How much money South Africa’s big banks made in the first half of 2024

Four of South Africa’s major banks – Absa, FirstRand, Nedbank, and Standard Bank – achieved combined headline earnings of R56.8 billion in the first half of 2024.

This was revealed in PwC’s Major Banks Analysis, which analysed the performance of South Africa’s largest banks in the first six months of 2024.

The report explained that acute levels of uncertainty characterised the start of 2024 as nearly half the global population entered an election year. 

However, in South Africa, notable improvements in structural constraints, including electricity supply, and generally positive market reaction to the formation of a Government of National Unity were reflected in lower government debt costs and a stronger rand. 

“Within an environment shaped by complex macroeconomic conditions and elevated levels of uncertainty, South Africa’s major banks continue to demonstrate the durability of their businesses,” said Rivaan Roopnarain, PwC South Africa Banking and Capital Markets Partner.

“These results reflect a deep and continuing commitment to executing their strategies with precision and adaptability while maintaining focus on enhanced customer experiences and leveraging the strength of their franchises to build trust through financial services.”

The report found that the major banks’ aggregate headline earnings growth of 2.5% against H1 2023 to R56.8 billion reflects the combination of resilient revenue growth across net interest income and non-interest revenue, supported by a decline in credit impairment charges of 6.3%. 

However, despite robust underlying franchise momentum and strong operating performances outside South Africa, headline earnings growth was impacted by significant foreign currency weakness in some territories.

One of the key themes that emerged from PwC’s analysis was that measured balance sheet growth across lending and deposit-taking activities continued to provide the foundation for the major banks to do more with customers.

Therefore, their earnings in the first half of this year were supported by resilient revenue growth across both interest income and non-interest revenue, aided by improved credit trends relative to recent periods.

In addition, the analysis found that intense strategic focus on the rest of Africa outside South Africa continues to provide strong levels of diversity to overall performance.

“The scale and competitiveness of operations in high growth African markets – and their earnings contributions – has emerged as a clear area of distinction for many of the major banks,” the report said.

However, it warned that balancing market-specific and sovereign risks with group-wide efficiencies was complicated in H1 due to significant factors such as increased cash reserving requirements and currency volatility in certain key territories. 

“This currency volatility resulted in the major banks’ combined foreign currency translation reserves reaching record levels, depressing group results,” it said.

In this year’s report, PwC found that the consistent theme of the major banks’ robust resilience metrics continued, with strong capital and liquidity levels and risk coverage. 

Moderated impairment charges, particularly in South African retail lending portfolios, drove down the combined credit loss ratio to 100 basis points, compared to 110 basis points a year earlier. 

The firm explained that improved credit trends in South Africa were supported by slower inflows into early arrears as a result of proactive customer assistance programmes and enhanced collection processes implemented by the major banks.

However, higher impairments were generally evident within corporate lending portfolios driven by counterparty and industry specific risks and within sovereign asset portfolios beyond South Africa given the fiscal issues facing several African countries. 

On a combined average basis, the major banks’ credit loss ratio remains at the upper end of their average “through-the-cycle” range.

Furthermore, the major banks’ combined strategic target of a 50% cost-to-income ratio was challenged in the current period by elevated inflation levels and volatile exchange rates. 

“With a continued focus on disciplined cost management evident in this results period, the major banks’ cost base remains reflective of investments in talent, technology and the corporate brand through marketing and sponsorships,” PwC said. 

“Concurrently, strategic priorities in software spend and cloud and technology-related costs reflect contractual increases and subscription costs, which are often foreign denominated.”

Overall, PwC said that while prospects for the rest of 2024 remain complex and subject to significant uncertainty, consensus expectations for interest rate cuts across several territories provide a basis for optimism. 

“Globally, economic sentiment is likely to be consequentially influenced by the combination of the US election, inflationary readings and tense geopolitics,” the firm said. 

“However, the major banks’ GDP growth expectations in both South Africa and various other African presence countries remain cautiously optimistic, which will influence their scenario planning and the positioning of their balance sheets in response to developments in the operating environment.”