War for clients

2014-03-02 14:00

Lenders shifting focus to transactional banking to gain market share

The battle for market share by South Africa’s big four banks continues, with transactional ­customers widely expected to make up for a scale-back in credit after SA Reserve Bank governor Gill Marcus abruptly ended a years-long honeymoon with a repo rate increase last month.

The prime rate at which bankers lend money to customers is tethered to the repo rate by a difference of 3.5 percentage points, meaning credit has become more expensive for customers.

According to the head of equities at Sanlam Investment Management, Patrice Rassou, banks were shifting their focus to transactional banking.

He said: “It’s because of regulation. Basel III means that the capital requirement in the lending businesses is more onerous.

Also, after having been burnt in their core mortgage lending business, the banks also realise that transactional banking is a better annuity business.”

At its results presentation on Monday, Nedbank executives spent most of the time discussing non-interest revenue growth. CEO Mike Brown said this had grown to almost R19.4?billion, with the bulk of it coming from fees and commission gained from increases in transactions across the group.

According to Brown, growth in household credit demand last year fell to levels last seen during the global financial crisis. This was as a result of lower overall wages owing to the spate of strikes observed across the country last year, high unemployment rates and increases in administered prices, all of which – along with high levels of consumer indebtedness – eroded consumer confidence.

Nedbank’s chief financial officer, Raisibe Morathi, said the bank had invested heavily in its distribution footprint and launched new products – some of the steps which led to ­“significant” gains in client numbers. The group now has 6.7?million customers, 600 000 more than the previous year.

In its FinScope survey last year, financial inclusion nonprofit FinMark Trust showed that by July last year, 27.3?million South Africans over the age of 16 were banked.

If this number had stayed static by December, this would give Nedbank a 24.4% share of the market. In June 2012, the Banking Association of SA (Basa) said Nedbank had a 20% share.

Nedbank’s managing director for retail and business banking, Ingrid Johnson, said her segment had added 2.2 million customers since 2009, with the majority using the bank’s Ke Yona entry-level banking products.

Although both FirstRand Bank and Standard Bank should provide updated customer numbers next week, when FirstRand releases its interim results and Standard its results for the year to December, the latest customer numbers show Standard had 6.2?million clients, giving it a 22.6% share of the market; while FirstRand’s FNB had 7.5?million customers, giving it a 27% market share.

This does not account for any double counting, as some customers have more than one account.

Standard was down from the 31% Basa said it had by June 2012, while FirstRand is up from its previous 23%.

Rassou said Capitec and FNB were winning the battle for market share, with “Nedbank also doing okay”. Capitec has 4.7?million active clients, according to its latest results.

All appear to have been eating Absa’s lunch. Two weeks ago, Absa’s parent, Barclays Africa, indicated it had 9.25 million customers in its published results for the year to December. This declined from 11.8 million in 2010.

The bank’s CEO, Maria Ramos, admitted it has been haemorrhaging customers over the past three years, saying: “Throughout this period, we have faced increasingly strong competition and we have lagged our peers in some important segments, particularly in retail and business banking in South Africa.”

She said the bank’s “turnaround” plan was addressing this problem, something Sanlam’s Rassou took kindly to. He said: “We think that Barclays Africa is a good turnaround story and it’s attractive on a valuation basis.”

Media reports late last year stated Barclays has poached Johnson from Nedbank, which Rassou said would be a real coup for Barclays. When asked about this, Nedbank said it did not comment on rumours.

A spokesperson for the bank said: “Retaining key executives across the bank is important. While it is inevitable and indeed healthy, there will be some turnover from time to time.”

» A previous version of this article incorrectly stated Barclays Africa did not disclose its customer numbers for the year to December.  The bank did in fact disclose these numbers.  We regret the error.

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