South Africa’s major banks - Absa, FirstRand, Nedbank, and Standard Bank- posted a modest uptick in earnings for 2024 against a backdrop of formidable challenges, according to the latest PwC report released on Monday.

Combined headline earnings climbed 5.9% from the 2023 financial year to R119 billion, a slowdown from the robust double-digit growth seen in prior years.

For context, 2023 saw earnings soar 13.8% to R113.2bn. The return on equity (ROE) nudged down to 17.5% from 17.6% in FY23, while the credit loss ratio improved to 89 basis points (bps) from 102 bps, underscoring resilience amid choppy waters.

However, the major banks’ combined headline earnings growth of 5.9% far surpassed South African and sub-Saharan economic growth. Underpinning earnings growth was the combination of resilient revenue growth across net interest income (3.7%) and non-interest revenue (5.1%), supported by credit impairment charges falling 6%.

PwC’s report noted that banks' balance sheets stood firm, bolstered by hefty capital and liquidity cushions - well above regulatory floors. Lending grew 5.4% and deposits 8.7%, fuelling earnings despite uneven trading outcomes. Digital banking hit new heights, with 21 million active users by year-end, nudging the cost-to-income ratio to 52.9% from 52.4% in FY23 as tech investments piled on.

This was despite 2024 being challenging both for global and regional economies, the report said. It was a year marked by heightened uncertainty, geopolitical tensions and shifting trade dynamics. Nearly half the world’s population participated in elections, creating a ripple effect of political and economic unpredictability.

Inflation, though cooling, clung on in emerging markets, deferring hoped-for rate cuts and squeezing fiscal space. Sub-Saharan Africa battled socio-economic strains, erratic weather, and jittery commodity prices, with currency swings adding to the mix.

However, South Africa saw some positive developments. Steps towards structural reforms, particularly in energy supply and logistics, began to yield results, while the formation of a Government of National Unity was met with cautious optimism by markets. These factors contributed to a stronger rand and relatively improved investor sentiment. Despite these improvements, the South African economy faced headwinds, with high unemployment levels and subdued real GDP growth of 0.6% in 2024, the PwC report said.

Rivaan Roopnarain, PwC South Africa Banking and Capital Markets Partner, said, "2024 has been another testament to the strength and adaptability of South Africa’s banking sector. Despite continuing and evolving challenges in the global, regional and domestic operating environment, the major banks’ management teams remained focused on delivering value to customers, managing risks and investing in future growth opportunities.”

Costa Natsas, PwC Africa’s Financial Services Leader, said, “South Africa’s major banks results in 2024 reflect the focused execution of their strategies despite challenging trading conditions and significant levels of uncertainty. The major banks appear to have navigated the risks and challenges facing their businesses and markets of operations to deliver a resilient financial performance. Looking ahead, while complex geopolitics and trade tensions pose elevated macroeconomic headwinds, core focus areas of the major banks are likely to remain on maximising growth vectors and customer experiences, while embedding emerging technologies.”

The report said Africa beyond South Africa remained a linchpin. Banks with deep roots in high-growth markets reaped strong returns, though currency volatility and regulatory tangles trimmed rand-denominated gains. Sustainability also took centre stage, with banks funnelling cash into green projects and eyeing AI to sharpen operations and customer touchpoints.

Meanwhile, credit quality brightened, with retail lending impairments easing thanks to savvier risk management. The credit loss ratio’s drop to 89 bps reflected this, though non-performing loans ticked up slightly to 5.3% of advances. Costs crept up 4.7%, outpacing revenue growth of 4.2%, a nod to sticky inflation and tech spends. The CET1 ratio inched to 13.3% from 13.2%, keeping banks well-armoured.

Francois Prinsloo, PwC Africa’s Banking and Capital Markets Leader, said: “The major banks have demonstrated their ability to navigate a complex and uncertain environment with resilience and effective strategic focus. As we look ahead, their commitment to innovation, sustainability and customer-centricity will remain central to their overall bank strategies for unlocking growth and delivering value.”

The report said global growth is pegged at a tepid 3.3% for 2025 by the International Monetary Fund and “trade headwinds - including the sharp uptick in trade policy uncertainty - are expected to keep investment subdued.”

The South African Reserve Bank trimmed its key interest rate by another 25 basis points to 7.5% at the end of January 2025, marking its third consecutive cut. "While inflation remains well-contained for now, the medium-term outlook is murkier than usual."

Looking ahead, the report said, "As 2025 unfolds, South Africa’s major banks remain focused on the dual priorities of navigating a challenging environment while capturing appropriate opportunities. Building on the resilience demonstrated in 2024."

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SA's big banks post modest 5. 9% earnings in 2024 amid economic headwinds - PwC

Absa Group achieves strong financial growth in 2024, looks forward to sustained growth