African Banks

African Banks

We cover a number of African banks and see encouragement and woe across diverse entities and systems.

Some African banks show up quite well on our PH Score™. Often though they are cheap and illiquid or quality at a price. Very few combine the value-quality combination we search for. (I guess that's the curse of Frontier Investing).

Corporate Governance can range from the sublime ("real" IG lenders in a junk destination) to the surreal. High single borrower or industry concentrations are prevalent. Oil-related borrowing is a worry. Restructuring is frequent. Reported impaired loan ratios would be far higher in several countries if restructuring, notably to oil-related borrowers, had not taken place.

There are concerns in some jurisdictions that buffers are barely adequate and regulatory capital requirements may be tested. This of course comes at a time when higher prudential capital requirements and FRS 9 (loan loss provisions) loom.

Access to FX liquidity has been reduced due to primarily the commodity price impact on reserves and government finance.

Besides doubts about some lending relationships and credit controls, there is also too much reliance arguably on holding high-yielding government debt. Banks do not, in some cases, seem to want to expand lending too much given macro forecasts.

The recent stabilisation of commodity prices could provide some cheer.