With the first two of SA's big four banks releasing muted financial results this week, signs are that the sector is taking strain and that things could get worse.
Some banks will benefit from strong growth in the rest of Africa or gains in market share at home.
But after SA's economy recorded growth of just 0.2% last year, an indication of what lies ahead came from Standard Bank, which revealed that its "severe" scenario on the impact of Covid-19 would see global growth reduced by 1.1 percentage points and SA's growth by 0.3-0.4 percentage points, cutting SA's economic growth to 0.4% for 2020.
This is in line with rating agency Moody's, which on Friday cut its global and SA forecasts, but still too optimistic for economists such as Citi's Gina Schoeman, who now expects just 0.1%.
Even in Standard's "benign" scenario, Covid-19 would cut 0.1 percentage points from SA's and global growth rates. "Covid-19 could disrupt global supply chains and overwhelm Africa's fragile health systems and the South African government could be unable to keep its fiscal promises," said Standard Bank group CEO Sim Tshabalala.
Nedbank opened the "big four" reporting season this week with a decline of 7% in headline earnings for the year to end-December as it hiked its provision for bad debts by two-thirds and signalled that earnings would grow by little more than 5% this year.
Standard Bank posted a 1% increase in group headline earnings, an outcome Tshabala called "disappointing", though its earnings from banking were up 5% with its Africa Regions, particularly its East African banking operations, outpacing the 4% growth in SA.
Absa year-end results, due on Wednesday, will be the first to be presented by its new CEO, Daniel Mminele, and the last before the completion of its separation from Barclays plc is due to be completed in June. FirstRand will report on Tuesday and is expected to put in the best showing of the four, mainly thanks to FNB.
Avior analyst Harry Botha said the results reflected tough conditions. Nedbank had been hit by one-off items but had also used the opportunity to "kitchen sink" its bad debts, raising provisions at the centre, but its earnings guidance of 5% was disappointing while Standard was a bit more upbeat.
Botha expects Absa to post earnings growth of 2%, and First Rand of about 5%. Standard, which has operations in 20 countries across Africa, derived 31% of its earnings and 32% of its revenue from its Africa Regions in the latest financial year, up from 30% the previous year, and returns on equity at 20.7% in the Africa Regions against 16.9% in its South African banking operations.
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