The CEO of FNB, SA’s largest business banking franchise, says it is a disservice to describe the country’s thriving township and rural economies as “informal”, where the lender has amassed more than 250,000 businesses as its clients.
Harry Kellan says the lender has opted to describe these businesses as “community economy”. He said businesses that serve that segment (townships and the informal sector) represent a significant opportunity and growth driver across retail and commercial.
“Describing these businesses as informal is doing them an injustice. These businesses are quite formal in terms of their operations. It’s a community network between individuals and businesses,” Kellan said.
The lender has made serious inroads into the informal sector, having advanced R18bn to 256,000 of small and medium-sized enterprises (SMEs) in that segment by the end of June, generating revenue of R3.7bn and R45bn in deposits.
FNB’s broader SME offering continues to be the best in the country, having amassed more than 1.2-million clients, R47bn in advances and more than R220bn in deposits.
FNB commercial margins improved in the year ended June due to a change in book composition, with lower-priced customers rolling off and strong growth in the higher-margin SME segment.
The bank, a key asset in FirstRand’s financial services portfolio, said the SME franchise is significant in size and the informal economy provides additional growth.
FNB says a further advantage is its “deep understanding” of income flows and business behaviour, allowing for a tailoring of financial solutions to its clients, from entry-level to business banking and enterprise.
SA’s banks and fintech groups are all increasing their loans to businesses as they look to dethrone FNB from the top spot, and SME lending has emerged as the next big battleground. Competition in this segment is driven by enhanced digital capabilities at incumbent banks and the entry of non-traditional competitors.
Capitec has also entered the business banking space, looking to replicate its retail market successes in the SME market. Its retail banking successes are well documented: the Stellenbosch-based outfit has grown its client base to 25-million, making it SA’s largest bank by customer numbers. It has also set it sights on the informal sector, where it believes there is huge value to be unlocked.
Business banking generally refers to the services used by small companies, while commercial or corporate banking covers the services used by large enterprises with high turnover.
Nedbank under CEO Jason Quinn is sharpening its claws to win market share in the business banking segment. In July it poached FNB Business CEO Andiswa Bata.
Bata was swiftly replaced at FNB by Ghana Msibi, and Kellan said FNB was unfazed by competition given its expertise in lending to SMEs. “We have been active in this space for a long time ... we are still growing [our] active customer base.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.