South Africa\u2019s \u2018Big Four\u2019 banks \u2013 Absa, FirstRand, Nedbank, and Standard Bank \u2013 are expected to suffer a loss of R53 billion due to non-performing loans, as their credit loss ratios are expected to rise in 2024.<\/p>\n\n\n\n
This is according to the Major Banks Analysis report<\/a> by PwC for the period ended on 31 December 2023, which was compiled after South Africa’s four largest banks published their full-year reported financial results last month. <\/p>\n\n\n\n The report noted that despite the difficult operating environment, the country’s major banks have registered strong growth. <\/p>\n\n\n\n The combined headline earnings of these four banks increased by 13.8% in 2023, reaching R113.2 billion compared to the previous year. <\/p>\n\n\n\n However, their average credit loss ratio increased from 82 bps in 2022 to 102 bps<\/strong>.<\/p>\n\n\n\n In South Africa, PwC noted that credit impairments have increased to the upper end of “through-the-cycle” levels. <\/p>\n\n\n\n This is due to low economic growth, consumer pressure, and the adverse effects of load-shedding on South African households and businesses. <\/p>\n\n\n\n As a result, the average credit loss ratio of these ‘Big Four’ banks is on the rise, which is expected to impact their financial performance in 2024.<\/p>\n\n\n\n The report highlighted that the banking sector’s credit loss ratio was 1%. This means the banks, which have R5.3 trillion in loans, could take a R53 billion hit in 2024. <\/strong><\/p>\n\n\n\n However, the impact of this loss will not be the same for all banks. <\/p>\n\n\n\n Some banks will have a higher proportion of non-performing loans than others, which will affect them more severely. <\/p>\n\n\n\n For instance, Absa will be the most impacted, with a credit loss ratio of 1.3%, while FirstRand will be the least affected, with a ratio of 0.8%. <\/p>\n\n\n\n This variation in the impact of losses reflects the varying risk appetites of these banks. Standard Bank’s ratio is 1%, and Nedbank’s is 1.1%.<\/p>\n\n\n\n The hit could be even bigger <\/strong><\/p>\n\n\n\n S&P Ratings forecasts that the effect of challenging macroeconomic conditions on local banks could be more significant than the previously estimated R53 billion, reaching as high as R74.2 billion. <\/p>\n\n\n\n