State of the banking sector in Cameroon

Cameroon’s banking sector, the strongest in Central Africa, is going through a period of adjustment with banks rethinking their models but the country still remains an attractive investment destination.

A report by Neil Ford

The country’s banking sector is in the middle of a period of change and retrenchment, with several banks being restructured and others pulling out of certain sectors to focus on their core business.

Yet the continued entry of new players into the sector suggests that the country is still viewed as an attractive proposition for bank investment because of the diversity of economic activity on offer and the potential growth offered by digital technologies.

The regional banking regulator, the Central African Banking Commission (COBAC) has recognised that the Covid-19 pandemic has placed particular strains on banks in all markets and so has lowered the capital conservation buffer for credit and microfinance institutions from 2.5% of total capital to 2% until June 2022 to help them cope with the fallout of the crisis.

The regulator believes that the crisis will have a big impact on banks and microfinance institutions in the region. It has blocked credit institutions from paying any dividend that is not approved by COBAC and has asked them to send a weekly report on their cashflow situation, plus monthly figures on the impact of the pandemic on loans.

Yaoundé’s main priority for now, however, is strengthening existing banks. COBAC has agreed to the government’s plan to recapitalise the Union Bank of Cameroon (UBC) and National Financial Credit (NFC) Bank, to the tune of CFA17.8bn ($30m) and CFA29.1bn respect ive ly.

However, in August 2021, COBAC issued a warning to NFC Bank because of its failure to exercise vigilance against money laundering and terrorism financing.

In November, the government finalised its acquisition of a 54% stake in UBC from Ecobank Transnational Incorporated (ETI). The government intends to complete the bank’s restructuring and hopefully return it to private ownership within five years.

The board announced in March 2021 that it had managed to increase its turnover by 9% and deposits by 18% over the previous 12 months, generating a CFA1.5bn ($2.7m) profit in the process.

Ecobank acquired its shares in the bank in 2010, after its takeover of Nigeria’s Oceanic Bank left it with two separate operations in Cameroon. Ecobank tried to give UBC to the microfinance firm Cameroon Cooperative Credit Union League more or less for free in 2013 but the move was blocked by COBAC, which demanded that the Pan-African bank pay an exit fee.

Yaoundé has a track record of intervening to support banks, including Commercial Bank of Cameroon (CBC), in which it took a 98% stake in 2014 and which it now intends to partially privatise as soon as possible. CBC was founded in 1997 but a COBAC audit in 2009 revealed very low levels of capital, which resulted in it being placed under provisional administration for what turned out to be seven years.

According to CBC’s Director General, Léandre Djummo, the government will retain a stake, while some shares will be sold to individual investors but most will be sold to a strategic partner via a call for expressions of interest.

The timetable for the sell-off has not yet been revealed, although press reports in the country put the ratio of the shares to be distributed as 17% to the government, 30% to retail investors and 51% to the successful strategic partner.

Microfinance provider Compagnie équatoriale pour l’épargne et l’investissement (Comeci) was placed under provisional administration in January 2018 by COBAC, which considered it insolvent but the process of settling claims against it was delayed by the liquidator’s ill-health. However, COBAC appointed a new liquidator in June 2021, allowing creditors to submit claims, while the liquidator is now seeking to recover outstanding debts to Comeci.

While some banks required regulatory intervention, others are refocusing their business. For instance, Standard Chartered Bank Cameroon closed its retail operations in the country last June and July to focus on the provision of services to companies and institutions.

Idrissa Kamara, CEO of Standard Chartered Cameroon, commented: “The aim is to ensure that we are efficiently organised to serve our corporate clients by using our resources as effectively as possible to develop the franchise and our competitive differentiation in this important segment, which is crucial for the country’s development.”

The Cameroon subsidiary was set up in 1986 but its retail operations held relatively low levels of deposits in comparison with other banks in the country and indeed, accounted for just 6% of its own total deposits in Cameroon early last year.

It is vital the Government gets a grip on parastatal debt, which threatens to undo the work done in containing sovereign debt.

New entrants Despite such strategic retreats, the sector has recently seen the entry of a new player, in the form of Banco Nacional de Guinea Ecuatorial (Bange).

Bange Bank Cameroon obtained its operating licence in November 2020, making it the 16th credit institution operating in the country, and then opened its first branch, in Douala, in October 2021. It also intends to open a branch in Yaoundé to kick off its operations in the country. It intends to focus on providing medium-term loans to help companies expand their operations, plus equipment leasing.

Another lease financing specialist, Alios Finance Cameroon, issued a bond last July to raise CFA10bn ($15m) at a yield of 5.40% to strengthen its operations.

The issue was arranged by Attijari Securities Central Africa (ASCA), which said: “Alios Finance Cameroon intends to boost the competitiveness of its financing offer, improve its risk cost and the quality of its portfolio to consolidate its sectoral leadership. This strategy requires the mobilisation of diversified, innovative, and appropriate refinancing mechanisms.”

It aims to improve its cost-income ratio to 54% by 2025. According to sources in Cameroon, it is the biggest lease financing firm in the country, with a market share of 35%, followed by Société Générale Cameroon (25%) and Afriland First Bank (18%).

Banking inclusion Such short-term changes in the Cameroon banking landscape are taking place against the backdrop of pro- found developments in the nature of African banking.

Digital banking has seen fintech and mobile telecom companies move into the banking sector, with huge implications for the industry. Traditional banks are being forced to focus on their mobile and internet platforms in order to reduce costs and provide the level of services that their customers increasingly demand.

The pandemic has substantially speeded up the process of digital transformation and although Central Africa lags behind most other parts of the continent in this process, research in 2020 found that banks in Cameroon offered more customers access to mobile or online platforms than anywhere else in Central Africa.

New solutions are also being found to ensure that less digitally-connected customers are not left behind. Last June, Ecobank signed an agreement with Cameroon Postal Services (Campost) to allow customers to access banking services via their mobile phones without needing a smartphone or any form of internet connection. Payments, transfers and even loans can all be arranged using the service, spreading the benefits of online and mobile banking to a wider segment of the population.

Smartphone ownership is increasing as handset prices fall but most people still do not own smartphones. According to official figures, just 12% of the population currently has a traditional bank account but under its national development strategy, the government has set a target of boosting banking penetration to 80% of the population by 2030, through a combination of traditional, digital and phone banking.

This article is part of our Banking in West Africa special report, which was published in issue 57 of African Banker magazine. Subscribe today to read the full report and stay updated with African Banker at https://shop.exacteditions.com/gb/african-banker