The Banking Industry in South Africa 2024

Challenges

Banking-related corruption, crime and fraud, including cybercrime and money laundering. Climate change-related shocks. Concern about state banks and contagion in the banking system. Criticism of high executive pay. Grey-listing could increase transactional banking costs. Impairments are growing as the number of indebted consumers rises. Increased emigration could compound skills shortages. Loadshedding costs. Reputational risk from financing fossil fuels and failing to increase sustainable finance. The commercial banking sector is dominated by major players and is highly concentrated. The Competition Commission’s rand fixing case against the banks has highlighted the government’s mistrust in private banks. Wealth banking is being affected by emigration.

Introduction

The banking sector is well capitalised and its capital adequacy and liquidity ratios have remained well above minimum statutory requirements. The slowing economy and increased cost of living have seen consumer lending slow, and banks are looking to the rest of Africa to generate better returns. Despite this, higher interest rates have lifted interest income. The sector is dominated by the five largest banks which hold about 90% of total banking sector assets. Risks include the increase in impaired advances, the setting up of a state bank and higher transaction costs. The major banks are facing increasing competition from digital banks, and increasing pressure to reduce financing of fossil fuel projects and increase sustainable financing.

Opportunities

Assisting SMEs with enterprise development and supplier development. Expansion of the major banks into the growing African corporate and investment banking market. Financing of small businesses. The development of digital banking products and apps. The inclusion of unbanked low-income earners. The regulation of cryptocurrency could allow for the development of new banking channels.

Outlook

Credit conditions are expected to remain tight in 2024. Non-performing loans will likely remain elevated. The sector is expected to maintain strong risk-adjusted returns, supported by net interest margins and transactional revenue. While major local banks’ balance sheets remained resilient, the outlook is uncertain. Technological disruption and competition from non-traditional players will continue to affect bank strategy. Climate change is expected to create significant opportunities for balance sheet growth and innovative sustainable financing solutions.

Report Coverage

This report on the banking industry in South Africa covers central banking, development banks, commercial and mutual and co-operative banks and other credit providers. It includes information on the size of the industry such as number of banks, customers, and major performance stats including loans and impairments. It covers the state of the industry, digital banking, economic effects on the industry, financial sentiment and stability, notable players, corporate actions and influencing factors. There are profiles of 82 companies including major players such as Absa, FirstRand, Standard Bank, Nedbank, Investec and Capitec, digital banks such as Bank Zero and TymeBank, international players such as BNP Paribas, development banks such as the Development Bank of Southern Africa and leasing companies such as the financial services arms of Toyota and BMW.

Trends

Banks are increasingly looking to service micro and township businesses Digitisation of banking, which could increase financial inclusion and reduce operating costs. Growing use of loyalty cards. Increasing focus on recruiting people with digital skills. Local banks are increasingly focusing on the rest of Africa as lending slows and impairments rise locally. Sustainable finance and green bonds are growing, while there are increased demands to reduce financing of fossil fuel projects. The poor economy and high cost of living has slowed demand for finance.