Internet banking is the least profitable of the 10 banking business areas surveyed for a PricewaterhouseCoopers report on banking in SA.
The survey was based on interviews with MDs and senior executives of 27 banks, 15 of which are foreign-owned and 12 are domestically owned, the report says.
The survey, which is the sixth of its kind, was developed by PricewaterhouseCoopers leading banking partner Tom Winterboer and Dr Brian Metcalfe, a professor at Brock University`s business school in Canada.
The survey found that the 12 domestic banks plan to spend more than $500 million on IT this year, whereas the foreign banks are planning to spend a more modest $50 million.
Other key findings
o domestic banks are under pressure to service the previously unbanked market;
o corporate migration is adversely affecting domestic and foreign banks;
o the South African banking market is overcrowded;
o the three most important measures of success are return on capital, image and reputation, and revenue growth;
o most banks in SA predict annual revenue growth of at least 20% over the next three years;
o the three most pressing issues are service quality, client focus and profit performance; and
o participants believe that the best opportunities over the next three years lie in treasury, capital markets, foreign exchange, structured products, and mergers and acquisitions.
While it found that Internet banking is the least profitable of the 10 business areas examined, it is also one of the most competitive segments of the market. The only other segments perceived as more competitive are investment and merchant banking, and retail banking.
The two most profitable sectors last year were treasury and investment and merchant banking.
Whereas IT was previously seen as the most important change enabler, survey respondents now indicate that it has been surpassed by client sophistication as a result of improvements in client knowledge.
However, IT remains an important driver of change. Others include mergers or consolidation, and globalisation.
The survey also indicates that IT developments and the emergence of alternative delivery channels have the most influence on competition.
"Downsized refocused competitors are more likely to pose a competitive threat than new entrants of newly restructured companies," the report says.
Respondents were asked to rank their peers in terms of several categories of banking activity, and Standard Bank was ranked top in six categories: corporate lending, foreign exchange, capital market bonds derivatives, money markets, Internet banking, and retail lending and deposits.
Merrill Lynch was ranked top for corporate finance (listings), institutional brokerage and retail brokerage (along with BJM).
FirstRand was first in mergers and acquisitions, structured finance, vehicle financing and private equity investments, while Investec was top in institutional asset management and private banking.
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