Coverage: Q3 2024 · Information to 7 February 2025
Originally Published as TGB Premium Intelligence
This report was first made available exclusively to TGB Premium subscribers. It is now available as open access as part of TGB's research archive.
TGB Quarterly Regional Banking Monitor · 7 February 2025
Central banks in South Africa, Ghana, Kenya and Uganda cut rates between September and October 2024 while Nigeria and Zambia tightened, and bank asset quality remained the region's main weakness, with non-performing loan ratios of 16.7% in Kenya and 24.3% in Ghana in August 2024.
The desk view
The third quarter of 2024 split sub-Saharan Africa's monetary policy. The South African Reserve Bank cut its repo rate to 8% in September and to 7.50% by January 2025, the Central Bank of Kenya took its rate from 12.75% to 10.75% in three steps, and the Bank of Ghana cut by 200bp to 27.0%. The Central Bank of Nigeria raised its policy rate to 27.25% and its cash reserve ratio to 50.00% in September, and the Bank of Zambia raised its rate to 14.0% in November. Capital positions were broadly stable, with total capital ratios of 17.21% in South Africa and 19.1% in Kenya. Asset quality was the main weakness: Ghana's non-performing loan ratio was 21.8% in December 2024 and Kenya's 16.4%. In Kenya, the central bank said lending rates had declined only marginally despite its cuts.
The regional picture
Policy moved in opposite directions across the region from September 2024. The South African Reserve Bank (SARB) cut its repo rate by 25bp to 8% with effect from 20 September 2024, after headline inflation eased to 4.4% in August. The Bank of Ghana lowered its monetary policy rate by 200bp to 27.0% in September, after inflation fell to 20.4% in August from 22.8% in June. The Bank of Uganda reduced its Central Bank Rate by 25bp to 9.75% on 7 October 2024, and the Central Bank of Kenya (CBK) followed on 8 October with a cut from 12.75% to 12.00%.
Nigeria and Zambia moved the other way. At its meeting of 23-24 September 2024 the Monetary Policy Committee of the Central Bank of Nigeria (CBN) raised the monetary policy rate by 50bp to 27.25% and the cash reserve ratio of deposit money banks to 50.00% from 45.00%. The Bank of Zambia held its rate at 13.5% on 15 August 2024 and then raised it by 50bp to 14.0% at its meeting of 11-12 November, because actual and projected inflation remained above its 6-8% target band.
The easing continued into early 2025. The SARB cut by a further 25bp in November 2024 and again in January 2025, taking its repo rate to 7.50%, a cumulative 75bp reduction from the 8.25% in place before September. The CBK cut to 11.25% in December 2024 and by 50bp to 10.75% in February 2025, a total of 200bp since October. The Bank of Ghana held its rate at 27.0% in November 2024 and again in January 2025 as inflation rose to 23.8% in December.
Policy rates at the end of September 2024, %
Source: Central Bank of Nigeria, Monetary Policy Committee key decisions (297th meeting, 23-24 September 2024), 24 September 2024; Bank of Ghana, MPC press release, September 2024 (120th MPC meeting), 27 September 2024; Bank of Zambia, Monetary Policy Report, November 2024, 30 November 2024; Central Bank of Kenya, Monetary Policy Committee meeting: background information, October 2024, 9 October 2024; Bank of Uganda, Monetary Policy Statement for October 2024, 7 October 2024; South African Reserve Bank, Statement of the Monetary Policy Committee September 2024, 19 September 2024.
South Africa: easing begins, credit quality still the watchpoint
The SARB's Monetary Policy Committee considered an unchanged stance, a 25bp cut and a 50bp cut in September before agreeing on 25bp. By the November meeting headline inflation had fallen below the 3-6% target range to 2.8% in October, and the 25bp cut that month was unanimous. The SARB nevertheless cautioned that global interest rates could shift higher again, and its November forecast saw the policy rate stabilising a bit above 7%; by January 2025 it saw rates stabilising near 7.25%. In January 2025 the vote was four members for a cut and two for no change, after inflation averaged 4.4% in 2024 and slowed to 3% in December. The SARB said the economy had contracted in the third quarter of 2024, mostly because of an unusually large drop in agricultural production. Its trade-war scenario, built on a 10 percentage point rise in US tariffs, put the rand near R21 per dollar, inflation at 5% and the policy rate half a percentage point above the baseline at its peak.
