strategy in 2011 has registered an impressive growth. The local unit of the pan African bank leveraged on its strong group to clean the balance sheet, grow its assets and make its presence felt in Zimbabwe’s banking landscape. Ecobank has the least non-performing loans ratio of 1% attained through adequate provisioning of bad debts, aggressive write-offs and strong asset quality management. Unlike most banks that have slowed on lending, Ecobank’s loans to the private sector jumped by 20% as at June 2017 on a year-on-year basis as the bank solidifies its position in the competitive banking sector. This is impressive in relation to the insignificant levels of NPLs. Fear of bad debts in an environment of controlled lending rates has seen some banks reducing their exposure to the private sector, opting to hold sovereign paper. However, this is different for Ecobank which has grown its assets by a massive 51% year on year as at June 2017 and produced impressive half year earnings. Given the group’s target of increasing its customers to 100 million by 2020 from approximately 10 million currently, the local unit is expected to continue on its aggressive growth path driven by the use of technology.

FMB, a pan African bank with interests in Malawi, Mozambique, Botswana and Zambia may soon join the pool of rising pan Africanism if it successfully acquires Barlcays Plc’s local unit. Most pan African banks have expanded mainly through the acquisition of existing banks and FMB will not be an exception. These pan-African banks are in a better position to play bigger roles in facilitating the country’s need for growing trade links within Southern Africa as well as East Africa. Their growth brings new opportunities and benefits for the country and African continent at large. It reflects the increase in economic integration within Africa, supports financial inclusion and give rise to greater economies of scale. In addition, these pan African banks are filling the gap left by European and other Western banks and are becoming the lead arrangers of syndicated loans and financiers of cross border trade in Africa. In 2016 for example, Western banks made headlines when they reviewed their correspondent banking relationships, terminating their relationships with banks across the Caribbean, central Asia, the Pacific Island and Africa. The trend, known as de-risking left a gap in the banking landscape, as correspondent banking plays an important role in the global payments system by enabling cross-border transactions and access to cross-border products. Locally, pan African banks Ecobank and Stanbic Bank capitalised on the opportunity and built relationships with local affected banks and further cementing their position in the banking sector.

Strong performance by pan-African banks at a time when global banks such as Barclays are leaving, bodes well for financial sector development in Zimbabwe and Africa as a whole. Worth noting is that these regional institutions are not only filling in the gaps left by the retreating global banks but are fostering financial development and economic integration.