South Africa’s major banks maintained steady growth in 2024 despite a challenging operating climate and macroeconomic uncertainties.
Combined headline earnings grew by 5.9%, reaching R119 billion. This surpassed FY23 results. The combined ROE stood at 17.5% (FY23: 17.6%). The net interest margin was 451 bps (FY23: 459 bps). The credit loss ratio improved to 89 bps (FY23: 102 bps). The cost-to-income ratio increased slightly to 52.9% (FY23: 52.4%). The common equity tier ratio grew to 13.3% (FY23: 13.2%).
GNU and the impact on major banks
The year 2024 was a turbulent period for global and regional economies. This was marked by heightened uncertainty, geopolitical tensions, and shifting trade dynamics. Nearly half the world’s population participated in elections. This created a ripple effect of political and economic unpredictability.
Global inflation moderated but remained high in many emerging markets. This delayed anticipated interest rate cuts. It placed strain on fiscal positions in several developing economies. These factors complicated economic recovery efforts.
In sub-Saharan Africa, socio-economic challenges, adverse weather, volatile commodity prices and fiscal challenges continued to strain economies. Currency volatility and inflationary pressures persisted.
South Africa, however, saw positive developments. Steps towards structural reforms in energy supply and logistics began to yield results. The formation of a Government of National Unity (GNU) was met with cautious optimism. These factors contributed to a stronger rand and improved investor sentiment. Despite these improvements, high unemployment levels and subdued real GDP growth of 0.6% in 2024 posed challenges.
Against this backdrop, South Africa’s major banks demonstrated resilience. They navigated complex conditions with strategic agility.
Strength and adaptability of major banks
According to our major banks analysis, 2024 showcased the strength and adaptability of South Africa’s banking sector. Despite global, regional and domestic challenges, major banks’ management teams focused on delivering value. They concentrated on managing risks and investing in future growth.
Key themes from the major banks’ 2024 performance include:
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Solid foundations
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The major banks’ balance sheets remain anchored by robust capital and liquidity positions. Solid buffers beyond regulatory requirements support risk-taking and strategic investments.
Driven by accounting standards and strong risk management, credit provisions kept pace with balance sheet growth. These provisions captured forward-looking information and risk trends in credit portfolios.
Credit performance in 2024 showed improvement. The combined credit loss ratio declined to 89 basis points, down from 102 in 2023.
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Digital transformation and cost efficiency
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The shift to digital banking accelerated, particularly in retail banking. The number of digitally active clients reached 21 million. This number approached a third of the South African population by year-end.
Investments in technology, including new systems, legacy enhancements, cloud-based solutions and cybersecurity, remained priorities. Investments in open banking and artificial intelligence were also significant.
The cost-to-income ratio edged higher to 52.9%. This reflected inflationary pressures, particularly in the first half of 2024.
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Balance sheet growth and earnings resilience
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Steady growth in lending (5.4%) and deposit-taking (8.7%) supported earnings growth in 2024. Larger balance sheets and increased customer numbers drove core banking activity revenues. However, the major banks’ trading businesses experienced differing results. This stemmed from divergent strategies and financial market volatility.
Improved credit trends, particularly in retail lending, translated into lower credit impairments. This supported overall earnings growth.
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Sub-Saharan Africa remains central to overall bank strategy
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While approaches to the continent vary, capturing financial services opportunities among young, mobile, digitally-savvy African populations is crucial. High-growth markets remain central to the major banks’ strategies.
Banks operating at scale on the continent saw strong growth and consistent performance in several West and East Africa territories. These banks continue diversifying their businesses, brands and revenue streams in key markets. However, regulatory challenges, economic constraints, inflation, and currency volatility dampened results in rand terms.
Despite these challenges, the pan-African focus remains critical to the major banks’ growth strategies. This sentiment aligns with our 28th Annual Global CEO Survey, which notes the transformation of Sub-Saharan Africa’s businesses. The region is driven by demographic changes, technological advancements and entrepreneurial leadership.
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Sustainability, emerging technologies and innovation
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The major banks made strides in aligning strategies with sustainability goals. They focused on mobilising funding for sustainable financing and climate transition initiatives.
At the same time, they explored emerging technologies, such as generative AI, to enhance operational efficiency, risk management and customer experiences. Use cases span credit risk management, operational risk management, and customer experiences.
This is consistent with global banking trends. Banks harnessing AI, data and qualified people are transforming operations, elevating customer experiences and exceeding stakeholder expectations.
Major banks’ results highlights
Our Major Banks Analysis highlights key themes from the combined local currency results of Absa, FirstRand, Nedbank and Standard Bank. It also provides reflections from the common strategic themes within other South African banks.
At 31 December 2024, the South African operations of the major banks included in our analysis comprised 83% of total banking sector assets in South Africa (based on BA 900 industry data).
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.
– Costa Natsas, Financial Services Leader at PwC Africa
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Headline earnings
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The major banks’ combined headline earnings grew by 5.9% against FY23, reaching R119 billion. This far surpassed South African and sub-Saharan economic growth. According to our major banks analysis, the earnings growth was supported by resilient revenue growth across net interest income (3.7%) and non-interest revenue (5.1%). This was further backed by a 6% fall in credit impairment charges.
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Loan growth
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Despite recovering consumer and business confidence from a period of high inflation and interest rates, new loan formation showed relatively improved conditions in 2024. Conditions particularly improved in the second half. Aggregate gross loans and advances grew by 5.4% against FY23. This growth was 2% against 1H23.
As in previous periods, growth in individual loan portfolios and industry sectors was differentiated between the major banks. This was based on differing strategies, geographic footprint, and risk appetite.
