Johannesburg - South Africa’s major banks continued to post robust profits for the year ended December, despite facing economic headwinds during the period.
Professional services firm PricewaterhouseCoopers (PwC) on Tuesday said its analysis on the performance of the country’s big banks showed that Barclays Africa, Nedbank, FirstRand and Standard Bank posted combined headline earnings of R72.3 billion on an annualised basis during the period, up 8.4 percent from the similar period last year.
PwC Africa’s financial services leader Johannes Grosskopf said the performance defied a difficult operating environment on the back of macroeconomic uncertainty.
“The combined results for the current period continue to bear testimony to the strength of the South African banking sector and resilience of our banks’ ability to generate earnings,” Grosskopf said.
PwC said net interest income remained a key revenue driver contributing to the earnings growth of the major banks.
It said the income grew by a healthy 12.8 percent for the 2016 calendar year, while the combined net interest margin grew by 22 basis points to 4.61 percent in the year ended December 2015 to end of December 2016.
The report also found that the combined return on equity grew to 18.6 percent in the second half of 2016, while total capital adequacy ration strengthened from 15.2 percent in 2015 to 16 percent last year.
The firm said said non-interest revenue (NIR) continued to be supported by growth in fee and commission income, which represented 73 percent of total NIR revenue for the second half of 2016. On an annualised basis, combined NIR grew 5.4 percent compared to 2015.
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It said the banks experienced moderate growth from a lending perspective with combined gross loans and advances going up by just 0.7 percent in the first half of the year against 2.1 percent in the comparative period.
Grosskopf said the combined credit growth was driven by corporate rather than retail demand. The banks total non-performing loans decreased by 2.8 percent against the first half of 2016, but went up by 4.5 percent compared to 2015.
He said the running theme in the full year results covered in the report had been the emphasis in growing Africa operations as a means of diversifying their product portfolios.
Early this year, global ratings agency Standard and Poor’s (S&P) said the outlook for the country’s big banks remained negative, but pressure was easing.
S&P warned that South African banks would not derive any earnings joy from their rest of Africa operations this year.
But PwC Banking & Capital Markets Industry leader, Costa Natsas, said the banks focused on their cost containment strategies over this period, which resulted in a relatively stable cost-to-income ratio.
“Most banks are cautiously optimistic about their prospects in the short-term,” Natsas said.