Standard Bank, South Africa’s largest bank by assets under management, has issued a warning to consumers and businesses: while the South African Reserve Bank (SARB) is likely to cut interest rates next week, further relief in 2025 is unlikely. This comes as inflation remains within the target band of 3% to 6%, with the Monetary Policy Committee (MPC) expected to reduce rates by 25 basis points to 7.25% at its March 20 meeting.
What’s Behind the Expected Rate Cut?
The anticipated cut would mark the fourth consecutive reduction, totaling 100 basis points since the easing cycle began. Inflation has dropped significantly over 2024, averaging 4.4%, with the January 2025 CPI figure standing at a low 3.2%. Standard Bank attributes this stability to improved economic conditions, including policy reforms and rising business and consumer confidence.
“This, together with ongoing policy reform and improved business and consumer confidence, will support economic growth. South African real GDP growth is expected to improve to 1.7% in 2025,” the bank stated in its financial results for the 2024 fiscal year.
Why No Further Cuts in 2025?
Despite the positive outlook, Standard Bank believes the March 2025 cut will be the last for the year. This conservative forecast contrasts with other market views. Economists from Investec, Old Mutual, and FNB predict an additional 50 basis points in cuts during 2025, with Investec forecasting reductions in July and November.
Investec Chief Economist Annabel Bishop noted that the SARB might skip the March cut due to uncertainty over US monetary policy and the potential for a VAT hike in South Africa. However, she still expects two rate cuts later in the year.
Standard Bank’s Financial Performance
Standard Bank’s interest rate outlook comes amid a strong financial performance for the group. For the full year ending December 2024, the bank reported headline earnings of R44.5 billion, a 4% increase from the previous year. Return on equity stood at 18.5%, while active clients grew by 4% to 20 million.
The South African franchise saw double-digit earnings growth, driven by increased client activity and improved credit trends. Digitally active retail clients in South Africa grew by 6%, reflecting a shift toward digital banking channels.
Sim Tshabalala, Standard Bank Group CEO, highlighted the group’s progress: “The group remains on track to deliver on its 2025 strategy and targets.”
Africa Regions and Global Outlook
Standard Bank’s Africa Regions division contributed 41% to group headline earnings, with notable growth in Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda, and Zambia. However, earnings in rand terms were marginally down due to currency fluctuations.
Globally, the bank noted an improved inflation outlook, with real GDP growth of 3.2% in 2024. The formation of South Africa’s Government of National Unity (GNU) post-elections, coupled with stabilized electricity supply and reduced logistical constraints, has bolstered consumer and business confidence.
Key Financial Highlights
- Total net income: R181.7 billion (+2%)
- Headline earnings: R44.5 billion (+4%)
- Credit impairments: R15.1 billion (down from R16.2 billion)
- Dividend per share: 1,507 cents (+6%)
Challenges and Opportunities Ahead
While Standard Bank remains optimistic about meeting its 2025 targets, it acknowledges uncertainties in the global geopolitical landscape, particularly related to US policy changes. The IMF projects global real GDP growth of 3.3% for 2025 and 2026, contingent on normalized monetary policy and open trade.
However, potential US tariff adjustments could disrupt trade and create inflationary pressures. Standard Bank believes these challenges will be temporary and will not derail medium- and long-term opportunities across Africa.
Standard Bank’s warning underscores the delicate balance between economic recovery and monetary policy in South Africa. While the expected March 2025 rate cut offers some relief, consumers and businesses should prepare for a potential pause in further reductions. As the country navigates these challenges, the focus will remain on sustaining growth, improving confidence, and addressing global uncertainties.
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