Major banks analysis

In the eye of the storm


Since we began our SA Major Banks Analysis series almost a decade ago, we have never seen two reporting periods so fundamentally different.

A rare commonality between the last six months of 2019 and the first of 2020 is that the South African economy ended 2019 and entered 2020 against the backdrop of weak domestic economic conditions and significant structural challenges. These structural challenges and the tough economic climate extended recessionary conditions in South Africa into Q1 2020. By the time the first quarter concluded, a global crisis of unprecedented pace, scope and impact was underway with dire human, social and economic consequences.

The major banks’ results for the period ended 30 June 2020 reflect these challenges, which were amplified by the effects of the pandemic and resultant containment measures.


People sitting at a round table

Register here to download theMajor banks analysis - October 2020

Key findings

Headline earnings

The South African major banks have a consistent track record of generating profit growth in relatively close proximity to domestic annualised GDP growth, as depicted in Figure 2.1. This track record — reflecting a three-year compound annual growth rate (CAGR) of 7.3% — has been disrupted in 1H20 owing primarily to a sharp increase in credit impairment charges under IFRS 9’s expected credit loss model.

View more


Cost-to-income ratio analysis

A perennial focus for the major banks over recent reporting periods has been tight cost control and disciplined management of the overall cost base. Notwithstanding the uncertain operating environment that prevailed over 1H20, the major banks cut expenses by a combined 3.5% against 1H19 (2.9% against 2H19). The combined cost-toincome ratio improved from 56.2% in 2H19 to 55.1% in 1H20 and remained flat against 1H19.


View more

Credit growth

Notwithstanding the crisis conditions and elevated levels of operating uncertainty that prevailed over 1H20, the aggregate loan portfolio registered growth of 8.0% against 2H19. This was driven primarily by corporate and interbank balances, as well as resilient loan growth in regional operations outside South Africa.

View more

Impairments and coverage ratios

Given the front-loaded nature of expected credit loss estimation under IFRS 9, the combination of a markedly worse economic outlook, deteriorating customer risk profiles and pandemic-induced social containment measures resulted in the combined bad debt charge increasing 3.3 times relative to 1H19. These elevated impairment levels were last seen during the global financial crisis. Increased impairments deteriorated the combined credit loss ratio to 232 bps (78 bps at 1H19 and 83 bps at 2H19).



View more

Contact us

Costa  Natsas

Costa Natsas

Financial Services Industry Leader

Tel: +27 (0) 11 797 4105

Rivaan Roopnarain

Rivaan Roopnarain

Banking and Capital Markets Partner

Tel: +27 (0)11 287 0915

Francois Prinsloo

Francois Prinsloo

Banking and Capital Markets Industry Leader

Tel: +27 (0) 11 797 4419

Follow us