The GCR Ratings (GCR) said on Thursday, South Africa’s domestic banking sector, continues to demonstrate sound earnings quality, strong performance and improved cost efficiencies.
In a detailed report, GCR said the country’s ’s economy showed signs of recovery with gross domestic product (GDP) growth of 0.65% in the Q4 of 2024, and 0.1% in Q1 2025.
This is despite the revision of real domestic GDP growth to 1.0% for 2025.
Headline inflation cooled to 2.7% in March 2025, nearing the lower bound of the South African Reserve Banks (SARB) target range of between 3.0% and 6.0%.
In addition, the repo rate was cut by a further 25 basis points to 7.25% last week.
The report also suggested the conservative underwriting in the oldest financial institutions, has boosted the sector’s asset quality, and sustained the improvement of the macroeconomic environment.
Non-performing loans (NPLs) continue to improve gradually, registering at 5.2% as of 31 March 2025 (31 March 2024: 5.3%), while the credit loss ratio is tracking around 120 basis points.
Planned infrastructure enhancements, including efforts to improve energy security, are expected to result in medium-term growth.
Picture: Banking Association of SA.