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<\/a><\/p>\n“Based on the data available for a 12 month period and in line with respective financial year-end results, EY found that most of the key industry metrics grew in low single digit territory, as a result of weak credit demand and low consumer and business sentiment,” EY said.<\/p>\n
“Although growth recovered strongly in the 2nd half of 2017, the weak first half of the year had a strong and visible effect on the banking sector\u2019s overall results.”<\/p>\n
Despite this,\u00a0the banks have remained profitable and well capitalised, demonstrating the robustness of the banking sector, it said.<\/p>\n
Fortunately, growth\u00a0prospects for 2018 look much healthier\u00a0thanks to a shift in sentiment, and positive moves from government to spur economic growth.<\/p>\n
“From a growth perspective, the stronger confidence will spur growth and lending is likely to increase, although it will not reach double digit territory just yet,” EY said.<\/p>\n
Competition is coming<\/strong><\/p>\n But it won’t be all smooth sailing, EY warned.<\/p>\n One of the biggest things the local banks will need to look out for in 2018 is the introduction of five new banking options entering into the South African market – three entirely new, while two established brands are relaunching.<\/p>\n The new entrants include two digital-only banks – TYME Digital<\/strong> and Michael Jordaan’s BankZero<\/strong> – as well as a full service bank in the form of Discovery Bank<\/strong>. Postbank<\/strong> and African Bank<\/strong>, meanwhile, will relaunch with retail banking services.<\/p>\n Bank Zero<\/a> <\/strong>has been granted a provisional licence by the South African Reserve Bank and is set to launch in the fourth quarter of 2018.<\/p>\n TymeDigital<\/a><\/strong> by Commonwealth Bank SA,said it hopes to be operational by the second quarter, while Discovery<\/a> <\/strong>has begun live-testing its banking capabilities, testing \u201csystem infrastructure, operating processes and regulatory engagement\u201d.<\/p>\n The insurer will launch its proposed banking offering to the public during 2018, it said.<\/p>\n These banks will be able to offer a fresh take on banking, EY said, without the cumbersome and costly legacy systems carried by the established banks – which will be a pressure point in the next 12 to 24 months.<\/p>\n Because of this, EY said the big six covered in its report will need to keep developing their digital platforms, and work on their efficiency ratios, as consumers move to a more digital-first approach to banking.<\/p>\n “The shift to digital channels is competitive and growing fast, and requires major investment costs. It is a critical component of any bank\u2019s strategy and provides opportunities both from an operational enhancement perspective as well as improving the customer experience,” EY said.<\/p>\n In its analysis of efficiency at the big banks, the advisory group noted that IT and associated amortisation charges are accounting for a rising share of costs, while shrinking physical networks are reducing headcount and staff costs.<\/p>\n However, there is a greater need to launch and refine digital platforms which is driving spend, while\u00a0the need for IT investment and rising regulatory compliance “will not disappear any time soon”.<\/p>\n To stay ahead of the game, and to efficiently take on any new disrupters (of which fintech is noted to be a big risk as well as an opportunity) the big banks should be prepared to pay upfront expenses, which will be necessary in the battle ahead.<\/p>\n
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