Rivaan Roopnarain | Partner | Banking & Capital Markets | PwC South Africa | mail me |
South Africa’s economic recovery gained credible momentum in 2025. GDP recorded its fifth consecutive quarter of growth in Q4-2025. This pushed the annualised rate to 1.1% for 2025.
The Government of National Unity’s reform agenda supported this growth. The end of load shedding also contributed. In addition, recovering consumer and business confidence strengthened the outlook.
Domestic economic optimism improved further. Credit rating upgrades supported this shift. South Africa’s removal from the FATF greylist also boosted sentiment. Meanwhile, inflation fell to an average of roughly 3.2%. This decline created room for the South African Reserve Bank to cut the repo rate to 6.75% by year’s end. It also enabled a new 3% inflation target.
Economic recovery gains traction
The impact was tangible. Household credit demand had remained subdued for some time. However, it began to recover. At the same time, corporate fixed investment regained ground from a low base. This recovery directly supported banks’ profitability and growth across lending portfolios.
Sub-Saharan Africa continued to present compelling growth dynamics. East Africa remained a standout performer. Analysts often describe it as the continent’s most consequential subregion. It also serves as a trade corridor linking Africa with the Middle East and Asia. The region offers fast-expanding consumer markets. It also provides infrastructure investment opportunities and growing cross-border economic integration.
In contrast, West Africa presented a more mixed picture. Nigeria and Ghana offer long-term structural opportunities. However, currency volatility and inflation continued to weigh on reported earnings in Rand terms. These pressures created uneven conditions for banks’ profitability and growth across regions.
Global volatility and market dynamics
The introduction of US tariffs increased to levels not seen in decades. As a result, markets experienced heightened volatility. This shift subdued investor confidence. At the same time, it created trading revenue opportunities for banks. Their global market operations benefited as clients pursued hedging and risk mitigation strategies. These dynamics played a dual role in shaping banks’ profitability and growth.
No major bank presented 2025 results without acknowledging the turbulent global geopolitical backdrop. Recent Middle East tensions dominated recent discussions. Some commentators cautioned that these dynamics could prompt the SARB to reassess the pace of interest rate reductions. In addition, rising oil prices pose an inflationary risk. These pressures could interrupt the benign rate environment that households experienced in 2025.
In 2025, the economy reflected encouraging signs of confidence, growth and investment activity. However, the broader global environment remained volatile and uncertain. This volatility was evident in geopolitical conflict, policy uncertainty and trade tariffs.
Strategic shifts in banking
Against this complex backdrop, major banks have again shown their skill, ability and experience in managing volatility. They also created strong returns in turbulent times. Key strategic themes emerged from the major banks’ results for this period.
Digitally enabled
Major banks continue to compete intensely on digital growth. Client acquisition and transaction volumes continue to increase. Mobile-first platforms drive this growth. To support this trend, banks focus their spending and investment on transitioning and refining core systems. They aim to achieve cloud computing capability. They primarily leverage hyperscaler platforms to accelerate modernisation. In addition, they unify systems across business segments.
At the same time, the technology landscape continues to evolve rapidly. Management teams analyse use cases of generative and agentic artificial intelligence. They assess potential impacts and opportunities both internally and for customers. Meanwhile, regulators across the globe focus on governance and trust frameworks for Artificial Intelligence (AI) adoption.
AI is increasingly viewed as a strategic business imperative. Organisations can use it to boost productivity, enhance decision-making and improve client and employee experiences when deployed thoughtfully and at scale. Industry maturity continues to develop. Most banks continue to refine their approach as AI capabilities evolve rapidly.
– Yusuf Bismilla, Digital Trust Partner at PwC South Africa
Global banking trends emphasise embedding AI for personalised experiences and real-time intelligence. They also highlight agentic AI, seamless omnichannel integration, enhanced fraud detection and automation-driven efficiency. Together, these trends support long-term bank profitability and growth.
Client centricity and experience as a differentiator
Banking products across retail, business and corporate segments have become increasingly commoditised. As a result, personalised client experiences now serve as the primary differentiator. Banks tailor these experiences to individual needs across customer segments. This shift has become the main competitive battlefield.
