Big 4 banks remain resilient with R42.49bn combined earnings to show
JOHANNESBURG – A study by PricewaterhouseCoopers (PwC) has shown that a focus on digital strategies helped South Africa’s four major banks to deliver resilient growth, posting combined headline earnings of R42.49 billion for the period ended in June despite a challenging operating environment.
The analysis said the migration of transactional volumes from physical to electronic channels was now firmly entrenched in the banking industry. PwC said all of the major banks, Absa, FirstRand, Nedbank and Standard Bank, have highlighted efforts in relation to digital platforms, while continuing to digitise in-branch experiences.
PwC Africa’s financial services leader, Costa Natsas, said the banks' earnings growth was a result of innovation. “Despite a challenging economic context, the major banks continue to report earnings growth, which remains a testament to the credibility and diversity of their franchises, product sets and management teams,” Natsas said.
The PwC study noted that the major banks remained robustly capitalised, comfortably above regulatory minima across all capital tiers, while generating commendable returns.
The PwC analysis is supported by a Moody’s report that gave a positive outlook for SA banks on Tuesday.
Moody’s VP-senior credit officer Akin Majekodunmi said the SA banking system remained stable as the banks were set to have sound finances over the next 12 to 18 months despite a sluggish economy.
“Profitability will stay firm despite slow business growth,” Majekodunmi said. “Net interest income, banks’ main revenue source, will come under pressure, because of lower loan growth, but we expect digital investment costs to reduce over the next 12 months.”
PwC said other major players in the local banking market had launched extensive transactional banking marketing campaigns over the last six months.
These are focusing relentlessly on differentiated digital offerings and offering attractive interest rates on savings products in an effort to capture wallet share of the consumer.
There is also continued focus on product design, digital channels and innovation strategies.
This includes new entrants to the market to provide easier and wider access to digital banking, differentiated loyalty and rewards programmes, more competitive pricing and, ultimately, holistic financial services offerings.
This backdrop of increased competitiveness in the domestic banking market presents exciting opportunities for customers who stand to benefit from more frequent, customised and fit-for-purpose innovations.
Banking and capital markets leader for PwC Africa, Francois Prinsloo, said the major banks' diversification strategies across franchises, regions and portfolios had been central to their ability to achieve growth against difficult trading conditions.
PwC said the major banks continued to remain sharply focused on executing their key strategic initiatives against what was expected to be a challenging medium term operating environment.