African banks: the time for strategic trade-offs

For several decades, the growth of African banking groups has been built around a structuring conviction: geographic diversification is a driver of resilience. In volatile macroeconomic environments, being present in multiple markets made it possible to absorb local shocks and capture new growth opportunities.

This paradigm enabled the emergence of true pan‑African champions, where previously only domestic banks dominated. But this model has now reached a turning point.

An extensive model under pressure

Financial indicators reflect an increasingly visible reality: the extensive model is reaching its structural limits.
Over the past decade, the profitability of major pan‑African groups has gradually eroded, driven by several combined factors:

• Dispersion of capital across heterogeneous markets
• Regulatory and operational fragmentation
• High operating costs linked to duplicated infrastructures
• Difficulty achieving critical mass in certain geographies

In several groups, a significant share of subsidiaries generates a return on equity below the cost of capital, mechanically weighing on consolidated performance.
The issue is no longer growth. It is now the quality of capital allocation.

The real challenge: exiting, not entering

International expansion has long been perceived as a sign of success. In practice, it has sometimes been driven by opportunism and speed, at the expense of selectivity.
But the strategic question has changed in nature:

The challenge is no longer entering a market. It is deciding which one to leave.

And this is precisely where many groups face a bottleneck.

• Exiting a market is perceived as an admission of failure
• Political and relational considerations slow down decisions
• Local structures resist group‑level arbitrage

The result: strategic inertia that perpetuates diluted performance.

Three structuring pillars for the next phase

The next competitive phase among African banking groups will be driven less by expansion and more by strategic and operational discipline.

Rationalizing the geographic portfolio

Groups will need to accept a simple reality: not all markets are strategic.
A disciplined capital allocation approach now requires prioritizing geographies where:

• competitive positioning is strong (top 3 or clear differentiation)
• critical mass is achievable
• return on capital exceeds the cost of capital

Conversely, structurally underperforming markets must be subject to clear decisions: divestment, partnership, or radical transformation.

Shifting from a multi‑subsidiary model to a platform model

Many groups still operate as a juxtaposition of local banks, with:

• heterogeneous information systems
• duplicated processes
• poorly harmonized product offerings

This model is inherently costly.
Tomorrow’s leaders will be those capable of building truly integrated platforms, enabling:

• shared technological infrastructures
• standardized processes
• industrialization of certain activities (back‑office, risk, compliance, payments…)

The goal is not only cost reduction, but the ability to scale efficiently.

A truly decision‑driven group‑level steering

In many groups, consolidated steering remains limited to harmonized reporting.
Yet transformation requires a fundamental shift: moving from descriptive steering to decision‑driven steering. This implies:

• a headquarters capable of arbitrating against local interests
• clear alignment of management incentives
• a strengthened role for boards on capital allocation matters

In other words, governance capable of prioritizing overall performance over local balances.

A fundamental leadership challenge

Successful transformations share a common characteristic: they rely on decisions that few organizations are willing to make.

• closing an activity
• selling a subsidiary
• giving up a historical presence

These decisions are neither technical nor financial. They are above all managerial and political.
Performance is not declared in a strategy. It is built through the execution of difficult decisions.

Conclusion: from expansion to choice

The next generation of African banking champions will not be defined by the number of countries covered or the size of their network, but by capital allocation discipline, strategic coherence, and the ability to execute structuring decisions.
In an environment where capital is becoming scarcer and more demanding, the groups that outperform will not be the most widespread, but the most selective.