21 September 2012
South Africa’s four major banks – Absa, FirstRand, Nedbank and Standard Bank – outperformed their Western global peers in several key areas, including return on equity, in the first half of 2012, professional services firm PricewaterhouseCoopers said in a report released on Wednesday.
Combined headline earnings of R21.3-billion and an average return on equity (RoE) of 15.9% saw the country’s banks beat a benchmark group of their Western counterparts, who recorded an average RoE of 2.1% for United States commercial banks and 14.7% for Canadian banks.
“This was a commendable performance by South African banks in a relative sense, and a very strong performance compared to the Western world,” PricewaterhouseCoopers said in its analysis report covering the first six months of 2012.
“Even more interesting is the composition of earnings for local banks when compared with other countries, which demonstrate that our banks have an enviable net interest income, non-interest revenue mix and continue to operate at favourable efficiency ratios.”
This performance came against the backdrop of the global economic crisis and financial instability. “While there are some headwinds in the domestic economy and significant uncertainties from Europe, [South Africa’s] banks continue to demonstrate that they have the capability to manage and adapt,” the report said.
To build on this success, the report said it is necessary to respond to changes in customer expectations; this includes harnessing technology for customer convenience and improving operational efficiencies.
Gateway to Africa
As part of its report, PricewaterhouseCoopers looked at South Africa as a gateway to the rest of Africa.
“As growth and investment in Africa continue to accelerate, South Africa offers a portal through which companies from Asia, South America and the Middle East can tap into opportunities across the continent and African companies can reach out to other parts of SAAAME (South America, Africa, Asia and the Middle East),” the report said.
“With growth of more than 5% a year over the past decade, a population of over 800-million and total purchasing power over US$1.9-trillion, Africa is emerging as one of the most attractive frontiers for growth.”
South Africa’s financial institutions, in particular, offer a gateway, as the country’s banking sector accounts for more than 40% of Africa’s assets and the insurance sector comprises more than 70% of the continent’s premiums.
This allows these institutions to provide trade finance and support for companies looking to invest in Africa, the report said.