A ccording to the South African Reserve Bank’s (SARB’s) latest “Quarterly Bulletin” published on March 27, the annual growth in total loans and advances extended by monetary institutions to the domestic private sector accelerated last year from 3.2 percent in April 2024—the lowest growth rate since October 2021—to 4.8 percent by August. It then eased moderately to 4.1 percent by January 2025. However, the central bank also reported that the continued moderation in credit extension to both households and companies resulted in an annual average growth rate in credit extension during 2024 of 4.2 percent, which was markedly lower than the 7.8 percent and 7.0 percent recorded in 2022 and 2023, respectively, with credit to companies increasing at a faster pace than that to households. “Despite the increase in the nominal value of total loans extended to companies in 2024, the year-on-year growth rate moderated further from annual averages of 8.9 percent and 7.5 percent in 2022 and 2023 respectively to 4.8 percent in 2024,” the SARB also reported. “The slowdown reflected a broad-based moderation in most of the credit categories, except for general loans and mortgage advances. Growth in general loans to companies accelerated from 1.0 percent in January 2024 to 7.5 percent in May but lost some momentum in the second half of the year as it moderated to 5.3 percent in December, partly due to base effects, and further to 4.2 percent in January 2025.” South African commercial lenders were also recently observed accelerating their closures of automated teller machines (ATMs) across the country in attempts to shift more decisively to digital banking. The most recent reported interim financial periods showed that all but one of South Africa’s top five banks had extended a years-long trend of ATM cuts during the first half of 2024, with the traditional Big Four—Absa Bank, First National Bank (FNB), Nedbank and Standard Bank—closing a combined 233 ATMs in the six-month period. Capitec Bank, the fifth-largest bank, however, has been opposing this trend by opening more ATMs in recent times. “At Capitec, accessibility is fundamental to financial inclusion. We believe every client should have seamless access to financial services that meet their needs, regardless of location or preferred banking method,” Asha Patel, head of brand and communications at Capitec, recently told Techpoint Africa . Fitch Solutions company BMI recently gave the Kenyan banking sector a resounding vote of confidence when it reported that lenders are in a “decent position” to handle regulatory and tariff-related challenges. “We anticipate that higher capital requirements will lead to considerable consolidation in Kenya’s banking sector over the coming years. In December 2024, Kenya’s parliament passed the Business Laws (Amendment) Act, which envisages a tenfold increase in the banks’ minimum core capital requirement, staggered over the next five years,” the report published on April 24 confirmed. “The largest banks have already met this comfortably, with the three largest banks by assets—KCB, Equity and Co-op Bank—reporting core capital of KES145bn, KES132bn and KES115bn at end-2024, far exceeding the new KES10bn requirement. Based on end-2024 results, a third of Kenyan banks met the new requirement, while we expect the next third of mid-tier lenders to reach the threshold by end-2029 through retained profits,” the report continued. BMI also suggested that Kenyan banks’ nonperforming loan (NPL) ratios had already peaked and that loan quality will continue to improve in 2025. “Kenya’s NPL ratio increased from 3.6% in March 2013 to 16.4% in December 2024, just down from a record high of 16.7% in August,” the report also noted. “Loan quality deteriorated owing to persistent challenges such as high lending rates, economic instability characterised by high inflation and currency devaluations, as well as delays in government payments.” That said, BMI also stated it expected “gradual improvements” in 2025, driven by lower interest rates, steady inflation, stronger loan growth and concerted efforts by banks to rehabilitate their loan portfolios and write off bad debts. Ten Nigerian banks recorded a modest 0.57-percent increase in after-tax profit during the first quarter of 2025, a recent analysis by local publication BusinessDay revealed, adding that this modest uptick was reflective of “the stabilising impact of interest rate levels on income-generating operations across the sector”. The lenders include Zenith Bank, United Bank for Africa (UBA), Access Holdings, FCMB (First City Monument Bank) Group, Stanbic IBTC Holdings, Fidelity Bank, Guaranty Trust Bank (GTBank), First HoldCo, Ecobank Transnational and Wema Bank. Together, they generated an estimated N1.51 trillion in profit during the first quarter (Q1), up from the N1.5 trillion reported in the same period of the previous year. A few lenders within the group enjoyed healthy profits, with Zenith Bank, Guaranty Trust Bank and United Bank for Africa posting after-tax profits of N311.8 billion, N258.03 billion and N189.8 billion, respectively. First HoldCo and Wema Bank, however, saw their profits sharply decline by 18 percent and 72.9 percent, respectively. “The flat interest rate environment is having a cooling effect on interest income for banks, even as they continue to adjust their strategies for non-interest revenue growth,” said Tunde Abidoye, an analyst at FBNQuest Merchant Bank, as quoted by BusinessDay . “The CBN [Central Bank of Nigeria] has closed the loophole—they’ve taken banks’ net open position to zero, meaning they can’t hold dollar assets. I expect that the trend of declining profits will continue till H1, and non-interest income will fall, which will affect earnings.” The annual profits generated by banks in the United Arab Emirates (UAE) hit a record high in last year’s final quarter, according to a report published by Fitch Ratings, while nonperforming loans (NPLs) declined markedly, leaving the sector in perhaps its healthiest position in many years. The UAE banks assessed by the credit-rating firm did, however, see their lending growth moderated to 1.7 percent in the fourth quarter (Q4) of 2024, down from 3.3 percent in the previous quarter, which Fitch attributed to lower growth at some large banks, partially due to loan sales and write-offs. Nonetheless, Fitch reported full-year lending growth up by a stellar 11 percent, well above the 7.7 percent notched up in 2023, with some Fitch-rated banks exceeding 15 percent for 2024, including Abu Dhabi