South Africa’s banking industry remains resilient despite several years of challenges due to heightened global inflation and the resulting cost-of-living crisis, the 2023 FATF grey listing, as well as deteriorating local economic conditions in electricity generation and logistics.
With the IMF forecasting 1.5% growth for the South African economy in 2025, the banking industry is expected to benefit from gradual economic reform, moderated inflation, and continued relief for households and corporates as interest rates decline.
Banks will tackle a number of regulatory initiatives this year. The most prominent is the industry’s mid-year deadline for the remaining Basel reforms. While the UK and US continue to delay implementation, the reforms remain a critical but complex programme for South African banks, with an expectation of continued operational refinement post go-live.
The bank outlook at the beginning of 2025 is set at positive/neutral (S&P and Fitch, respectively) with the expectation that non-performing loans will improve and profits will remain stable. However, the industry remains vulnerable to sovereign creditworthiness risks as well as the possibility of a prolonged FATF grey listing.
