earnings vs customers vs market capitalization vs reach

South African banks face a difficult challenge in the short to medium term, as they face the impact of Covid-19, a depressed local economy, and clients seeking debt relief.

These factors are likely to increase competition among the big five retail banking institutions in the future.

BusinessTech has analyzed the largest retail banks, measuring them across 10 key metrics, ranging from customer base to P / E ratio.

The data below covers data for the group and for South Africa, as indicated, taken from the latest annual financial results for each respective bank.

Note: With the exception of FirstRand, whose full-year results end in mid-2020, most of the results below do not reflect the results or the effect of the pandemic and the Covid-19 lockdown.

The data covers:

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Market capitalization and P / E ratio (Group)

Three years ago, Capitec had the smallest market capitalization of the big five retail banks; today, it has the third largest, above Nedbank and Absa on the Johannesburg Stock Exchange.

Meanwhile, FirstRand has comfortably overtaken Standard Bank and ranks first with R230 billion.

Capitec has achieved significant gains in its share price and far outperforms any other competing bank, but as a result it also has the highest price-to-earnings (P / E) ratio.

The P / E ratio is the ratio to value a company that measures the current price of its shares in relation to its earnings per share.

The ‘cheapest’ stock among banks is now Nedbank, with a P / E of 6.27.

Data captured on September 10, 2020.

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FY Financials (TO)

Standard Bank has the highest net interest income and highest overall earnings in South Africa. At the group level, Standard Bank and FirstRand are closely related, with the former registering R62.92 billion versus R62.85 billion for the latter.

However, with FirstRand’s financial year ending in June 2020, it is the only bank to reflect the impact of the pandemic and the Covid-19 shutdown, which should give an indication of how the crisis will reflect on the annual results of the other banks, when reported.

Consumers have come under extreme pressure due to the closure of Covid-19 and have sought out various forms of financial assistance offered by banking groups. The pressures have also led to prospective impairments being included in the financials.

For the purposes of comparison below, we have used FirstRand’s results for its FNB retail segment only, before impairments related to Covid-19 are taken into account.

Banks’ finances reflect earnings within South Africa, not taken at the group level.

Overall earnings are a measure of a company’s earnings based solely on capital investment and operating activities. It excludes income that may be related to personnel reductions, asset sales, or book write-offs.

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Basic capital (Group)

the Banking report of the top 1000 banks It is based on a measure of a bank’s Tier 1 capital, known as core capital, which consists of equity and retained earnings.

Standard Bank has maintained its position as the largest bank in the country, registering $ 10.54 billion in Tier 1 capital in 2020.

This is followed by FirstRand, which is closing the gap with the country’s leader.

Absa remains in third place, with Nedbank retaining its fourth position. Capitec did not rank among the top 1000 banks in 2020, but reported Tier 1 capital at $ 1.36 billion.

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Network and reach (SA / Group)

With news that legacy banks are downsizing their physical networks, it is not surprising to see a reduction in the overall number of branches across all banks. However, following the trend observed in 2019, Capitec has once again increased its reach, now at 864 branches and 5,652 ATMs.

Standard Bank still has the largest branch network and the second largest ATM network. Absa has 1,016 branches in its group operations and 9,763 ATMs, giving it the widest network by that measure.

When counting group employees, Standard Bank is the largest employer (50,691 versus FirstRand’s 49,233), yet locally it leads Nedbank and Absa by a much smaller gap. FirstRand does not specify how many people FNB employs.

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Bank clients (Latest report)

Absa has updated its client base in its 2020 interim results, revealing a client base of 9.7 million. This was the same number reported in the bank’s fiscal 2019 results.

As of June 2020, this includes just 6.7 million transactional accounts, with a primary base of 2.9 million customers.

This places Absa in second place among the big five banks, behind Capitec, which still leads the group, with 13.9 million clients at the end of February 2020. Chief Executive Officer Gerrie Fourie has since stated that the figure is 14.5 million in August 2020.

In fiscal 2019, Standard Bank reported a total of 9.6 million customers, including 8 million active customers and 1.6 million unique instant money customers, ranking third overall. In its mid-2020s, it reported a combined base of 9.1 million active customers.

Nedbank reported 7.5 million retail customers at the end of 2019, and the group’s last interns pegged the number at 7.3 million. Latest FirstRand results put FNB’s customer base at 8.2 million, with retail customers representing 7.2 million.

The group has experienced small drops in its mid-market account base, but this has been offset by growth in its premium segment.

While the number of customers is important, keeping them happy is also a key factor. According to the South Africa Customer Satisfaction Index (SAcsi) on Banking for 2019/20, Capitec is back in the big five.

They are followed by Nedbank, FNB, Absa and Standard Bank.

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Read: FirstRand Profits Plunge As Clients Seek Debt Relief