This strong focus on client centricity has driven structural changes. Some banks have shifted toward segment-based operating models. These models allow banks to concentrate talent, systems and technology investment where customer demand is greatest. They also enable targeted product innovation. At the same time, banks preserve scale efficiencies in back-office and shared services.
New and emerging entrants in retail banking continue to intensify competition. These entrants challenge traditional pricing assumptions. They also redefine expectations for digital banking experiences. As a result, banks must continuously innovate to protect and enhance profitability and growth.
Resilient balance sheets
Major banks continue to demonstrate their ability to navigate uncertainty. Strong capital, liquidity and risk management positions support this resilience. In FY25, combined deposits reached R8.3 trillion. This reflects an 8.4% increase against FY24. Gross loans and advances reached R6.8 trillion, growing 5.8% against FY24. These fundamentals underpin sustained banks’ profitability and growth.
Pan-African diversification as a structural growth vector
Banks with significant regional presence achieve stronger growth rates in those economies. However, inflation, currency volatility and sovereign risks create headwinds. Despite this, the continent’s structural advantages remain compelling. These include natural resources and young, digitally native populations.
Corporate and investment banking opportunities remain strong. Advisory and trading activity in markets outside domestic operations supports revenue growth. Partnerships with fintechs and mobile money operators also contribute. These factors help sustain banks’ profitability and growth despite local pressures.
Cost discipline, productivity and operational simplification
Cost management remains a defining test of management quality. Banks focus on achieving positive operating leverage. This requires revenue to grow faster than costs.
To achieve this, banks continue to reinvent operational models. Automation, digital servicing, and AI-enabled productivity tools improve efficiency. These tools support profitability even in low-growth environments. As a result, they remain strategic priorities.
Sustainable finance and energy transition as a commercial opportunity
The energy transition is creating infrastructure investment opportunities at scale. Banks increasingly align their strategies with these opportunities. Renewable energy finance has moved into the mainstream. Management teams now frame climate finance as both a regulatory requirement and a commercial growth driver.
Major banks’ results highlight
Our Major Banks Analysis highlights key themes from combined local currency results. These results cover Absa, Capitec, FirstRand, Investec, Nedbank and Standard Bank. The analysis uses published results for the 2025 reporting period.
For this period, analysts restated all comparative figures to include Investec. The analysis also includes its South African operations for the period ended 30 September 2025. Overall, the South African operations in this analysis represent 93% of total banking sector assets. This estimate draws on December 2025 BA 900 industry data.
South Africa’s major banks continue to demonstrate why global markets recognise them for innovation, discipline and stability. Their 2025 results show an industry that has navigated significant macro headwinds. They also delivered earnings growth, with several banks achieving record performances. We expect banks to respond to global forces reshaping competitive advantage. These forces include artificial intelligence, data-driven operations, embedded finance and ecosystem models. In addition, banks must balance sustainable finance as both a regulatory requirement and a commercial opportunity.
– Costa Natsas, Financial Services Leader at PwC Africa
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Headline earnings
Combined headline earnings grew by 9.4% against FY24 to R152.5 billion. This growth continued to outpace economic growth rates across South Africa and sub-Saharan Africa. Strong non-interest revenue growth of 9.3% supported this performance. In addition, disciplined cost control strengthened results. A largely flat bad debt charge also contributed to earnings growth.
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Loan formation
Improved household and business sentiment supported lending activity in 2025. As a result, aggregate gross loans and advances grew by 5.8% against FY24. They also increased by 5.8% against 1H25. Individual loan portfolios showed varying growth across banks. These differences reflect distinct strategies, geographic exposure and risk appetites.
In the competitive retail lending sector, a moderately improved economic environment supported growth. This trend was evident in home loans, credit cards and asset finance portfolios. Similarly, data from the National Credit Regulator showed improvement. The number of consumers in good standing increased to 18.7 million by June 2025.
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Credit quality
The combined credit loss ratio remained well-managed. It improved slightly to 182 basis points from 187 basis points in FY24. The bad debt charge decreased by 0.6%. Total non-performing loans declined by 0.2% against FY24. They now represent 5.1% of gross loans and advances, compared to 5.4% in FY24.
