Assets Under Management

South Africa is Africa’s most advanced economy and has the biggest banking sector by total assets. Egypt has the second biggest banking sector by total assets. It does not come as a surprise that South Africa and Egypt have the biggest and second-biggest banking sector in the continent, given that these are the only countries classified as emerging markets. Interestingly, South Africa’s banking sector total assets are double that of Egypt, while the latter has double the number of banks as compared to South Africa. This highlights the concentration of the banking sector, especially in South Africa. Mozambique has the smallest banking sector by AUM, and it consists of just one bank.

Banking capital in Africa is concentrated between the top five countries as measured by total assets.These countries are South Africa, Egypt, Morocco, Nigeria, and Algeria. The banking sector of these countries makes up 83% of the continent’s total banking assets. Tier one capital held by banks in the top five countries makes up 78% of total tier one capital. Interestingly, among the top five countries, Nigeria has the highest tier one capital as a percentage of total assets at 10% followed by South Africa, Morocco, and Algeria at 8%. While Egypt has the lowest tier one capital as a percentage of total assets at 7%. Egypt has, however, grown tier one capital by 31% from 2017 to 2018, this is the most growth among the top five countries.

Most of the capital invested by banks is invested in fixed income instruments, especially government debt instruments. Banks are geared towards fixed income instruments because of liquidity requirements. Banks are required to invest in government bonds under the liquidity coverage ratio. These fixed income instruments are also used as collateral by central banks in repurchase agreement transactions.