SA’s major banks show a robust recovery, delivering strong financial performance despite complex conditions

Trading conditions in South Africa began 2022 with momentum, as the first quarter GDP figure reflected an economy that returned to pre-pandemic levels.  This outcome was underpinned by the lifting of lockdown restrictions, strong terms of trade, and high commodity prices.

However, several adverse factors tempered that momentum during the first half of the year.  These included the re-introduction of load shedding, flooding in KwaZulu-Natal (a province which includes sub-Saharan Africa’s biggest container port), increased labour action, elevated inflation levels globally and domestically, slow growth, and significantly heightened geopolitical tensions.

Overall, the major banks navigated complex operating terrain in the first half of 2022.  Armed with important lessons learned through the volatile experience of the pandemic, and having refined overall bank strategies as a result, the major banks spent the first half of 2022 focused on the customer experience through continued digitisation, and on driving the efficient execution of strategic priorities.

Major banks’ results highlights

PwC’s Major Banks Analysis report highlights key themes from the combined local currency results of Absa, FirstRand, Nedbank and Standard Bank, and in-corporates common strategic themes from other SA banks.  These results are summarised in the graphic below.

While the first half of 2022 remained challenging and uncertain for many South Africans, there were clear signs that the worst effects of the pandemic were now behind us, with the major banks having delivered robust results for the period on the back of focused execution of strategic priorities by management teams.

Supported by strong balance sheet metrics across capital, liquidity, and credit provisioning, the major banks’ results reflect the benefits of underlying franchise momentum and management focus on strategy execution that is centred on enhancing customer experiences.

What we observe in this set of results is evidence of the quality, strength, and diversity of the major banks’ franchises, achieved against more buoyant indica-tors of consumer activity.

The key themes highlighted in the report include:

Headline earnings

Underpinned by strong transactional activity and revenue growth across product lines, industry sectors and banking franchises, combined headline earnings grew 19% against 1H21.

Those banks with large regional presences outside South Africa saw the benefit of geographic diversification, with banking operations in key African markets benefitting from the higher rate environment, a recovery in international trade, and strong growth in trading revenues

For some of the major banks, headline earnings reached record levels.  Strong balance sheet resilience across key capital, liquidity, and provisioning metrics remained a consistent theme for all of the major banks.

Asset growth

Comparatively improved household balance sheets, better consumer and business confidence levels, and pent-up demand from the worst phases of the pandemic have produced strong credit growth—particularly in secured portfolios (which include vehicles and home loan financing).  Overall, gross loans and advances grew by 9.8%.

Liquidity and funding

On the back of higher interest rates and better household and business liquidity levels, demand for term and savings products helped total deposits grow by 9.7%.

The combined loan-to-deposit ratio remained flat at 87%, while liquidity prudential ratios continued to be managed well above regulatory required levels.

Credit quality

Throughout the worst phases of the pandemic, the major banks bolstered their reputations as strong risk managers.  That theme continued as they managed risks judiciously during the period, with a bias towards credit quality.

The combined credit loss ratio (measured as the income statement impairment charge divided by average advances) fell by 5 bps to 77 bps (1H21: 82 bps).  Total non-performing loans remained largely flat, comprising 4.6% of gross loans and advances (1H21: 5.2%), while provisions against these loans increased to 46.5% (1H21:43.8%).


Combined operating expenses grew 8.2%, slightly above the 7.4% CPI recorded in June 2022 which represented a 13-year high in South Africa.  While tight management of discretionary spend remains a focus area for management teams, the combination of staff costs, technology related spend, and a rebound in travel and marketing con-tributed to the major banks’ cost base.

Rising inflation has been experienced globally in recent months, driven by complex factors including supply chain disruptions exacerbated through the pandemic and the Russia / Ukraine conflict.

Return on equity, and capital

The combined regulatory capital of the major banks had already surpassed pre-pandemic levels in the previous reporting period.  That theme continued in the first half of 2022.

The total capital adequacy ratio amount-ted to 17.1% (1H21: 16.9%), providing the foundation for continued investments and supporting healthy dividend payout ratios in the period.

The major banks’ ability to generate robust earnings while maintaining strong capital adequacy has long been a feature of the South African banking system. Combined return on equity grew 150 bps to 16.9% (1H21: 15.4%).


The outlook for the second half of 2022 is expected to be volatile and uncertain.  Geopolitical risks remain tense and acute, and will add to supply chain pressures in the developed world.  A dramatic rise in inflation coupled with recessionary risks across several economies is serving as the basis for the most rapid monetary policy tightening in decades.

This fraught macroeconomic environment increases risk aversion in global financial markets, and generates a material headwind for developing economies.  African countries with elevated levels of dollar-denominated sovereign debt may face particularly challenging constraints.

In South Africa, persistently high unemployment, the path towards a political elective conference in December, and electricity supply constraints all serve as the backdrop for continued uncertainty.

Additionally, the country’s potential grey-listing by the Financial Action Task Force (FATF) represents a worrying prospect.  Implications of a grey-listing are broad, including increased monitoring by FATF and more onerous reporting requirements by correspondent banks, possible restrictions on correspondent banking relationships, and adverse impacts on funding costs.

Unlike other sharp downside risks. which are often rapid and unexpected, the possibility of FATF grey-listing has been well documented.  This has allowed the major banks to engage proactively with stakeholders, including with correspondent banks, to manage potential impacts.

Positively, the disciplined execution of structural reforms—including alleviating energy supply constraints, improvements in logistical infrastructure across freight rail and ports, and generally easing the administration of doing business—could add incrementally to South Africa’s GDP prospects.

While the fortunes of the banking industry and the broader economic environment are intertwined, several factors and actions taken by the major banks should help navigate the uncertainties ahead.  These include their strong brands, the bias towards prudence evident in credit provisioning and capital management, the positive endowment effect of higher interest rates, and over-all balance sheet growth across loans and deposits which provides the basis for transactional revenues.

We expect the unrelenting focus on the customer experience through digital, product, and channel innovation to continue.  Tech-powered transformation; data-enabled customer focus; and broad-based trust are becoming increasingly important.

Similarly, integrating climate-related risks and leading ESG practices into lending policies and pricing strategies, existing enterprise risk management, and external reporting frameworks will continue to demand management time over the medium term.

Combined financial results of South Africa’s major banks (first half of 2022)

Source: PwC Major Banks Analysis report

WRITTEN BY Rivaan Roopnarain, Costa Natsas, and Francois Prinsloo

Rivaan Roopnarain is the Africa banking and capital markets partner at PwC.

Costa Natsas is PwC Africa’s financial services leader.

Francois Prinsloo is PwC Africa’s banking and capital markets leader.


This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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