The banking system entered the easing cycle with stable capital and liquidity. The SARB's latest Financial Stability Review (FSR) reported an average total capital adequacy ratio of 17.21% in the year to August 2024, against 17.36% in 2023, and a common equity tier 1 (CET1) ratio of 13.31%, against 13.43%. The liquidity coverage ratio averaged 147.0%, down from 150.6%.
South African banking-sector indicators, annual averages, % unless stated
| Indicator | 2023 | 2024 (year to August) |
|---|---|---|
| Total capital adequacy ratio | 17.36 | 17.21 |
| CET1 ratio | 13.43 | 13.31 |
| Impaired advances to gross loans | 5.20 | 5.40 |
| Return on equity (smoothed) | 14.84 | 14.94 |
| Return on assets (smoothed) | 1.11 | 1.11 |
| Liquidity coverage ratio | 150.6 | 147.0 |
Source: South African Reserve Bank, Financial Stability Review, Second edition 2024, 30 November 2024.
Credit quality is where the FSR's attention lay. Non-performing loans rose from R257 billion in March 2023 to R304 billion in July 2024, lifting the ratio from 4.7% to 5.7%. General and specific provisions peaked in April and June 2024 respectively, and the overall coverage ratio had increased since the start of the year. Total loans and advances averaged R5,562.7 billion, up 4.50% year on year, while total assets averaged R7,762.8 billion, up 4.24%. The FSR judged that the outlook for financial stability had improved since June 2024, largely because of an orderly election and the formation of the Government of National Unity. It also said the Prudential Authority would issue a final directive phasing in a positive cycle-neutral countercyclical capital buffer of 1% from 1 January 2025. Among the six key risks to domestic financial stability it listed were deteriorating public-sector debt ratios, financial distress in households and SMMEs, and remaining on the FATF greylist over the medium term.
Nigeria: tight liquidity, revaluation-led earnings
The CBN tightened in two consecutive meetings: a 50bp increase to 26.75% in July 2024 was followed by a further 50bp to 27.25% in September. In September it also raised the cash reserve ratio for merchant banks to 16% from 14%, kept the asymmetric corridor at +500/-100bp and retained the liquidity ratio at 30.00%.
Reported profits at two listed banking groups nonetheless rose sharply. Guaranty Trust Holding Company (GTCO) reported group profit before tax of NGN1,219.5 billion for the nine months to 30 September 2024, against NGN433.2 billion a year earlier, about 2.8 times the prior-year figure. Access Holdings reported NGN558.2 billion, against NGN294.4 billion. At GTCO, unrealised fair value gains on financial instruments of NGN523.2 billion were equal to about 43% of profit before tax, and the notes state that these gains are strictly unrealised. At Access, fair value and foreign exchange gains of NGN548.4 billion were equal to about 98% of profit before tax.
Nigerian banks, nine months to 30 September 2024, NGN billion
| Item | GTCO 2024 | GTCO 2023 | Access 2024 | Access 2023 |
|---|---|---|---|---|
| Net interest income | 781.5 | 297.5 | 844.8 | 390.0 |
| Interest expense | 198.9 | 77.0 | 1,553.1 | 658.5 |
| Loan or financial-asset impairment charges | 63.6 | 89.5 | 144.9 | 61.8 |
| Profit before tax | 1,219.5 | 433.2 | 558.2 | 294.4 |
| Profit for the period | 1,085.0 | 367.4 | 457.7 | 250.4 |
Source: Guaranty Trust Holding Company Plc (filed with Nigerian Exchange), Unaudited consolidated and separate financial statements, September 2024, 29 October 2024; Access Holdings Plc (filed with Nigerian Exchange), Consolidated and separate interim financial statements for the period ended 30 September 2024, 30 October 2024.
