Embed Size (px)
Citation preview
2020 BASA Transformation Report05 March 2020
Dr Stuart Theobald, CFAOrin Tambo,CFALetta MaponyaneColin Anthony
Presentation outline
2
Background
Methodology1
Economic context & highlights2
Findings3
3
Background
Data supplied by the banks were based on the Financial Sector Code scorecard methodology
Data covers FY16-FY18 for all banks with December year ends (most), and FY17-FY19 for those with March year ends (Capitec, African Bank and Investec)
Submitting banks:Absa, African Bank, Albaraka, GroBank, Bidvest Bank, Capitec, Finbond, FirstRand, Grindrod, Investec, Mercantile, Nedbank, Sasfin, Standard Bank, China Construction Bank Corporation, Citi, Ubank and HBZ Bank
2
4
Ownership and management control data were weighed by banks’ total assets to determine industry aggregates
Methodology
Earlier year figures (2016, 2017) were recalculated to reflect changes in the same group to allow year-on-year comparisons (two banks exited and four banks entered) and therefore differ from last year’s report
Economic context
4
Findings
• Weak economy• Worsening credit
environment• Bank balance sheets grew
6.5% (inflation 4%)• Bank ROE declining• Bank profit growth of only
4.7%
Economic environment
Difficult to drive transformation that depends on lending growth to targeted sectors
Impact on transformation
Difficult for banks to incur the costs of enhanced skills and supplier development
Limited promotion opportunity
Highlights
5
Background
Black board directors up from 43% to 51%.Black board directors up from 43% to 51%.
Top black senior managers up from 32% to 36%
Socioeconomic development spending 6% up to R666mSocioeconomic development spending 6% up to R666m
Supplier development almost doubled to R795m
Black skills development spend up 23% to R3.3bn
Spending on consumer education up 24% to R180m
Exposure to black SMEs 13% up to R28.8bnExposure to black SMEs 13% up to R28.8bn
Black agricultural financing up 41%
Ownership
6
• Black ownership measures have declined across the three years on all measures but on aggregate remain above the FSC targets, except for black economic interest.
• Economic interest of black women, which had improved marginally in 2017, also declined during 2018 but remains above the FSC target for individual banks of 10%.
• The decline in black interest is mostly due to a continued exit of black shareholders who received shares through black empowerment schemes established by the large banks that matured 2015/16.
Findings
32,8%
12,8%
28,7%
11,1%
9,2%
29,7%
12,9%
24,8%
11,3%
5,3%
29,0%
11,8%
24,2%
10,5%
4,3%
25,0%
10,0%
25,0%
10,0%
3,0%
0%
10%
20%
30%
40%
Black VotingRights
Black WomenVoting Rights
Black EconomicInterest
Black WomenEconomic
Interest
Economicinterest of
designatedblack groups
Black ownership percentage in banks
2016 2017 2018 Target
Management control – board
7
Findings
175
186177
63
7580
26 3037
54 5660
19 16 15
2 4 5
0
20
40
60
80
100
120
140
160
180
200
2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
Total number ofboard
members
Black boardmembers
Black womenboard
members
Total executivedirectors
Black executivedirectors
Black womenexecutivedirectors
Number of directors
40%43%
51% 50%
19%20%
25% 25%
36% 37% 38%
50%
6% 6% 7%
25%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
2016
2017
2018
Targ
et
2016
2017
2018
Targ
et
2016
2017
2018
Targ
et
2016
2017
2018
Targ
et
Black boardmembers
Black women Black executivedirectors
Black womenexecutive directors
Proportion of directors who are black
Management control
8
Findings
• The number of black managers across all levels has ticket up over the past three years and has grown in every category in percentage terms.
• Overall, black managers accounted for 74.7% of bank management teams during 2018, up from 72.8% in the previous year
• Black top senior management roles climbed to 36% during 2018 from 32% in the previous year
29%
41%
60%
82%
32%
46%
63%
83%
36%
47%
65%
85%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Top senior Senior Middle Junior
Black representation in executive management
Top senior Senior Middle Junior2016 Black 104 2920 25803 511032017 Black 66 3164 27338 512182018 Black 90 3651 28807 51682
1
10
100
1000
10000
Black representation in management (X axis log 10 scale)
9
Findings
• There has been a sustained increase in the number of black managers (particularly African) in junior and middle management level.
• Conversely, the number of whites in junior and middle management is declining.
31 66132 35433 143
7 090 6 879 6 781
12 30611 98511 75810 28410 092
8 753
470 495 3920
5 000
10 000
15 000
20 000
25 000
30 000
35 000
2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
African Indian Coloured White Foreigner
Junior management
12 60913 822
15 043
7 745 7 991 8 054
5 347 5 525 5 710
15 85914 95514 733
1 064 1 101 1 082
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
African Indian Coloured White Foreigner
Middle management across banks
Break down of race categories (1/2)
Break down of race categories (2/2)
10
Findings
• The number of white, African and Indian top senior management and senior management increased
5342
53
3419
3012 5 7
205
117
145
43
21 15
0
50
100
150
200
250
2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
African Indian Coloured White Foreigner
Top senior management
1 0061 199
1 466 1 356 1 4371 609
489 528 576
3 707
3 3773 668
356 398 412
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
African Indian Coloured White Foreigner
Senior management across banks
Skills development
11
• Banks continued to channel more resources towards initiatives aimed at developing black skills.
