PwC's Major Banks Analysis shows that South Africa's Big Four banks remain resilient in tough times.
PwC has released their Major Banks Analysis, based on the country’s biggest banks’ financial results for the year ended June 2018.
Building on previous PwC analyses over the last nine years, the Major Banks Analysis identifies common trends and issues currently shaping the banking industry. PwC stated that:
“SA’s major banks delivered a resilient set of financial results for the reporting period ended 30 June 2018, despite various operating and economic headwinds that characterised the period.”
PwC’s analysis highlighted the combined local currency results of the four banks:
• Headline earnings up 0.5 percent since 2H17 (12.1 percent since 1H17)
• Return on Equity (REO) of 18.8 percent (18.6 percent in 2H17 and 17.9 percent in 1H17)
• Net interest margin of 4.36 percent in 1H2018 (4.63 percent in 2H17 and 4.56 percent in 1H17)
• Cost-to-income ratio of 55.1 percent (55.7 percent in 2H17 and 55.5 percent in 1H17)
Johannes Grosskopf, Financial Services Leader for PwC Africa says:
“The major banks remain resilient and continue to have robust capital adequacy levels which have been a feature of the South African banking system over many years.”
Despite the good results, the banks were impacted by movements within the industry as well as the wider economy. The PwC report said: “The results should be seen in the context of the macro and domestic economic environment during the period against which they were achieved."
Within this context was the more competitive environment between the banks and the continued transition of customers to digital channels. This was visible in the form of lower transactional fees and commissions in retail banking, competitive pressures in deposit pricing and depressed margins in the trading businesses.
Economic and regulatory factors have impacted interest rate margins, leading to, on average, higher liquidity and funding related costs during the period. The rand was also stronger in the first half of 2018, which partially offset the strong performance of many of the banks’ operations outside South Africa.