Commercial Bank (ADCB) (15.3 percent), Abu Dhabi Islamic Bank (ADIB) (22 percent), Emirates Islamic Bank (28 percent), National Bank of Ras Al-Khaimah (RAKBANK) (19 percent) and United Arab Bank (UAB) (21 percent). On the nonperforming-loans front, moreover, Fitch estimated that the balance for UAE banks declined by AED 12 billion in 2024, AED 9 billion of which occurred in Q4, with the rating firm crediting the improvements to write-offs, loan sales and recoveries, with a similar reduction in sector loan-impairment reserves since the end of 2023. According to Fitch, the average impaired loan ratio declined to 4 percent at end-2024, compared with 5.1 percent at end-2023. These numbers are broadly in line with figures published by the Central Bank of the UAE (CBUAE), which showed nonperforming loans declining from 5.3 percent in Q4 2023 to 4.1 percent one year later. The banking sector’s provisions for nonperforming loans (as a percentage of total NPLs) did tick up marginally in Q4, but they have remained on a long-term downward trend, which began in Q2 2023. Nonetheless, Fitch projected that banks will strengthen their recovery functions following the introduction of credit risk-management standards by the Central Bank of the UAE in Q4 2024. “We expect more write-offs and bad debt sales in 2025–2026, therefore the sector average impaired loans ratio will remain below the central bank’s 5 percent target,” according to the credit-rating firm. Growth and profits were underpinned by healthy operating conditions and robust liquidity in the banking sector, Fitch added, forecasting solid lending growth this year of about 9 percent. The sector’s return on average equity (ROAE) was also recorded at a very healthy 19.1 percent, up from 18.7 percent in 2023, despite 2024 being the first full year in which banks paid corporate tax (after its introduction in June 2023). Some Fitch-rated banks also reported ROAE above 20 percent, namely Emirates NBD (21 percent) and its subsidiary, Emirates Islamic Bank (22 percent), Abu Dhabi Islamic Bank (28 percent), Dubai Islamic Bank (DIB) (21 percent), Mashreq (bank) (29 percent) and Commercial Bank of Dubai (CBD) (22 percent). “Combined net income of Fitch-rated banks in Q4 was about AED20 billion, similar to Q4, and full-year profit was AED80 billion, up from AED76 billion in 2023,” Fitch also reported. “The rise was driven by a 10 percent expansion of the banks’ pre-impairment operating profit (which exceeded AED100 billion in 2024), contained loan impairment charges due to the favourable operating environment, and strong coverage of already crystallised problem loans at most banks.” Saudi Arabia’s banking sector extended its strong growth in lending through March, according to the latest data from the Saudi Central Bank (SAMA), which revealed that the total credit issued by commercial lenders in the Kingdom had reached SR3.1 trillion (US$827.2 billion), a hefty 16.26-percent year-on-year expansion. This represented the highest growth rate in three years and eight months. The surge was mainly prompted by a jump in corporate lending, which rose from 52.46 percent of total bank credit in March 2024 to 55.19 percent this year. Credit extended to businesses grew by 22.3 percent over this period to reach SR1.71 trillion. It is thus clear that businesses in Saudi Arabia are leading the borrowing activity, which in turn signals that more investment and diversification plans are in the offing. Real-estate activities are seeing particularly high growth amidst corporate-loan demand, accounting for 22 percent of total business lending and enjoying a massive 40.5-percent year-on-year rise to reach SR374.5 billion. As such, the trends reflect Saudi Arabia’s current insatiable appetite for housing, commercial infrastructure and new development projects, in line with the Kingdom’s ambitious Vision 2030 programme. Similar positive news is also being reported by Egypt’s banking sector, with commercial lenders having expanded their holdings of foreign assets, largely due to strong foreign direct investment (FDI) inflows. According to data from the Central Bank of Egypt (CBE), the domestic banking sector saw its net foreign assets (NFAs) skyrocket from $10.2 billion in February to $15 billion in March at a remarkable growth rate of 47 percent. As such, it stands in stark contrast to last year, when Egyptian banks were in the red on their foreign-currency liabilities to the tune of $4.19 billion. It would seem that banks have expanded their foreign assets since then, with March’s $2.7-billion FDI injection adding to the release of the $1.2-billion tranche of the International Monetary Fund’s (IMF’s) $8-billion extended fund facility (EFF). “The month-on-month widening in the total NFA position is mainly attributed to a $4.51 billion increase in the banking sector’s foreign assets, while foreign currency liabilities remained unchanged,” Heba Monir, financial analyst and economist at HC Securities and Investment, explained to media outlet ZAWYA . “This reflects a meaningful improvement in foreign exchange liquidity within the banking sector. Both developments have played a key role in boosting foreign currency liquidity at local banks.” Business conditions for Omani banks should remain favourable in 2025, according to a report published by Fitch Ratings, with high oil prices and robust economic growth ensuring stability. “Increasing diversification in Oman has improved economic prospects and created growth opportunities for banks,” Fitch reported on April 11. “Real GDP growth will likely accelerate, driven by both hydrocarbon and non-oil sectors. The Positive Outlooks on all Omani banks reflect the rating action on the Omani sovereign and our expectation that improving operating conditions could benefit some banks’ intrinsic profiles.” Fitch also projected asset quality to recover further in 2025, helped by write-offs and favourable economic conditions, which, in turn, should support sector capitalisation. “We expect lower interest rates will have a limited impact on banks’ net interest margins, and that loan impairment charges will remain moderate, along with reasonable cost discipline,” the credit-rating firm added. “Most banks’ capital buffers are supported by sound internal capital generation. Funding and liquidity conditions are stable. We expect oil prices to continue [to] support growth in customer deposits, which accounted for 90 percent of total sector non-equity funding.” BANKING CEO OF THE YEAR
Middle East
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