Fitch said the hike in earnings would offset weak growth and performance in the banks’ home market.
It said asset quality remained stable last year, despite a modest rise in average impaired loans ratios to 4.1 percent, compared with 3.4 percent at the end of 2017.
“The prevailing credit environment in South Africa will place pressure on retail and business banking; however, a material worsening in impaired loans ratios is unlikely,” Fitch said. “The threat to asset quality remains from direct and indirect exposure to troubled sovereign-owned enterprises and their high degree of connectedness to South Africa's economy.”
Nitrogen Fund Managers analyst Waldo du Plessis said local companies often experienced problems in other African markets and felt the banks’ regional forays “are more of a hindrance to their local operations”.
Standard Bank, the biggest bank by assets, benefited from strong growth in its African markets last year, its result showed.
On a constant currency basis, group headline earnings grew 8 percent, while the headline earnings contribution from its Africa Regions’ unit grew 31 percent, with the top five contributors being Angola, Ghana, Mozambique, Nigeria and Uganda.
Absa, which derives three-quarters of its business from the local market but which operates in 12 other African countries, said in its results for the year to the end of December last year that headline earnings from local retail and business banking increased 2 percent to R8.9 billion, while the contribution from the rest of Africa increased 9 percent to R3.2bn.
The grim outlook for the local banking environment, and the growing importance of regionally sourced earnings, was echoed by another international credit rating agency as early as last week.
Moody’s Investors Service encouraged sub-Saharan African banks to consolidate as the best way forward, with most countries in the region undergoing tough economic times and “little scope for organic growth”.
Analysts have pointed out there is little likelihood of significant consolidation among South African banks.