Market Share: Ecobank competes with GCB
An analysis of the market share of banks provides insights into the operations of the entity. In last week’s piece, we analysed the market shares for the 26 universal banks that published financial statements for the year ended December 31, 2013 (refer Figure 1).
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Using total income as the measuring rod, GCB was in pole position as the bank with the largest market share of 12.2 per cent (refer to page 11 of the May 27, 2014 edition of the Graphic Business).
In the current piece, we explore the market share metrics using share of industry net operating income (Figure 2); share of industry total deposits (figure 3) as well as share of industry operating assets (Figure 4).
We revisit the definition of market share as ‘the percentage of an industry or market's turnover that is earned by a particular entity over a specified time period, which is calculated by taking the entity's turnover over the period and dividing it by the total turnover of the industry over the same period.
This metric is used to give a general idea of the size of a company relative to its market and its competitors’.
Share of industry net operating income
A recent research study by Standard Chartered ‘… shows that one of the biggest opportunities to make money in Africa lies in selling financial services …’.
Indeed while the total headline income for the banks increased by 52 per cent between 2012 and 2013, the increase in net operating income moved northwards by some 40 per cent, thus giving credence to the foregoing research finding - one of the biggest opportunities to make money in Africa lies in selling financial services …’.
In terms of ranking, Figure 2, Ecobank topped the table with 12.2 per cent share of net operating income. Overall, 14 banks increased their market share ranging from 0.1 percent for Bank of Baroda through to Ecobank with a 0.8 per cent increase.
The market share for Fidelity Bank and First Atlantic Bank remained flat with respective shares of 0.5 per cent and 0.8 per cent.
At the bottom of the league of banks losing market shares was ADB with a negative 1.8 per cent drop. Ten other banks lost market shares based on net operating income.
Share of industry customers’ deposit
Money placed with a bank financial institution is termed ‘customers’ deposit’. Bank deposits may be in a savings or current account with the account holder having the right to withdraw any deposited funds, as set forth in the terms and conditions of the account. The ‘deposit’ itself is a liability owed by the bank to the depositor.
Deposits for the 26 universal banks grew by 20 per cent from GH¢19.6bn in 2012 to GH¢23.3bn in 2013 marking an overall reduction of nine per cent over the two years. Similar to the 2012 picture, the government’s avarice for borrowed money with relatively higher interest rate rewards, meant that the universal banks were competing with the State for a share of the depositors’ funds.
Using customers’ deposit as a metric for ranking the market shares of the banks, Ecobank again topped with a 13.3 per cent share followed by GCB in second position with 11.3 per cent (Figure 3 refers). In all, the market shares of 13 banks moved northwards, while 11 banks’ saw their shares moving southwards. The market shares for First Atlantic Bank and Societe General remained flat with respective portions of the customers’ deposit market of 0.9 per cent and 0.5 per cent.
Share of industry operating assets
The assets of bank financial institutions are mainly held in loans and advances to customers. Using operating assets to rank the market shares of the banks, Ecobank topped with a 12.8 per cent share and again followed by GCB with a 9.3 per cent share (Figure 4 refers).
In all, 12 banks increased their market shares ranging between 0.1 per cent through to 0.8 per cent. The biggest gainers were Barclays bank and UT Bank which increased their respective market shares by 0.8 per cent apiece to 8.1 pe rcent and 4.3 per cent.
The mark shares for International Commercial Bank, Societe General and Bank of Baroda remained flat at respective 1.2 per cent, 0.7 per cent and 0.4 per cent.
The market share for each of the remaining 11 banks moved south with GCB Bank experiencing the largest fall of 1.6 per cent from 10.9 per cent in 2012 to 9.3 per cent in 2013.
Conclusion
Market share analysis is primarily competitive. It gives, amongst other things, a picture of the state of competition in the industry. With 26 universal banks as of 31st December 2013, the various analyses confirm the keenness of the competition between Ecobank and GCB Bank for market dominance.
We continue the analysis of the bank financial statements in subsequent publications with more insights into the profitability of the banks, return on investments, efficiency ratios, among others.
The author is the Executive Head of the School of Banking & Management at the Osei Tutu II Centre for Executive Education & Research: A Centre of Excellence in Practical Learning & Development in Banking & Management
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