Balance sheets also swelled. GTCO's total assets reached NGN15,615.8 billion at 30 September 2024 from NGN9,691.3 billion at the end of 2023, an increase of about 61%, and its customer deposits rose to NGN10,682.2 billion from NGN7,410.8 billion. Access Holdings' total assets rose to NGN41,089.5 billion from NGN26,688.8 billion, up about 54%, with customer deposits of NGN22,280.6 billion and loans to customers of NGN11,861.8 billion. Funding costs weigh more heavily at Access, whose interest expense of NGN1,553.1 billion was about 1.8 times its net interest income of NGN844.8 billion; GTCO's interest expense of NGN198.9 billion was about 25% of its net interest income. The Access banking group's capital adequacy ratio fell to 20.42% at 30 September 2024 from 21.09% at the end of 2023, and its tier 1 ratio to 15.11% from 15.60%.
Kenya: rate cuts, slow pass-through and rising bad loans
On 8 October 2024 the CBK judged that there was scope for further easing, after overall inflation fell to 3.6% in September from 4.4% in August and private-sector credit decelerated sharply. Growth was slowing: real GDP rose 4.6% in the second quarter of 2024, against 5.6% a year earlier, and 4.0% in the third quarter, against 6.0%. On 5 February 2025 the CBK also cut the cash reserve ratio by 100bp to 3.25%.
Lending had stalled. Growth in bank lending to the private sector slowed to 1.3% in August 2024 from 3.7% in July, while foreign-currency loans, about 26% of the total, contracted by 10.6%. By December 2024 private-sector lending had contracted by 1.4% year on year, with local-currency loans up 2.1% and foreign-currency loans down 11.4%. In December the CBK said short-term government securities rates had fallen sharply in line with its rate, but banks had not lowered their own rates proportionately. In February 2025 it said lending rates had declined only marginally, began on-site inspections to check that banks were cutting rates in line with the risk-based credit pricing model, and stated that any bank not passing on lower funding costs would be penalised under recently enacted Banking Act amendments.
The system remained well capitalised, liquid and profitable. The total capital adequacy ratio was 19.1% in August 2024, against a statutory minimum of 14.5%, and the liquidity ratio was 54.3%. Return on equity was 25.3% and return on assets 2.9%. Asset quality worsened over the year to August, with gross non-performing loans rising to KSh674.9 billion from KSh611.4 billion while gross loans slipped to KSh4,045.1 billion from KSh4,064.7 billion. The CBK noted increases in non-performing loans in transport and communication, personal and household, trade, real estate and manufacturing.
Kenyan banking-sector indicators
| Indicator | August 2023 | June 2024 | August 2024 |
|---|---|---|---|
| Total capital adequacy, % | 18.5 | 19.1 | 19.1 |
| Core capital ratio, % | 15.9 | 16.6 | 16.8 |
| Gross NPLs to gross loans, % | 15.0 | 16.3 | 16.7 |
| Liquidity ratio, % | 49.6 | 53.5 | 54.3 |
| Return on equity, % | 25.7 | 26.0 | 25.3 |
| Return on assets, % | 2.6 | 2.9 | 2.9 |
Kenya: gross NPLs to gross loans, %
Source: Central Bank of Kenya, Monetary Policy Committee meeting: background information, October 2024, 9 October 2024; Central Bank of Kenya, Press release: Monetary Policy Committee meeting, December 5, 2024, 5 December 2024; Central Bank of Kenya, Press release: Monetary Policy Committee meeting, February 5, 2025, 5 February 2025.
The ratio eased to 16.5% in October and 16.4% in December 2024, still above the 15.0% of August 2023.
Ghana: capital rebuilding, credit risk elevated
Ghana's banks spent 2024 rebuilding capital after the sovereign debt restructuring. The industry capital adequacy ratio without regulatory reliefs rose to 10.3% in August 2024 from 7.5% a year earlier, and to 11.3% in December 2024 from 8.3% in December 2023. Including reliefs, the ratio was 14.0% in December 2024 against 13.9% a year earlier. Total assets grew 42.4% in the year to October 2024, to GH¢367.2 billion, and 33.8% over 2024 as a whole. The Bank of Ghana said banks had accumulated enough capital buffers to withstand the effects of the external debt restructuring, and that the impact of the Eurobond restructuring would be minimal given pre-emptive provisioning.
Credit risk remained high. The non-performing loan ratio was 24.3% in August 2024, against 20.0% a year earlier, which the central bank attributed to increased defaults by large borrowers. It eased to 22.7% in October and 21.8% in December, still above the 20.6% of December 2023. Nominal private-sector credit grew 26.3% in the year to December 2024, while the average bank lending rate fell to 30.45% in October from 32.69% a year earlier. In January 2025 the Bank of Ghana said it would ensure that banks with capital gaps kept to their committed recapitalisation plans, and would intensify supervision of non-performing loans.
