Capitec, South Africa’s biggest bank by customer numbers, is the best-performing JSE-listed banking share so far in 2024, followed by Nedbank, Absa, and FirstRand.<\/p>\n\n\n\n
The two biggest JSE-listed banks\u2014FirstRand and Standard Bank\u2014saw their share prices drop by double-digit percentages between 1 January and 24 April 2024.<\/p>\n\n\n\n
Standard Bank was particularly hard hit, slumping 17.23% year-to-date (YTD) after the lender\u2019s earnings outlook for 2024 disappointed some investors.<\/p>\n\n\n\n
The stock dropped as much as 5.4% last month after publishing its full-year financial results\u2014the biggest intraday loss since 13 September 2023. <\/p>\n\n\n\n
This is despite Africa\u2019s biggest lender by assets still reporting record profit in 2023 as businesses across the continent helped counter tepid growth at home.<\/p>\n\n\n\n
However, CEO Sim Tshabalala noted the bank’s elevated cost base, given the lender operates in Africa, as well as currency weakness in nations where the bank has business, will \u201ccreate some pressure\u201d in 2024.<\/p>\n\n\n\n
The bank flagged low to mid-single-digit growth in net interest income, mid-single-digit gains in fees and commissions and lower trading revenue for the year.<\/p>\n\n\n\n
The share knock of the depressed outlook for South African banks extended to FirstRand, which also noted it would see slower growth in corporate and retail loans in the 2024 fiscal year.<\/p>\n\n\n\n
Consequently, FirstRand’s share price has dropped 15.71% YTD.<\/p>\n\n\n\n
The top five private South African banks, which are among the continent’s largest, are generally considered well-capitalised and conservative in their lending practices. <\/p>\n\n\n\n
They play a significant role in driving the economy, which has been facing challenges. <\/p>\n\n\n\n
However, FirstRand has mentioned that inflation, high interest rates, and regular power blackouts are impacting their operations, leading to an increase in loan defaults. <\/p>\n\n\n\n
Alan Pullinger, FirstRand’s CEO, expressed concerns about the high level of uncertainty in the regions where they operate. <\/p>\n\n\n\n
The bank anticipated its credit loss ratio (CLR) to increase in the current financial year but to remain within its target range of 80 to 100 basis points. <\/p>\n\n\n\n
Pullinger stated that the CLR was 78 basis points for the year ended 30 June, up from 56 basis points a year earlier.<\/p>\n\n\n\n
Credit impairment also hit Absa, with the group\u2019s credit loss ratio now outside its target range.<\/p>\n\n\n\n
Credit impairments in the everyday banking segment were the most prolific, with the R7.6 billion recorded nearly making up half of all total credit impairment charges.<\/p>\n\n\n\n
Normalised headline earnings were R20.9 billion, higher but relatively flat compared to the R20.7 billion recorded in FY2022. <\/p>\n\n\n\n
Although the group\u2019s H2 dividend per share dropped by a sizeable 12.7% to 685 cents per share, its total dividend for the year increased by 5% to 1,370 cents per share.<\/p>\n\n\n\n
However, this didn’t save Absa’s YTD performance from negative territory, with the share price slumping 15.58%. <\/p>\n\n\n\n
To put these banks’ share performance into perspective, the FTSE\/JSE All Share Index slumped 3.09% YTD, showing that most of South Africa’s big banks severely underperformed the market. <\/p>\n\n\n\n
On the other hand, however, Capitec seemed to go against the grain, with its share price climbing 6.47% YTD, followed by NedBank’s meagre 0.51% gain. <\/p>\n\n\n\n
The stock jumped as much as 9%, the most in seven months after the company reported record profit that beat analysts\u2019 estimates.<\/p>\n\n\n\n
Although credit impairments knocked the bank’s net interest income, which increased by just under 2% to R7.74 billion, transition volumes and its insurance business offset this.<\/p>\n\n\n\n
Net transaction and commission income rose by almost 30% to R14.79 billion.<\/p>\n\n\n\n
Funeral insurance income grew by 27% to R1.3 billion, while credit life insurance income increased by 13% to R1.9 billion from R1.7 billion in 2023.<\/p>\n\n\n\n
This brought the company\u2019s total income from operations after credit impairments to R27.32 billion \u2013 an over 16% increase compared to 2023.<\/p>\n\n\n\n
Capitec is South Africa\u2019s best-performing share since the advent of democracy and wants to use its retail banking strategy to grow its business banking and insurance units.<\/p>\n\n\n\n
The table below compares the performance of the shares of South Africa\u2019s five biggest banks and what the value of a R1,000 investment in each company at the start of the year would be today (as of 24 April 2024).<\/p>\n\n\n\nBank<\/th> Share price change in YTD 2024<\/th> Today\u2019s value of R1,000 investment invested at the start of 2024<\/th><\/tr><\/thead> Capitec<\/td> +6.47%<\/mark><\/td> R1 064.70<\/mark><\/td><\/tr> Nedbank<\/td> +0.51%<\/mark><\/td> R1 005.10<\/mark><\/td><\/tr> Absa<\/td> -15.58%<\/mark><\/td> R844.20<\/mark><\/td><\/tr> FirstRand <\/td> -15.71%<\/mark><\/td> R842.90<\/mark><\/td><\/tr> Standard Bank<\/td> -17.23%<\/mark><\/td> R827.70<\/mark><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n
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