South Africa's biggest banks still dominate despite competition

The five biggest banks in South Africa continue to dominate the market, despite the country being home to 19 banks, with more competition on the way.

The South African Reserve Bank's Prudential Authority has published its annual report for the 2018/19 financial year, covering the state of the country's banking and insurance sectors.

According to the group, the South African banking sector is dominated by five large banks, which collectively hold 90.5% of the total banking sector assets as at 31 March 2019 (31 March 2018: 90.2%).

Local branches of international banks account for 5.6% of banking sector assets at the end of March 2019 (March 2018: 5.9%), while other banks represented 3.8% at the end of March 2019 (March 2018: 3.9%).

Assets under control by South African banks totalled R5.654 trillion in March 2019, up 8.7% from the prior year.

The five biggest banks control R5.1 trillion of this amount.

According to the latest available data from the SARB's banking supervision report (to the end of 2017), the biggest banks in the country by asset value were:

• Standard Bank
• FirstRand
• Absa
• Nedbank
• Investec

The SARB is yet to release its annual review for 2018.

Healthy financial sector

The Prudential Authority noted that the South African banking sector remained profitable in the 2018/19 financial year, with a profitability ratio (12-month moving average return on equity) of 15.7% - however this was slightly down from 15.8% in the previous period.

Banks remained adequately capitalised, with adequacy ratios well above the statutory requirements, and tier 1 capital was also stable, it said.

The mutual banking sector also showed healthy growth, with assets increasing by 4.5% to R3.136 trillion, though it has seen a declining trend in profitability.

South Africa is home to 19 banks - 14 local banks and five foreign controlled banks - as well as four mutual banks.

During the course of the year, SARB said it received applications for four new banking licences, of which two were approved and one is currently in progress. One licence application was withdrawn.

Question

Based on the above reading, how would you categorise the market structure of banking in South Africa, Provide evidence from reading above