South Africa’s major banks showed resilience by posting solid financial results in a difficult and volatile economic climate, PwC said on Thursday.
According to the company’s major bank analysis, the results of South Africa’s four major banking groups for the year ended December 31, 2014 were an admirable reflection of the industry’s financial health, PwC said in a statement.
The four are Barclays Africa Group Limited, First Rand, Nedbank and Standard Bank.
“South Africa’s major banks have weathered difficult global and domestic operating conditions during 2014, to achieve admirable results,” said PwC banking and capital markets leader for Africa, Johannes Grosskopf.
“For the past several years South Africa’s banking system has remained adequately capitalised with good returns on equity.”
The four banks posted combined headline earnings of R30 billion, up 8.5 percent from the second half of 2013.
This came off the back of strong net interest income growth of 13.2 percent, non-interest revenue growth of 6.6 percent and stable impairment charges, which led to a relatively flat 0.4 percent increase against the second half of 2013.
The banks reported combined gross loan growth of three percent for the six months to December 2014, the same loan growth as in the first six months of the year to June 2014.
Growth in gross loans and advances continued to be stronger in the corporate and investment banking sector than the retail sector.
Impairments increased by only 0.4 percent when compared to the second half of 2013, reflecting continued focus on risk management, workout and collection efforts across the banks.
Combined operating expenses increased 6.8 percent when compared to the second half of 2013. Total operating income increased 10 percent for the same period.
Consequently their combined cost-to-income ratio improved to 54.5 percent, compared to 56.6 percent in the second half of 2013.
Cost containment continued to be an important focus for the banks, while they continued to invest in human capital and enhance their IT capabilities to respond to customer demands, concerns over cyber crime and regulatory requirements.
Salary costs remained the most significant contributor to the cost line, at 54 percent of total costs.
Maintaining cost-to-income ratios at current levels was expected to become increasingly difficult in the short to medium term. This was because of currency weakness and the need to transform branch networks and IT platforms.