SGBCI: Banking

THE COMPANY: Société Générale de Banques en Côte d’Ivoire (SGBCI), the largest bank in the West African Economic and Monetary Union, was created in 1962 from the local branches of France’s Société Générale, with the participation of the government and several international financial partners. SGBCI was listed on the regional stock exchange in April 1976 and is the leading bank in the Ivoirian banking sector with total assets of CFA798.5bn (€1.2bn).

SGBCI currently controls 16.5% of the market share in terms of loans and 16.8% in terms of deposits. With a cost-to-income ratio of 54%, SGBCI shows the best profitability ratio among the Ivoirian commercial banks. Its high performance has been based on a superior use of assets for providing loans, compared to its peers. SGBCI’s success has also relied on its capacity to mobilise sufficient deposits, with almost 40% of civil servants in Côte d’Ivoire as customers.

In 2012, with a total cumulative resource of CFA4.04trn (€6.06bn) in the banking sector, SGBCI mobilised CFA659bn (€988.5m), representing 98.9% of the CFA667bn (€1bn) total client deposits. While Ivoirian banks provided a total of CFA3.31trn (€4.97bn) in loans, SGBCI accounted for CFA556.66bn (€834.99m) with 77% in customer loans. In 2013 and 2014, the loan growth of the bank will be driven by higher economic growth in Côte d’Ivoire – with projections for 8% GDP growth in 2013 – and by SGBCI’s efforts to expand into real estate, consumer credit, and small and medium-sized enterprise (SME) markets. SGBCI has also recently weathered a double challenge: the post-election crisis and the arrival of Nigerian and Moroccan competitors.

Stimulated by this additional competition, SGBCI has planned to open an average of 10 branches per year to help expand its customer base. The bank made a first symbolic step with the reopening of the branch in Man, in the west of the country, after being closed for nearly a decade. SGBCI shows strong willingness to cover the entire national territory and reach as many as 90 branches, compared to the current 64. This will allow the bank to capitalise on proximity to its customers and widen its base.

Since July 2013, SGBCI has been facing a wage claim from its employees. The workers are requesting salary enhancements of up to 100% to reach wage levels close to those of the competition. In our opinion, this strike will affect bank profitability in the short term. However, we think that with the recovery of economic growth, SGBCI will find opportunities to provide new loans and increase its net banking income to cover the growth of staff costs.

SGBCI, with a price-to-book ratio of 2.2x, is currently trading higher than the sector average of 1.77x. The company’s 10-year average dividend payout ratio is 109%. According to SGBCI’s management, the company’s dividend policy should remain consistent over the years at around 85%.

DEVELOPMENT STRATEGY: As the leader in the Ivoirian banking industry, SGBCI will benefit from the period of reconstruction and recovery, largely due to a larger number of investments in Côte d’Ivoire. The strategy of SGBCI is to get more active in retail banking, and consolidate its position in the corporate segments. SGBCI is expanding its branches and ATM network in Côte d’Ivoire, getting closer to the customers. This strategy is set to receive a capital expenditure of CFA20bn (€30m) over the next three years, in order to build 10 branches a year. SGBCI’s main strategic targets include focusing on Abidjan and its 5m inhabitants, attracting more SMEs and securing more customers from the country’s largest public-sector organisations. The bank's clients already include 40% of civil servants. SGBCI’s objective is to reach out to other sectors and boost its retail lending past the CFA100bn (€150m) mark.

Currently, corporate banking still represents the largest portion of the total lending volumes. This is because SGBCI benefits from the trust of large multinationals, mostly French companies, and local SMEs.