Banks at Africa generally and in South Africa particularly weathered the perfect storm caused by the COVID-19 pandemic.

This testifies to their resilience and confirms the conclusions of a study commissioned in 2015 by the African development bank entitled “The banking system in Africa: Key Facts and Challenges”. The report revealed that although africa the banking environment is relatively shallow and less penetrated, it is as competitive as that of other developing and high-income regions.

  • Banks at Africa have shown their resilience as they weathered the existential threat and headwinds brought on by COVID.
  • Bank in Africa is significantly ahead of the rest of the world according to the AfDB in terms of mobile banking penetration and adoption.
  • Banks at South Africa mostly made money as the economy shed its last vestiges of COVID controls.

The continent has improved banking technology and innovation and in some cases outpaced other regions, especially in mobile banking. In terms of regulation, banks Africa are well regulated with competition and entry regulations on par with the standards of other major regions.

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According to the findings of the AfDB, it would be difficult to convince stakeholders that the banks of Africa in the face of an existential threat. The way these same banks have withstood the shocks of COVID-19 shows that the banking sector in Africa is made of more severe fabrics. In March 2022the banks of South Africa announced their financial performance for fiscal year 2021 and their results were strong across the board. The combined overall profits of the banking sector in South Africa alone was 99% higher than what financial institutions had reported in 2020. This means that all banks in the South Africa collectively doubled their profits from the previous year. Prescient analysts looking to question this feat would concede that the aggregate earnings measure would be high as it came off a low base where there was little economic activity in 2020. Granted. That’s a fair point. However, September is reporting season for major banks. South Africa and financial institutions continued to post strong profits.

The financial results communicated by the banking establishments relate to the first six months of 2022. The Johannesburg Stock Exchange banking Indicator, Standard banking group which is the largest bank in Africa by assets reported earnings earlier in August 2022 said its overall revenue increased by 33%. This strong performance by the banking giant translated into a return on equity of 15.3% and an interim dividend payment 43% higher than the last dividend declared. The bank’s financial performance was particularly robust due to the removal of the remaining restrictions related to COVID-19. This resulted in the bank’s revenue growing much faster than expected. “A broader customer base with increased transactional activity, strong business performance and growth in Standard Bank the loan portfolio saw the bank’s non-interest income increase by 13% and net interest income by 15%. The bank’s overall revenue increased by 14%,” the bank said.

Standard Bank the performance for the first six months of the 2022 financial year is consistent with the finding of a watercraft report on the state of the banking sector in South Africa in March 2022. The resurgence of the banking sector in South Africa and in Africa is due to favorable economic conditions as well as an improved credit cycle. When banks begin to feel optimistic about the future, they reduce their loan loss provisions on their books.

  • Demand for banking and credit products has pleasantly surprised bank executives as economies open up.
  • Standard banking group Which one is africa the largest banking institution by assets recorded a 33% increase in profits.
  • Banking institutions, as economies recover from the pandemic and resulting headwinds, have begun to reduce loan loss provisions, signaling heightened optimism and confidence in the future.
  • Improved credit performance and increased transactional activity from customers enabled the steam bank to be profitable.

This means that banks are lending to customers more than they would if they were pessimistic about the future. A provision for loan losses is an expense in the income statement made as a provision for uncollected loans and loan repayments. This provision is used to cover different types of loan losses, such as non-performing loans, client bankruptcy and renegotiated loans that result in payments lower than previously estimated. The reduction in these provisions means that banks can lend more aggressively to their customers.

This reduction in loan loss provisions should not be interpreted by investors and stakeholders to mean that banks across the continent will, going forward, do away with risk management altogether with respect to their portfolios. of loans. There are still active controls against the risk of customer default; however, banks are generally more comfortable lending than they were in 2020 and early 2021. Now in 2022, with economies opening up thanks to the lifting of COVID- 19, banks in Africa are experiencing increased demand for their lending products and transactional services.

Second, the banks’ results for the first half of 2022 reflect positive credit performance, increased or increased transactional activity with customers, which have combined to produce the resilience the sector has experienced in terms of operating profit growth. . Revenue benefited from a strong contribution from broader financial services in addition to financial services such as insurance and asset management in terms of non-interest income. Credit quality is improving and is characterized by a decline in non-performing loans. Evidence of this, the report says, is debt collection efforts, improved customer repayments, and what the report calls the migration of credit to lower tranches. Banks will continue to focus and invest in digital banking capabilities, which will result in positive customer satisfaction scores and sentiment of experience.

These are some of the features that have made banks in Africa resilient in the face of headwinds caused by the COVID-19 pandemic. It should be noted that the banks of Africa, like those in the rest of the world, operate in a dynamic and constantly changing environment. The global economic environment can best be summed up using the phrase coined by the US military, VUCA. The global economic environment is currently volatile, uncertain, complex and ambiguous. The prevailing uncertainty in the global economy will impact African banks and again test their resilience. The world had barely passed the two-year economic slump caused by COVID-19 when Russia invaded Ukraine in February 2022 in a conflict whose impact has gone far beyond the neighborhood of these European countries.

The conflict has caused inflation through increased food and energy. To mitigate this, central banks around the world have announced sweeping increases in interest rates. Interest rates are the price a person or business pays to borrow money. In other words, interest is the price of money. Announcements by central banks to raise interest rates actually raise the price of money. Banks and other financial institutions trade money. When the price of a good or service increases, the basic tenet of economic thought teaches that the demand for the good or service must decrease. This means that given the rising interest rate environment, growth in bank revenues and profits is not sustainable. This development will be reflected in the banks’ books when they publish their annual profits in March 2023.

Rising interest rates increase the likelihood of non-performing loans on bankbooks, reducing their profitability. A non-performing loan (NPL) is a loan that is in default because the borrower has not made scheduled payments for a specified period.

Not only is the price of silver more expensive today than it was in 2021, but the environment in which banks do business is now very different than it was a year ago. The largest economies in the world such as the United States, UK, Europeand China reported slowing economic growth. They are all important business partners with Africa. This creates an inexorable link between their wealth and africa global economic fortunes. This is particularly the case of China. The Asian country is africa largest trading partner. A slowdown there will invariably lead to reduced economic activity on the African continent. Banking institutions butter their bread by supporting economic activity. A slowdown in the same will naturally result in lower profits.

Copyright The Africa Exchange. Distributed by AllAfrica Global Media (allAfrica.com)., source English press service