African Banks Provided Highest Return On Capital In 2013

African banks gave shareholders the highest return on investment in 2013, The Banker, a publication of the Financial Times Ltd., said in a new report.

“In terms of profit generation, African banks made the highest returns on capital of 24 per cent — double the average return for the rest of the globe and far exceeding average returns of only four per cent in Europe,” the magazine’s 2014 Top 1000 Bank ranking report said.

Kenya’s Equity Bank ranked first in Africa, with a 54.68 percent Return on Capital (ROC); National Bank of Egypt’s 52.77 percent ROC made it second on the list. CIBEgypt garnered a 47.84 percent ROC in 2013, while State Bank of Mauritius ranked 4th with 40.49 percent. Kenya Commercial Bank (KCB) recorded 39.53 percent to rank 5th in Africa.

The performance of African banks in giving good returns of investment is largely due to increased Foreign Direct Investment (FDI) inflow into the continent, which grew by 4 percent to $57 billion in 2013, according to latest figures by the United Nations.

Equity Bank leadership in terms of ROC is therefore unexpected as FDI into East Africa increased by 15 percent in 2013 to $6.2 billion, driven by inflows into Kenya and Ethiopia.

“Kenya is becoming a favoured business hub, not only for oil and gas exploration but also for manufacturing and transport,” the UN Conference on Trade and Development’s (UNCTAD) ‘World Investment Report 2014′ said.

FDI flows into Southern Africa also increased to $13bn, almost doubling 2012 figures.

World Bank noted that while the real Gross Domestic Product (GDP) of sub-Saharan Africa grew by 4.7 percent in 2013 and is expected to grow to 5.3 percent and 5.5 percent in 2014 and 2016 respectively as FDI inflow grows.

With further FDI growth expected in 2014 and beyond, African banks are expected to continue their impressive performance. [VA]