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Commercial banks

Ivory Coast's Banking Sector Faces Challenges Amidst Liberalization and Consolidation

Strategic Insights

— 1 min read

Ivory Coast's banking sector, dominated by French-owned banks, has faced significant challenges due to bad debts in the cocoa sector. The bad debts, resulting from poorly managed loans to commodity trading companies, have pressed banks to make large provisions to clean up their portfolios. The impending liberalization of cocoa markets, expected to result in extensive consolidation among traders, will further impact the sector.

Key Takeaways:

  • SGBCI, Ivory Coast's biggest bank, reported a 16% drop in profits to CFA Fr2.8bn from CFA Fr3.3bn in 1997, with costs rising due to a general pay increase and voluntary redundancies.
  • BICICI, the second-largest bank, paid a dividend but reported a 50% decline in net profits to CFA Fr3.02bn from CFA Fr5.99bn in 1998.
  • The liberalization of cocoa markets will lead to consolidation among traders, making it harder for local banks to spread risk and increasing competition from abroad.
  • The Western African central bank is expected to tighten up rules on sound prudential lending, adding pressure on banks to clean up their books.
  • Niche players, such as Citibank, have begun to develop the industry, issuing T-bills and a T-bond in neighboring countries.
  • Hudson Finance's managing director, Jean-Luc Bedie, believes liberalization will improve the industry's health, while Dominique Demarquette, outgoing managing director of BIAO, sees room for a new competitor to bring a fresh vision of banking to the emerging country.

Statistics:

  • SGBCI's profits fell to CFA Fr2.8bn from CFA Fr3.3bn in 1997, a 16% decline.
  • BICICI's net profits declined by 49.6% to CFA Fr3.02bn from CFA Fr5.99bn in 1998.
  • The CFA franc was weak against the dollar at the time of the excessive lending, exacerbating the bad debt problem.
  • Over 60% of the T-bill and T-bond financing came from countries abroad, according to Citibank's managing director, Mark Wiessing.

Sources:

  • Financial Times Limited, 1999. All Rights Reserved.

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