Ghanaian banking-sector indicators, %
| Indicator | August 2024 | October 2024 | December 2024 |
|---|---|---|---|
| Capital adequacy ratio without reliefs | 10.3 | 11.1 | 11.3 |
| Capital adequacy ratio with reliefs | 13.8 | 14.2 | 14.0 |
| Non-performing loan ratio | 24.3 | 22.7 | 21.8 |
| Private-sector credit growth | 21.7 | 28.8 | 26.3 |
| Headline inflation | 20.4 | 22.1 | 23.8 |
Source: Bank of Ghana, MPC press release, September 2024 (120th MPC meeting), 27 September 2024; Bank of Ghana, Monetary Policy Committee press statement No 121, November 2024, 29 November 2024; Bank of Ghana, MPC press statement, January 2025 (122nd MPC meeting), 27 January 2025.
Rising inflation then halted further cuts. Inflation rose to 21.5% in September and 22.1% in October 2024, and the Bank of Ghana held its rate at 27.0% in November. By December inflation was 23.8%, mainly because of food prices, which left the policy rate about 3.2 percentage points above inflation.
Zambia: drought, a weaker kwacha and tighter policy
Drought dominated Zambia's third quarter. The Bank of Zambia cut its 2024 real GDP growth projection to 1.2% from 2.3%, and average annual inflation rose to 15.5% in the third quarter from 14.6% in the second, reaching 15.7% in October. The kwacha depreciated by 1.7% against the US dollar in the third quarter, against 3.8% in the second. The statutory reserve ratio had stood at 26.0% since February 2024; money market liquidity eased in the third quarter, and the interbank rate averaged 13.5%, down from 18.1% in the second.
Banks shifted towards the state. Growth in private-sector credit slowed to 29.7% year on year in September from 35.8% in June, as drought reduced economic activity. Commercial banks bought K10.1 billion of government securities in the quarter, taking their holdings to K48.0 billion at the end of September. Their average nominal lending rate fell by 0.2 percentage points to 28.4%.
Uganda
On 7 October 2024 the Bank of Uganda's Monetary Policy Committee cut the Central Bank Rate by 25bp to 9.75%, citing an improved inflation outlook. Annual headline and core inflation fell to 3.0% and 3.7% in September 2024, from 3.5% and 3.9% in August, and the bank projected average core inflation to stay below its 5% medium-term target over the next 12 months. Growth was strong: Uganda Bureau of Statistics estimates cited by the bank put annual real GDP growth at 6.6% in the quarter to June 2024.
Cross-country comparison
Sub-Saharan Africa: policy rates and banking indicators (reference dates in brackets)
| Country | Policy rate, end-September 2024 | Latest rate in this report | Capital | Asset quality | Profitability |
|---|---|---|---|---|---|
| South Africa | 8% | 7.50% (January 2025) | Total CAR 17.21%; CET1 13.31% (2024 to August) | NPL ratio 5.7% (July 2024) | ROE 14.94% (2024 to August) |
| Nigeria | 27.25% | Not available | Access banking group CAR 20.42% (September 2024) | Not available | GTCO pre-tax profit NGN1,219.5bn (nine months) |
| Kenya | 12.75% | 10.75% (February 2025) | Total CAR 19.1% (August 2024) | Gross NPL ratio 16.4% (December 2024) | ROE 25.3% (August 2024) |
| Ghana | 27.0% | 27.0% (January 2025) | CAR 11.3% without reliefs (December 2024) | NPL ratio 21.8% (December 2024) | Not available |
| Zambia | 13.5% | 14.0% (November 2024) | Not available | Not available | Not available |
| Uganda | 10.0% | 9.75% (October 2024) | Not available | Not available | Not available |
Source: South African Reserve Bank, Statement of the Monetary Policy Committee September 2024, 19 September 2024; South African Reserve Bank, Statement of the Monetary Policy Committee January 2025, 30 January 2025; South African Reserve Bank, Financial Stability Review, Second edition 2024, 30 November 2024; Central Bank of Nigeria, Monetary Policy Committee key decisions (297th meeting, 23-24 September 2024), 24 September 2024; Access Holdings Plc (filed with Nigerian Exchange), Consolidated and separate interim financial statements for the period ended 30 September 2024, 30 October 2024; Guaranty Trust Holding Company Plc (filed with Nigerian Exchange), Unaudited consolidated and separate financial statements, September 2024, 29 October 2024; Central Bank of Kenya, Monetary Policy Committee meeting: background information, October 2024, 9 October 2024; Central Bank of Kenya, Press release: Monetary Policy Committee meeting, February 5, 2025, 5 February 2025; Bank of Ghana, MPC press release, September 2024 (120th MPC meeting), 27 September 2024; Bank of Ghana, MPC press statement, January 2025 (122nd MPC meeting), 27 January 2025; Bank of Zambia, Monetary Policy Report, November 2024, 30 November 2024; Bank of Uganda, Monetary Policy Statement for October 2024, 7 October 2024.
