PricewaterhouseCoopers in a report released last week said that South Africa’s four major banks – Absa, FirstRand, Nedbank and Standard Bank – surpassed their Western global peers in several key areas, including return on equity, in the first half of 2012.
“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.
With combined headline earnings of R21.3-billion and an average return on equity (RoE) of 15.9%, 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 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.
Even more interesting is the composition of earnings for local banks when compared with other countries, which demonstrate that South African banks have an enviable net interest income, non-interest revenue mix and continue to operate at favourable efficiency ratios.
The report suggests South Africa to be the 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.
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.