Johannesburg - An innocuous press release from Standard Bank Securities may be the start of truly visible competition in the South African banking sector.
Last week the retail stockbrokerage advised its clients it was reducing the minimum trading fee to R50, effectively making it the cheapest product on the market.
Simon Brown, head of education at Standard Bank Online Share Trading, told Fin24.com the bank intends to be aggressive in 2010 in terms of gaining market share, and price is one of the areas where it intends to compete.
"This reduction is the fourth in five years. We believe that anybody with an ambition to save or invest should have direct access to the markets," he said.
Make no mistake, the banks remain super profitable. Standard Bank recorded R14bn in profit in the last financial year while Absa chalked up R9.9bn; FirstRand earned R7.1bn and Nedbank came in with R1.4bn. However, all have taken pain with rising bad debt charges and a drop in credit demand.
A reduction in stockbrokerage fees is unlikely to even register as a blip on the screens of those who sit on executive floors in banks, but it may indicate a shift in the banking landscape which will benefit clients.
In a recent report, analysts at Credit Suisse Standard Securities identified increased competition for market share in Africa, excess capital generation and greater domestic competition and consumerism as likely key themes for the South African banking sector.
A good example of this is in the small- and medium-sized enterprise (SME) banking sector, where competition is increasing a number of new products in the market.
John Botha from FNB's Instant Accounting offering told Fin24.com that the bank reassessed its product last year. Initially, fees were charged on a turnover basis, then a transactional basis and finally the bank elected to offer the service free of charge in an attempt to boost value-add to its client base.
Small firms and micro enterprises have some overlap with retail banking, as start-up owners are often forced to raise funds in their personal capacity before they become sufficiently interesting for specialised banking SME banking units.
Competition is coming
Talk of meaningful competition in the retail banking sector is often met with cynicism by consumers who perceive the banking sector as extending the middle finger to all, including the powerful Competition Commission.
Many of these consumers will point to above-inflation increases on fees which have been put through in 2010 as signs that talk of competition is little more than lip service.
However, in recent years meaningful competitors have emerged. African Bank with profits of R1.8bn in the microlending sector, Capitec in the low-cost banking market (R302m) and Sasfin in the small business banking sector (R189m) are gaining increasing clout in traditional big four banking territory.
While it hasn't come cheap, Capitec recently announced it had raised another R150m in the debt market; this brings it to the tail end of its R2bn capital-raising exercise.
African Bank raised another R5bn in 2009 as part of its longer-term R10bn capital-raising plan, and Sasfin was armed with $10m from the international finance corporation.
- Fin24.com