Banks are lowering their costs due to constrained consumer appetite for more credit

SOUTH Africa's big banks adopted rigorous measures to contain costs last year after net interest margins (NIM) narrowed and consumer spending remained subdued, according to report released by professional services firm BDO South Africa on Tuesday.

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All four banks indicators showed cost containment improving, but the big banks did not necessarily benefit.

While traditional bank metrics such as headline earning growth and credit loss ratios were all positive, it was the scale of the cost that was impressive, said Kevin Hoff, Partner & Head of BDO Financial Services South Africa, in the presentation in stark contrast to the average interim results.

The average interim results by 6.2% basis points in 2024, in stark contrast to the 24 basis points increase the previous year.

The average return on equities at Absa, FirstRand, Standard Bank, and Nedbank increased by 1.7% in 2024, while the year before it was 4%. The relatively slower performance was due to subdued growth in SA's gross loans and advances growth slowed to 5.48%, from 6.58% in the previous period.

Investment in technological upgrades and digitisation is driving cost efficiency across the banking sector, even with stable cost-to-income ratios in 2024, even with the rate of income growth slowed, indicating the sector to slow the BDO South Africa.