South Africa's six major banks — Absa, Capitec, FirstRand, Investec, Nedbank and Standard Bank — delivered combined headline earnings growth of 9.4% in their 2025 financial year, pushing aggregate profits to R152.5 billion and with several banks posting record results, according to PwC's annual Major Banks Analysis released this week. The results came against what PwC described as a volatile and uncertain global environment, "evident in geopolitical conflict, policy uncertainty and trade tariffs."

BALANCE SHEET STRENGTH ON DISPLAY

The combined return on equity for the six lenders reached 20%, up from 19.7% in the prior year. Combined deposits grew 8.4% to R8.3 trillion, while gross loans and advances expanded 5.8% to R6.8 trillion. The common equity tier 1 ratio edged up to 17.3% from 17.2%.

Credit quality showed continued improvement, with the combined credit loss ratio declining to 182 basis points from 187 basis points a year earlier. Total non-performing loans fell 0.2%, comprising 5.1% of gross loans and advances compared to 5.4% in the prior year. Inflation averaged 3.2% in 2025, the lowest in 21 years, allowing the South African Reserve Bank to cut rates to 6.75%.

ABSA'S AFRICA BET PAYS OFF

Among the individual results, Absa Group reported headline earnings growth of 12% to R24.8 billion, supported by a 51% rise in headline earnings from its Africa Regions business to R2.5 billion. That unit now accounts for approximately 10% of overall headline earnings.

East Africa, often described as the continent's most consequential subregion, remained a standout performer for banks with regional footprints, offering fast-expanding consumer markets, infrastructure investment opportunities, and growing cross-border economic integration. West Africa presented a more mixed picture: while Nigeria and Ghana offer long-term structural opportunity, currency volatility and inflation continued to weigh on reported earnings in rand terms.

DOMESTIC TAILWINDS EMERGE

Several developments supported domestic optimism during the year. South Africa was removed from the Financial Action Task Force grey list. A sovereign credit rating upgrade from S&P Global Ratings in November 2025 provided further validation, and household credit demand — subdued for an extended period — showed signs of recovery as lower inflation and rate cuts improved affordability.

Cost growth of 6.9% was held below operating income growth of 7.2%, giving the combined sector positive operating leverage despite continued investment in technology and digital infrastructure. Strong non-interest revenue growth of 9.3% and decisive cost control underpinned earnings growth, supported by a largely flat bad debt charge.

ENERGY TRANSITION AS COMMERCIAL OPPORTUNITY

A recurring theme across the six sets of results was the framing of South Africa's energy transition as a primary commercial growth driver rather than merely a regulatory obligation. Renewable energy finance has moved into the mainstream of corporate and investment banking, with management teams across the sector positioning their institutions to capture the bankable infrastructure investment being generated by the country's shift away from coal-dominated power generation.

Francois Prinsloo, PwC South Africa's banking and capital markets industry leader, noted that the results reflect "broad-based balance sheet resilience, disciplined strategy execution, and the ability of management teams to orchestrate their businesses through market turbulence and global headwinds." The question for 2026 is whether the favourable domestic trends can be sustained in the face of the headwinds now building globally — particularly rising oil prices linked to Middle East tensions, which PwC said are an inflationary risk that could interrupt the benign rate environment South African households experienced in 2025.