According to Bureau data from the National Credit Regulator (NCR), the number of credit-active South African consumers grew to 28.32 million by the end of September 2024. This marked a 3.3% year-on-year increase.
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Credit quality
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As we noted previously, the relationship between interest rates and impairments has been well-established. This dynamic continued in 2024, albeit with interest rate cuts. The South African Reserve Bank (SARB) reduced rates by 50 basis points to 7.75% in 2024. A further 25 basis points cut occurred in January 2025.
According to our major banks analysis, banks benefited from provision releases in FY24. This followed the successful restructuring of legacy corporate non-performing loans. A slowdown into early arrears and defaults in South African retail credit portfolios also contributed.
The combined credit loss ratio moderated to 89 bps (FY23: 102 bps). The income statement bad debt charge decreased by 6% during the same period. Total non-performing loans increased by 3% against FY23. These now comprise 5.3% of gross loans and advances (FY23: 5.4%).
According to the NCR Bureau data, the number of South African consumers with impaired records in Q3-24 decreased by 65,094. This brought the total to 10.2 million. Meanwhile, consumers in good standing increased by 237,246 to 18.13 million.
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Costs
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In 2024, Stats SA reported that the average inflation rate was 4.4%. This was down from 6.0% in 2023. According to our major banks analysis, inflation in 2024 was the lowest in four years. The last time inflation was this low was in 2020, when it was 3.3%.
Outside South Africa, inflation remained sticky in several key territories where the major banks operate. This was influenced by a variety of factors. Against this backdrop, cost control remained a significant focus for management teams in 2024.
Cost drivers aligned with strategic focus areas. These included cloud-based technologies, cybersecurity costs and continued investments in technology infrastructure. Currency weaknesses in African markets outside South Africa offset ZAR-based cost growth.
Overall, the pace of cost growth (4.7%) marginally exceeded revenue growth (4.2%). As a result, the aggregate cost-to-income ratio increased to 52.9% (FY23: 52.4%).
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ROE and capital
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Similar to our observations in the first half of 2024, the volatile currency effects of translating foreign operations impacted the major banks’ combined ROE. The ROE fell by 15 bps to 17.5% (FY23: 17.6%). However, this outcome still reflects positive economic leverage. The combined ROE remains above the major banks’ average cost of equity of 15%.
Although the combined common equity tier 1 capital ratio slightly increased to 13.3% (FY23: 13.2%), the major banks are mindful of the need for ongoing capital optimisation strategies. This is in light of new prudential regulatory reforms taking effect in 2025.
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.
– Francois Prinsloo, PwC Africa’s Banking and Capital Markets Leader
Outlook for the major banks analysis
The IMF notes in its January 2025 World Economic Outlook Update that global growth prospects are divergent and uncertain. Global growth is expected to remain stable, but lackluster, at 3.3% in both 2025 and 2026. The report mentions that “trade headwinds – including the sharp uptick in trade policy uncertainty – are expected to keep investment subdued”.
In South Africa, sharp focus shifted to the nation’s urgent need for growth and fiscal position. This came after the sudden postponement of the Budget Speech, which took place on 12 March 2025. The theme for Budget 2025/2026, ‘Responsible growth for a sustainable future’, highlights the need for the right fiscal choices today. These choices are in the interest of South Africa’s tomorrow.
While the 0.5% increase in the VAT rate in 2025 and 2026 will negatively impact consumers, it is part of a strategy. This strategy aims to right the country’s fiscal ship.
Meanwhile, the SARB cut its key interest rate by another 25 basis points to 7.50% at the end of January 2025. This marks the third successive reduction. While inflation remained well-contained, the medium-term outlook is more uncertain than usual.
Focus areas for major banks in 2025
As 2025 unfolds, South Africa’s major banks remain focused on the dual priorities of navigating a challenging environment. They also aim to capture appropriate opportunities.
Building on the resilience demonstrated in 2024, the key focus areas in 2025 are likely to include:
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Interest rate relief and credit growth
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In the context of an anticipated rate-cutting cycle, the major banks are poised to benefit. They expect stimulated lending activity, particularly in retail and small business segments. Reduced impairment pressures are also expected.
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Digital leadership and innovation
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The customer shift to digital banking continues to accelerate. Investments in AI, cloud technology, and cybersecurity remain central. We expect the major banks to enhance customer experiences. They will streamline operations and leverage data and enhanced analytics. These actions aim to drive personalised financial services delivery and internal efficiencies.
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Sustainable finance and climate transition
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Sustainability remains a core focus. The major banks look to build on their sustainable financing portfolios. Global climate goals remain a priority. This includes funding green infrastructure projects and initiatives. These initiatives seek to manage climate-related risks in vulnerable sectors.
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A decisively pan-African focus
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The major banks’ operations in high-growth African markets remain critical engines of growth. Despite currency volatility and regulatory challenges, strategic investments continue. These investments diversify revenue streams and strengthen competitive positioning.
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Cost management and efficiency
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Disciplined cost control will remain a priority. This is especially important given potentially renewed inflationary pressures. These pressures stem from recent global trade dynamics and tariff threats. The major banks have clearly stated their intentions. They plan to optimise their cost-to-income ratios. This will be achieved through technology-driven efficiencies and targeted investments in talent and infrastructure.
In conclusion
South Africa’s major banks are well-positioned to balance short-term challenges with medium- to long-term growth opportunities. Leveraging their track record of resilience and innovation is crucial. Our major banks analysis notes that the strength of their franchises will guide their value propositions. This will happen in a highly complex and uncertain operating environment.
Rivaan Roopnarain | Partner | Banking & Capital Markets | PwC South Africa | mail me |
