The PwC study found that during the period under review, combined return on equity (ROE) grew by 15 basis points to 18.8 percent. File Photo: IOL

SOUTH Africa's big banks continue to rake in profits despite a subdued economy and a rise in policy uncertainty bedevilling the economy.

The PricewaterhouseCoopers (PwC) study on the four biggest banks in the country showed the lenders posted combined profits of R40.4 billion in the six months ended June, up 12.1 percent year on year against the first six months of 2017.

The study further found that during the period under review, combined return on equity (ROE) grew by 15 basis points to 18.8 percent.

The report released on Friday looked into the combined local currency results of Absa, FirstRand, Nedbank and Standard Bank.

“It is evident from the results of the major banks that they have continued to spend considerable time and cost on their digital strategies, refining and simplifying products and enhancing their loyalty programmes,” said Costa Natsas, the banking and capital markets leader for PwC Africa.

Standard Bank last month published its interims results, which showed its profits of R12.7bn, up from 5 percent in the prior period and ROE of 16.8 percent from 16.1 percent before.

Absa's retail and business banking unit posted a 4 percent climb in profit to R4.2bn in the six months to June. The country's biggest bank by market capitalisation, FirstRand, delivered an 8 percent increase in profits to R26.5bn for the year ended June, while Nedbank reported a 27 percent surge in first-half earnings to R6bn.

PwC flagged that the competitive pressures on the big banks was set to increase in the next few months, as the market anticipates the launch of new entrants and wider product offerings from existing banks.

Discovery Bank announced last week that it would acquire FirstRand’s effective and economic interest in the Discovery Card loan book and has indicated that it is expected to launch the bank in the fourth quarter of this year.

The Patrice Motsepe-controlled TymeDigital, Bank Zero and the SA Post Bank are also drawing closer to their public launches. African Bank also announced its intentions to move further into the transactional banking space.

Asief Mohamed, the chief investment officer at Aeon Investment Management, said banking was becoming more competitive in South Africa.

“Capitec has taken market share from the big four banks over many years. The long-awaited Discovery Bank is expected to be a formidable competitor for all the banks in South Africa,” Mohamed said.

A World Bank report released last week said South Africa’s financial products were too complex for customers and usually came with high fees and unfair terms.

PwC said the big four lenders remained focused on adapting their long-term strategies to reflect dynamic consumer, competitor, societal and regulatory shifts.

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- BUSINESS REPORT