CAPE TOWN: South Africa’s four largest full-service banks continue to grow non-interest revenue (NIR) aggressively, with the totals across the retail/personal banking units increasing from just under R38 billion in the 2010 financial year to over R53 billion in 2015 (the analysis for FNB, given its June year-end, runs from 2011 to 2016). This translates to growth of 41%, while total customers* increased by 9%. In the retail banking context, non-interest revenue effectively comprises net fee and commission income (and in some cases, net insurance premium income). Or, bank charges. PwC, in its September 2016 analysis of South Africa’s major banks, reports that 70% of total NIR comprised “fee and commission income” in H1 2016.
This divergence in growth rates between customers and NIR is expected, given that the South African market is increasingly saturated. And, banks are increasingly looking at NIR for growth, as net interest income (NII) – and net interest margins – come under pressure, given the limited credit appetite among consumers. More strenuous regulatory requirements, particularly since the global financial crisis, have added additional pressure on this income line. PwC says “a distinct strategic focus by all the major banks on growth in non-interest revenue sources such as fee and commission-based income, asset management activities and other related services is expected to continue”.
One way of looking at the NIR figures in a more contextually-relevant way, is to divide the total NIR for each retail bank by their respective number of customers (and then by 12 to get a sum per month). Now, this is not necessarily wholly accurate given the different ways the different banks disclose data (in Standard Bank’s case, the headline NIR figure is for ‘Personal and Business Banking’, for example, while customers are totals of the number of accounts in the retail bank (only)).
