South Africa’s banks are booming, with Capitec and Nedbank’s share prices improving by roughly 40% since the start of the year.
South Africa’s stock market rose to a record high as prospects of interest-rate cuts combined with a global rally in risk assets.
The JSE All Share reached yet another record high at the close of trade on Wednesday, 21 August, rising by 6.94% since the 29 May election.
Markets have responded positively to the formation of the Government of National Unity (GNU), in which the ANC formed a national government with nine other parties, most notably the market-friendly DA and IFP.
The local bourse has also benefited from the belief that interest rate cuts are likely in September. The South African Reserve Bank (SARB) is set to cut the repo rate from its 15-year high of 8.25%.
These expectations come from a better-than-expected July inflation print of 4.6%—a single percentage point over the SARB’s target.
The rand has also strengthened in recent weeks due to improved risk-on sentiment in the global markets.
Banking stocks have been some of the primary beneficiaries of the improved sentiment, with Standard Bank and FirstRand’s share price rising to all-time highs.
“With imminent interest rate cuts and declining global inflation, we have seen renewed interest in the rand and the stock market, and we think valuations look very attractive, especially in domestic sectors like the banks,” said James Johnstone, co-head of emerging and frontier markets at Redwheel.
Best performing stocks
Looking at the performance of the banks since the start of 2024, Capitec’s share price has seen the largest rise.
Its share price rose by 42.75% in the first half of the year, meaning that R1,000 rand invested at the start of the year would now be worth R1427,50.
In the financial year ended 29 February 2024, the group saw a 16% growth in headline earnings (R10.5 billion) following its decision to diversify its income streams and grow quality clients.
In a trading statement for the six months ended 31 August 2024, Capitec also said that there is a reasonable chance that its headline earnings will increase by between 25% and 35% to 5,090 cents and 5,497 cents per share (31 Aug 2023: 4,072 cents) following an improvement in its credit loss ratio.
The group is also expected to benefit from the launch of the two-pot system in September, with customers accessing part of their savings component to pay off short-term debt.
In second place is Nedbank, with its share price rising by just under 40% since the start of the year.
In its interim results for the first six months of 2024, Nedbank’s headline earnings increased by 8% year over year to R7.9 billion.
Good non-interest revenue growth, a lower impairment charge and tight cost control underpinned this 8% increase.
On the other end of the scale, Absa’s share price has only risen by 4.12%, which is lower than the overall All-Share Gain.
In the group’s results for the six months, Absa’s headline earnings per share dropped by 5% to 1,228.4 cents in H1 2024.
Amidst the comparatively weak performance, Absa CEO Arrie Rautenbach will retire early, leaving his current role on 15 October 2024. ABSA Corporate and Investment Bank Chief Executive Charles Russon will take over as interim group CEO.
The share price performance of the big six banks in South Africa can be found below:
| Bank | % Change | Total |
| Capitec | +42.75% | R1 427.50 |
| Nedbank | +39.80% | R1 398.00 |
| FirstRand | +16.45% | R1 164.00 |
| Standard Bank | +14.20% | R1 142.00 |
| Investec | +7.50% | R1 075.00 |
| Absa | +4.12% | R1 042.00 |
With reporting from Bloomberg
Read: ‘Door wide open’ for interest rate cuts in South Africa next month
