Africa-Press – South-Africa. South Africa’s biggest banks have seen a rise in non-performing loans over the last year, but there are early signs of an improvement.
In the Prudential Authority’s (PA) annual report for 2024/25, CEO Fundi Tshazibana said that South African financial institutions showed remarkable resilience amid the economic turmoil of the past few years.
However, she noted that sticky inflation, election uncertainty in 2024, and a decade of slow growth meant banks saw a spike in non-performing loans.
Absa, Standard Bank and Capitec all saw their credit losses grow in 2023 and 2024 amid high interest rates, elevated inflation and poor household finances.
Insurance companies, which are also under the purview of the PA, also saw an increase in lapsed premium payments.
Tshazibana noted that the total number of impaired advances increased to 5.2% for the whole sector. This was worse for specific sectors, particularly unsecured loans.
This was far higher than the typical impairments of 3.3% that the PA sees in an average year. The increase in non-performing loans was in line with peer countries in low-growth environments.
More positively, with improving macroeconomic conditions and easing inflationary pressures, banks should see a positive shift in their credit risk profiles in the short- to medium-term.
The PA’s comments are also reflected in the latest information from South Africa’s largest banks, with improvements already being seen.
Absa saw its credit loss ratio decrease from 118 basis points in 2023 to 103 in 2024, slightly above the group’s through-the-cycle target range.
In a trading update for the five months of 2025, Standard Bank noted that its credit loss ratio was just outside the top end of its through-the-cycle range of 70 to 100 range. This was still lower than the first five months of 2024.
Capitec’s credit loss ratio dropped from 8.7% in FY24 to 6.9% for the year ended February 2025, excluding AvaFin. As a non-secured lender, it has a far larger credit loss ratio than its “Big Four” rivals.
Uncertain future
PA CEO and SARB Deputy Governor Fundi Tshazibana
While South Africa’s local metrics are improving, Tshazibana noted that global geopolitical tensions and conflicts are still introducing external risks and uncertainty to the financial sector.
Globally, there appears to be a growing tendency towards deregulation, emphasising reducing capital and other requirements for banks, she said.
Another major risk for banks, and the broader South African economy, is the incoming tariffs from the United States.
In his liberation day speech in April, Donald Trump announced 30% “reciprocal tariffs” on South Africa.
Although President Cyril Ramaphosa and several experts have questioned the methodology used to get the 30%, Trump announced that the tariffs will go live on 1 August 2025.
A major theme of the new Trump administration has been uncertainty, with many confused over what the US will do next.
Tshazibana, who has experience within the trade sector, noted that tariffs generally do not go up by a set amount across all imports.
Questions remain over whether the new tariffs will be 30% on average, with some goods receiving discounts, while others receive even harsher taxes.
Other parts of the world are also uncertain about the Trump tariffs, and senior US officials are also unsure about Trump’s next move.
With a few weeks to go until the tariffs go live and Trump’s hope of getting countries to make deals, it remains to be seen if the 30% tariff goes ahead.
The PA said it will not be responsible for managing the risk, as financial institutions need to understand who their depositors are and their exposure to the tariffs.
Businesses are, however, nimble, and many may need to look to other markets for their exports. With so much still up in the air, the impact of the tariffs is just theory at this point.
“As we look ahead, it will be crucial for South African banks to remain vigilant, ensuring strong governance and risk management practices to safeguard the banking system,” said Tshazibana.
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