Although the performances between the individual banks varied, one a combined basis the four major banks posted headline earnings of R42,49bn, which grew 5.3% against 1H18, but only 0.2% against. 2H18. To some extent, this reflects the effects of slower than expected GDP growth over 1H19, relatively muted corporate credit demand and generally lower activity on the part of SA Inc. during the first half of the year.
Tight cost control and a disciplined approach to cost management is an area that the banks have consistently focused on over recent reporting periods. The outcome of their efforts is reflected in the major banks combined results through operating expenses growing 7% against 1H18, but falling 1.6% against 2H18, resulting in an overall positive operating leverage experience (operating income grew faster than costs) for 1H19.
Return on equity
Major banks remain robustly capitalised, comfortably above regulatory minima across all capital tiers, while generating commendable returns. During the current period, the combined common equity tier 1 capital ratio improved marginally by 3bpd to 12.3% while the combined ROE shrunk by 30bps to 18.5% when compared 1H18 (19.0% at 2H18).
Credit growth and asset quality
Notwithstanding the subdued economic conditions that prevailed over, 1H19, the aggregate loan book registered growth of 9% against 1H18 (and a more moderate 3.7% against 2H18). The theme we had previously observed of retail credit demand outpacing corporate lending continued in the current period for some banks, with growth mainly attributable to business banking products and credit cards.