South Africa's major banks registered modest growth and diversification last year
Global professional services firm PwC has released its latest analysis of the forum Major Banks in South Africa – Absa, FirstRand, Nedbank and Standard Bank – and has found them amid stable growth and evolution despite a highly challenging economic environment in the country.
While the South African economy has been struggling ever since the global dip in oil and commodity prices in 2014, the global financial sector currently appears to be thriving on the back of digitalisation and the expansion of the consumer market. This scenario appears to be rubbing off on South African banks.
As per PwC’s latest analysis of South Africa’s major banks, “business and consumer confidence” in South Africa remained fairly low last year, although the average consumer spending still managed to register an increase, which worked out favourably for the country’s financial sector.
The four major banks in the country registered substantial growth in their headline earnings over the previous year, averaging at nearly 9% and amounting to a total of over R82 billion. The majority of this growth, as per PwC, came in the second half of last year, in tandem with the increase in consumer spending.
South Africa is one of the fastest growing markets in the world when it comes to fintech, and the report found that digital lending strategies have driven growth in the transactional value for major banks, particularly in non-interest revenue, which grew by more than 6% when compared to the previous year.
The returns on equity (ROEs) also grew substantially across the major banks, with all four averaging an ROE increase of nearly 19% against 2017. The growth was driven by strong activity amongst some sectors more than others, as elucidated by PwC in its analysis.
“Some banks noted continuing challenges by corporate borrowers in the mining, construction and cement industries. On a positive note, the major banks noted improvements in the health of corporates in the oil and gas sectors - on the back of stable and more elevated oil prices compared to a few periods prior,” read a statement by the firm.
Meanwhile, PwC Africa’s Financial Services Leader Johannes Grosskopf said, “The major banks continued to deliver growth in spite of a challenging environment. They’ve benefitted from their broader African strategies which they have focused on and set in motion in prior periods. Another contribution is their ability to leverage enabling technologies and the execution of their digital strategies which now clearly support increased transaction volumes on digital platforms. This continued digital and customer-centric focus will make competition with more nimble new entrants into the local banking market especially interesting, with the customer as beneficiary through potentially richer service offerings and more competitive pricing.”