• During FY18 banks spent R3.3bn on black skills development, 23% more than the previous year.
• Notably, more than 60% of banks’ spend on skills development of black employees over the past three years was on black female employees.
• More than half of spending was on black Africans.
Findings
2 512
1 573
526
2 730
1 6881 475
3 347
1 908 1 893
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
Black spend Black women spend African spend
Skills development spend (Rm)
2016 2017 2018
Socioeconomic development
12
• Socioeconomic development spending, which includes spending on organisations that predominantly benefit black people, increased 6% between 2017 and 2018.
Findings
584
628
666
540
560
580
600
620
640
660
680
Socioeconomic development spend (R'm)
2016 2017 2018
6% growth
Preferential Procurement
13
• Banks’ total measured procurement spending almost doubled during 2018, with a large portion of that going to black suppliers.
• All categories of black suppliers benefited from the increased expenditure.
Findings65
637
71 8
33
14 7
83
14 7
83
15 6
96
9 33
8
71 5
64
72 1
35
9 25
7
6 03
4 21 0
54
13 1
73
140
637
119
287
25 9
32
28 2
86
25 9
44
16 4
80
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
Total measured All BEEcompliantsuppliers
QSE (same asEME for 2016)
EME (same asQSE for 2016)
51% blackowned
30% blackwomen owned
Preferential procurement (R'm)
2016 2017 2018
Consumer education
14
• Bank spending on various consumer education initiatives increased 24%
Findings
116
146
180
0
20
40
60
80
100
120
140
160
180
200
Consumer Education (R’m)
2016 2017 2018
24% growth
26% growth
Empowerment financing
15
• Banks’ total balance sheet exposure to empowerment financing jumped 18% while targeted investments increased 4%.
Findings
224
648
120
928
270
957
148
134
318
958
154
580
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
500 000
Empowerment financing Targeted investments
Overal empowerment financing within the big six (R'm)
2016 2017
Empowerment financing: components
16
• Balance sheet exposures to transformational infrastructure financing were largely flat between 2017 and 2018.
• Overall exposure to black farmers rose 41% from 2017 to 2018.
• Exposure to the affordable housing market increased slightly as growth in mortgage loan books and residential development loan books were offset by declines in non-mortgage home loans and wholesale loans.
• Exposure to black SMEs jumped 13% to R28.8bn with EMEs accounting for the lion’s share of that increase.
• Exposure to BEE deals stood at R164bn, 34% higher than the previous year.
Findings
47
27
3
44
104
67
25
3
52
123
68
29
4
53
164
0
20
40
60
80
100
120
140
160
180
Transformationalinfrastructure
Black SMEfinancing
Blackagriculturalfinancing
Affordablehousing
B-BBEEtransaction
financin
Empowerment financing (R'bn)
Supplier development contributions
17
• This element was first introduced in 2017. Prior to that, related spend was accounted for under enterprise development.
• Contributions more than doubled, driven by growth from the likes of FirstRand (up R220m – the bank started tracking this element in 2018); Absa (up R48.3m) and Capitec (up R32.4m)
Findings
402
795
0
100
200
300
400
500
600
700
800
900
Supplier development contributions (Rm)
2017 2018
98%
Enterprise development financing
18
• A significant drop in spend on enterprise development between 2016 and 2017 is most likely a result of changes in the codes
• Bank spending on enterprise development increased 19.5% between 2017 and 2018, with most major banks having increased their expenditure in this category.
Findings
352
149178
0
50
100
150
200
250
300
350
400Enterprise development spend (R'm)
2016 2017 2018
20%
Financial inclusion – geographic access
19
Findings
• The banking industry’s performance on service points and sales points is largely ahead of sector targets. This in a way indicates that the sector as a collective has done well on these two aspects.
• In contrast, achievements on transactions points lag the sector target and have declined over the three years.
84% 84%78%
84% 82%77%
82% 79% 80%85%
70%
60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Transaction points Service points Sales points
Geographic access
2016 2017 2018 FSC target
Financial inclusion – electronic access
20
• Capitec and FirstRand excel in this category.
• Generally, though, banks’ electronic penetration within low-income groups is still low and all banks reported declines on this measure between 2017 and 2018.
Findings
19% 13%
92%
42%
19%
5%
19%
12%
94%
49%
10%
30%
19%12%
91%
48%
6%
18%
0%
20%
40%
60%
80%
100%
FSC target Absa Capitec FirstRand Nedbank StandardBank
Electronic access
2016 2017 2018
Financial inclusion – product access
21
Banks remain well ahead of the targets on this aspect. However, there was a slight dip in the number of qualifying accounts between 2017 and 2018.
Findings
14,7
16,5 16,3
12,2 12,4 12,6
0
2
4
6
8
10
12
14
16
18
2016 2017 2018
Number of active accounts for qualifying products (millions)
Actual accounts Target accounts
The end
22