Of the three countries with system-wide data here, Ghana and Kenya have the higher non-performing loan ratios; Kenya's total capital ratio of 19.1% sits well above its 14.5% minimum, while Ghana's ratio without reliefs was 11.3%, and South Africa's lower NPL ratio was still rising in July 2024. Kenya's return on equity of 25.3% compares with 14.94% in South Africa; in Nigeria, reported bank profits rest heavily on valuation and currency gains.
Outlook risks
In Kenya, the test is whether the 200bp of cuts since October 2024 and the threat of penalties under the Banking Act amendments bring lending rates down and revive private-sector credit. In Ghana, inflation of 23.8% in December 2024 and a non-performing loan ratio of 21.8% leave the pace of recapitalisation as the key issue for weaker banks. In Nigeria, the 50.00% cash reserve ratio set in September 2024 constrains lending, and earnings rest heavily on fair value and currency gains. In South Africa, the SARB's trade-war scenario, with a weaker rand and a higher policy rate, shows the external risk to an easing cycle that has so far coincided with stable bank capital.
What to watch
- 10-11 February 2025: the Bank of Zambia's Monetary Policy Committee meets, after raising its rate to 14.0%.
- April 2025: the CBK's Monetary Policy Committee meets again, after cutting its rate to 10.75%.
- 25-28 March 2025: the Bank of Ghana's Monetary Policy Committee meets, with the decision announced on 31 March 2025.
Primary sources: South African Reserve Bank, Statement of the Monetary Policy Committee January 2025, 30 January 2025; Bank of Zambia, Monetary Policy Report, November 2024, 30 November 2024; South African Reserve Bank, Statement of the Monetary Policy Committee September 2024, 19 September 2024; Central Bank of Kenya, Monetary Policy Committee meeting: background information, October 2024, 9 October 2024; Bank of Ghana, MPC press release, September 2024 (120th MPC meeting), 27 September 2024; Bank of Uganda, Monetary Policy Statement for October 2024, 7 October 2024; Central Bank of Nigeria, Monetary Policy Committee key decisions (297th meeting, 23-24 September 2024), 24 September 2024; Central Bank of Kenya, Press release: Monetary Policy Committee meeting, October 8, 2024, 8 October 2024; South African Reserve Bank, Financial Stability Review, Second edition 2024, 30 November 2024; Central Bank of Kenya, Press release: Monetary Policy Committee meeting, February 5, 2025, 5 February 2025; Bank of Ghana, MPC press statement, January 2025 (122nd MPC meeting), 27 January 2025; Bank of Zambia, Monetary Policy Committee Statement, November 2024, 13 November 2024; South African Reserve Bank, Statement of the Monetary Policy Committee November 2024, 21 November 2024; Central Bank of Kenya, Press release: Monetary Policy Committee meeting, December 5, 2024, 5 December 2024; Bank of Ghana, Monetary Policy Committee press statement No 121, November 2024, 29 November 2024; Guaranty Trust Holding Company Plc (filed with Nigerian Exchange), Unaudited consolidated and separate financial statements, September 2024, 29 October 2024; Access Holdings Plc (filed with Nigerian Exchange), Consolidated and separate interim financial statements for the period ended 30 September 2024, 30 October 2024.