BANKING NEWS
Strong performance
South African by South African banks
despite economic
News
uncertainty
The financial results of South Africa’s four major banks for the six months
ended on June 30, 2012 have remained resilient despite the recent global
economic uncertainty, according to a report issued by professional services
firm PricewaterhouseCoopers (PwC).
“ALTHOUGH IN MOST CASES, NOT DIRECTLY, OUR BANKS
have had to cope with another six months of global financial
instability, particularly in Europe. The downside risks in Europe
remain elevated, which is weighing heavily on market sentiment
and it appears that will be the case for some time,” says Tom
Winterboer, Financial Services Leader for PwC Southern Africa
and Africa.
Despite these difficult economic circumstances, the four
major South African banks (Absa, FirstRand, Nedbank and
Standard Bank) posted combined headline earnings of
R21.3 billion, up by 17% from the comparable period last
year and average normalised return on equity (RoE) of 15.9%.
This compares favourably to a benchmark group of Western
global peers that recorded average RoE for the 2011 financial
year in the range of 2.1% for US commercial banks and 14.7%
for Canadian banks.
‘This was a strong performance by South African banks
compared to the Western world. Even more interesting is the
composition of earnings for local banks when compared to
other countries, which shows that our banks have an enviable
non-interest revenue mix and continue to operate at favourable
efficiency ratios,’ says Johannes Grosskopf, PwC banking and
capital markets leader for Southern Africa.
These are some of the findings from PwC’s South Africa
Major Banks Analysis Report, analysing the results of the
country’s major banks for the six months ended in June 2012.
Capital levels continue to be a strength. Total qualifying capital
and reserve funds across the major banks showed moderate
growth. However, the combined total capital adequacy ratio
of the major banks declined marginally by 50bps to 14.9%
from 15.4% at the second half of 2011.The slower growth in
capital and decline in capital adequacy levels reflect the capital
challenges faced by the major banks. This is a result of six
months of Basel II.5 implementation and the prospect of Basel
III implementation on January 1, 2013.
‘The major banks have all indicated that the transition to the
higher capital requirements anticipated by Basel III will take place
without significant difficulty or deterioration in regulatory capital
levels. This can largely be attributed to ongoing risk-weighted asset optimisation initiatives of the major banks, a prudent approach
to business as well as the relatively prudent regulatory capital
regime adopted by the regulator over the years,’ says Grosskopf.
The world is evolving...
54
SA BANKER
Edition 3