Rivalry may beef up banking

Johannesburg - Competition between banks may be burgeoning this year as new leadership takes over and fresh products are launched.

At least, this is the theory touted by market commentators, who argue that tough trading conditions and leadership changes at Nedbank, FirstRand and Absa are indications that the sector may become more competitive overall.

As interest rates have probably reached the lowest end of the present cycle, with data showing that private sector credit demand is on the decrease, banks would have to fight harder to attract borrowers this year.

Absa and First National Bank launched new products in the low-cost banking market in the last two months to make them more competitive against the likes of Capitec.

In turn, rumours are doing the rounds that Capitec may be about to launch a technology-driven small business banking offering which would up the stakes in this key segment of the market.

"It would make sense for Capitec to move into the small business sector, as that is where the margins are," said an analyst in an interview with Fin24.com.

"Entrepreneurs' bank" Sasfin has also bolstered its own war chest with a $10m investment from the International Finance Corporation in exchange for shares. With Sasfin growing its infrastructure with a new head-office and expanding its staff from 542 to 573, increased competition can be expected around small businesses.

After a brief attempt in 2009 to raise its profile, Grindrod Bank has gone back to quietly facilitating property transactions and corporate finance deals. However, with the big Grindrod balance sheet behind it and the stated intention of growing its retail offering, it may become more visible again.

'Not convinced'

The same could be said for Bidvest Bank. Primarily a foreign exchange dealer, it is also quietly expanding its workforce and retail footprint. If it receives a boost from the 2010 World Cup and foreign tourists, as management is expecting, it may provide an outlet for other banking operations.

Someone who does not believe 2010 will offer more benefits to banking clients is Graeme Macpherson from Justmoney.co.za.

"The big four banks tend to be rather stolid, slow-moving behemoths," he said. "There isn't a culture in South Africa of changing your bank to get a better deal like the 'rate tarts' in the United Kingdom.

"Our best guess would be that Capitec will continue with rapid and aggressive expansion in this market, but the big four will be sitting back on their existing customer bases, extracting further fees from them."

- Fin24.com

The author holds shares in Capitec.