(Ecofin Agency) - 2020 has been a tough year for large US banks active in the investment segment in sub-Saharan Africa, Refinitiv reported.
Over the period reviewed, Morgan Stanley posted $18.1 million in revenue, down 21.5% YoY despite a 100% increase in the number of transactions the company arranged, while Citigroup’s profit dropped by 44.4% YoY and the number of transactions it arranged fell by 41%.
The bad period for US investment banks happened to be a blessing for Japanese Sumitomo Mitsui Financial Group, which for the first time became the leading investment bank in sub-Saharan Africa, generating $57.3 million in revenues, up 557.2% YoY. The Japanese’s performance over the period was supported by its 6 operations in the banking loan segment. Standard Chartered Bank, Bank of America Securities, and Absa Group (ex-subsidiary of Barclays) also experienced a positive year with a 55% increase in revenues for each of them, despite a decline in the number of their transactions (except for Absa).
Overall, investment banks active in SSA generated a total revenue estimated at $524 million, down 19% when compared with 2019. The figure is also the worst performance over the past six years. The situation is justified by the decline in segments such as the capital market, merger, and acquisition market, and that of syndicated loans.
Although sub-Saharan Africa was relatively less affected by the pandemic, some of its hard-hit economies, such as South Africa, are also its most dynamic financial and capital marketplaces. Strict quarantine measures in several countries in the region have also prompted caution among investors who have faced significant trade-offs.
Performance in the first quarter of 2021 should be monitored. Many credible institutions are predicting an economic recovery in the region in 2021. But in a market where it is difficult to spot all the transactions between economic players, it is difficult to predict how strong the recovery will be. Also, in many partner countries, especially in the West, the situation remains quite volatile.