South Africas Banks Post Growth As Economic Climate Improves

South African banks have posted strong revenue growth in 2024, as an improving macroeconomic climate and a stabilising political environment bolster the outlook for the countrys banking giants. In the first half of the year Standard Bank reported headline earnings of 22bn rand 1.2bn a 4 rise compared to the same period the year before and a return on equity of 18.5. In the same period, Old Mutuals pre-tax profit rose by over 10 to 9.22bn rand 504m, while Capitec saw headline earnings growth of 36 to 6.4bn rand 350m.

, Absa, and Nedbank also saw similarly strong revenue growth. Combined, South Africas major banks saw a total headline earnings growth of 2.5 in the first half of 2024 compared to 2023 despite South Africas macroeconomic picture being complicated in the period owing to a fraught election campaign and considerable levels of political volatility.

What explains this strong performance across the board? Higher interest rates in South Africa and globally are part of the picture. With interest rates starting 2024 at 8.25 and still standing at 7.75 compared to pandemic levels of around 3.5 this has boosted the net interest income banks South African receive on their issues loans.

Part of the growth is also coming from the fact that many major South African financial institutions are increasingly investing abroad in other African markets.

Furthermore, international banks with their headquarters in the UK or Europe, such as HSBC, Standard Chartered and BNP Paribas, are increasingly divesting from Africa in order to focus on their core operations and markets. This is opening the door for Africas most prominent financial institutions many of which are South African to fill the gap that has been left by their departure.