Rikus Grobler | Oct 18, 2017 | 0
Standard Bank officially the worst
Standard Bank ended at the bottom of the ladder in the latest PSG Banking Review, while its peer, FNB Namibia, again tops the charts.
Elaborating on its methodology and results the PSG team said “We rank FNB the best bank in Namibia as it consistently came in 1st in all but 5 of the 13 sub-categories. It scored a further 4 second place rankings and 1 third ranking. Bank Windhoek is ranked a close second, trading first and second places with FNB in 7 sub-categories. Nedbank Namibia is ranked 3rd followed by Standard Bank Namibia in 4th place. Adding insult to injury, Standard Bank ranked 4th in 9 of the 13 subcategories.
“The ranking system does not consider liquidity ratios since the optimal liquidity ratio will differ between banks depending on the risk profile and is open for interpretation. Moreover, there is a fine line between too much liquidity and too little making ranking banks according to this metric problematic. While service delivery could play a significant role in the rankings it was not included in the ranking system given the subjective nature of assigning a rating” commented PSG. “The credit risk category contains the credit loss ratio and NPL/advances ratios with a weighting of 60% and 40% each. In this category, Nedbank ranked first making it the best bank at managing its credit risk. FNB is ranked 2nd in the credit risk category. FNB is also ranked first in the capital adequacy category with its higher capital adequacy ratio.” “The rankings are based on the financial statement data which could differ between banks in the way certain items are reported. The ranking system is based on backward looking financial statement data and should not be used for investment decisions which should be based on various factors” PSG cautioned. “In the advances category, FNB and Bank Windhoek is ranked 1 and 2 again. The reason for this is that these banks have grown advances at a faster pace than other banks over a three year period and also had the largest advances market share at 32.1% and 32.8% at December 2014.” In terms of cost efficiency, FNB ranked first again, which makes it the most cost efficient bank, because of its significantly lower cost-to-income ratio. “Though there was no change in the overall standing of the banks, it is only Nedbank which showed an improvement overall in rankings terms. They are moving closer to Bank Windhoek and at 2.3 for Bank Windhoek and 2.6 for Nedbank they are not far apart. This is largely due to their improvement in their credit loss ratio and their 5 year asset growth.” Explaning their methodology, PSG said “In order to evaluate and compare the local banks we developed a ranking system based on several of the ratios and data with 1 being the best and 4 the worst. The ranking system consist of 5 categories namely profitability, cost efficiency, credit risk, advances growth & market share and capital adequacy. In this report financial ratios were based on the most recent financial statement data and all compounded growth numbers on three years to represent the category. Each category and sub-category are assigned a weighting based on our opinion of the relative importance of each in order to determine the ranking for each bank.” The full report is available on PSG’s website or from [email protected]