Data from the National Credit Regulator also showed improvement in consumer credit health. The number of consumers with impaired accounts decreased from 20.7 million to 20.5 million in Q2-25. This reflects a decline of 154,846, or 0.75%, quarter on quarter. It also reflects a decline of 246,284, or 1.2%, year on year.
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Costs
Statistics South Africa reported that the average inflation rate for 2025 was 3.2%. This marks the lowest level in 21 years, since 2004. The only more recent year with lower inflation was 1969, at 3%. However, inflation trends varied across key African markets. Fiscal pressures in some territories created volatility. Against this backdrop, banks maintained strong cost discipline throughout 2025.
Cost drivers aligned with strategic priorities. These include investment in digital innovation, cloud technology and cybersecurity. In addition, competition intensified in retail transactional banking. New entrants with agile, cloud-based technology stacks are putting increased pressure. Overall, cost growth rose by 6.9% against FY24. However, operating income increased by 7.2% against FY24. This created positive operating leverage. The aggregate cost-to-income ratio remained stable at 51%, compared to 50.4% in FY24.
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ROE and capital
On a combined basis, return on equity increased by approximately 42 basis points to 20%. This level remains above the average cost of equity. Earnings growth supported capital strength. The combined common equity tier 1 capital ratio improved slightly to 17.3%, compared to 17.2% in FY24. This improvement occurred despite new prudential regulatory reforms that took effect on 1 July 2025.
The financial results of South Africa’s major banks in 2025 reflect consistent themes. These include balance sheet resilience, disciplined strategy execution, and strong management capability. Banks continue to navigate market turbulence and global headwinds effectively. At the same time, they respond to evolving market and customer trends. They also seek opportunities to scale new technologies. These efforts support productivity, faster decision-making, and improved client experiences.
– Francois Prinsloo, Banking and Capital Markets Leader at PwC Africa
Outlook
Recent geopolitical developments have reshaped the global economic landscape. In late February 2026, US-Israeli military action against Iran triggered a global energy shock. This shock has already influenced fuel prices, inflation, shipping routes, the Rand and commodity markets.
Brent crude prices surged in response. Prices rose above $119 per barrel in early March. This marks a sharp increase from $73 per barrel at the start of the period.
The Strait of Hormuz plays a critical role in global oil supply. Roughly one-fifth of global oil passes through this route. However, large parts of commercial operations ceased after insurers withdrew P&I cover. Developments continue to evolve rapidly on a daily basis.
South Africa faces a complex and differentiated exposure. Like other net oil importers, it faces imported inflation pressures. However, it also benefits from a record commodity price windfall. In addition, an activated maritime corridor creates further opportunity. Whether these advantages translate into real economic gains depends on execution. Operational capacity will play a key role. The speed and effectiveness of policy responses will also remain critical.
Despite these global pressures, the 2025 major banks’ results present a coherent narrative. The sector has navigated macroeconomic headwinds with discipline. It has also delivered earnings growth, with several banks achieving record results.
Credit quality has improved. Technology investments are delivering results. Geographic diversification continues to support earnings. However, resilience alone is not sufficient. The sector must now focus on reinvention.
In conclusion
Banks must build genuinely differentiated client relationships. They must also deploy AI at scale. In addition, they must compete effectively with fintech players and ecosystem models. Balancing cost efficiency with investment for growth remains critical.
South Africa’s major banks remain well capitalised and well managed. They are also well-positioned for future growth. However, the key question for 2026 and beyond remains. Will current momentum drive the bold strategic moves required for the next competitive cycle?
This cycle has already begun, with challenger banks gaining ground. At the same time, regulatory complexity will likely intensify. New requirements for First Loss After Capital (FLAC) instruments will add pressure. In addition, regulators have finalised post-crisis Basel prudential reforms.
Globally, compliance requirements continue to expand. Anti-money laundering, data privacy and consumer protection regulations are increasing. As a result, institutions face growing compliance complexity.
We expect major banks to remain responsive to these dynamics. They will continue to monitor both the operating environment and macroeconomic conditions closely. As demonstrated historically, strong foundations support their resilience. These include advanced risk management capabilities, as well as strong capital and liquidity positions.
These strengths position banks to enhance internal efficiencies. They also support improvements in client experience. Furthermore, they enable banks to leverage opportunities arising from rapid technological change.
