Banking giants Stanbic, Absa and First National Bank (FNB) have been tipped by Fitch Ratings, the global credit ratings agency, saying the lenders are well positioned to withstand financial shocks arising from the ongoing US-Iran conflict.
The assessment comes at a time when geopolitical tensions are sending fresh waves through global markets, raising concerns over inflation, interest rates, energy prices and economic growth.
Despite these pressures, Fitch believes South Africa’s major banking groups have sufficient financial strength to absorb potential spillovers from the conflict.
Fitch Sees Strong Defence Against War Fallout
According to Fitch Ratings, Standard Bank, Absa and First National Bank, alongside their respective bank holding companies, benefit from strong franchises, diversified operations, healthy profitability and solid capital and liquidity positions.
These strengths could prove crucial if the US-Iran conflict triggers further disruption across international financial markets.
The conflict has already contributed to inflationary pressures in South Africa. Headline inflation climbed to 5.0% in June 2026, compared with 3.0% in February.
The increase has placed additional pressure on monetary policymakers, with the South African Reserve Bank raising its repo rate by 25 basis points to 7% in May 2026.
However, Fitch does not expect the current pressures to derail the banking sector’s overall performance.
Interest Rates Could Rise Again
Fitch expects South Africa’s benchmark interest rate to increase by another 25 basis points by the end of 2026.
That would put additional pressure on households and businesses already facing higher borrowing costs. Higher interest rates can also increase credit risks as borrowers struggle to service loans.
Despite this, Fitch expects the banking sector’s profitability metrics to remain broadly stable in the near term.
The ratings agency forecasts a 50 basis point reduction in the policy rate by the end of 2027. It also expects real Gross Domestic Product growth to accelerate to 1.3% in 2026, up from 1.1% in 2025.
The combination of improving economic growth and eventual monetary easing could provide support for banks’ earnings and credit quality.
Loan Risks Remain Under Watch
While Fitch has highlighted the resilience of the banking groups, it also acknowledged that impaired loan ratios remain elevated.
The good news for the banks is that these ratios are moving on a declining path.
Fitch said impaired loans are adequately covered by specific loan loss allowances, with the calculations taking into account tangible collateral and the prospects of recovering outstanding funds.
This provides an important cushion for the banks should credit conditions deteriorate further.
The lenders also benefit from strong pre-impairment operating profits. These earnings provide a significant buffer that can absorb higher loan impairment charges while still supporting the banks’ ability to generate capital internally.
Capital Buffers Give Banks More Protection
Another major source of strength identified by Fitch is the banks’ capital position.
Common Equity Tier 1 capital ratios for the banking groups stood between 12.0% and 13.1% at the end of 2025, excluding unappropriated profits. For Investec Limited, Fitch used first-quarter 2026 figures.
These ratios remain comfortably above regulatory minimum requirements.
Strong capital positions are particularly important during periods of geopolitical uncertainty because they give banks greater capacity to absorb unexpected losses.
For investors and depositors, healthy capital buffers can also provide reassurance that the banks are not excessively vulnerable to sudden deterioration in economic conditions.
Liquidity Position Remains Solid
Fitch also pointed to strong funding and liquidity positions across the banking sector.
At the end of May 2026, the sector recorded a net stable funding ratio of 117% and a liquidity coverage ratio of 161%.
These figures demonstrate that the banks have substantial liquidity buffers available to manage potential funding pressures.
This could become increasingly important if the US-Iran conflict causes further volatility in global financial markets, commodity prices or investor sentiment.
New Debt Rules Strengthen Resilience
South Africa’s five major banking groups have also started issuing a new class of debt known as Financial Loss Absorbing Capacity, or FLAC.
The instruments are designed to absorb losses and potentially convert into regulatory capital if a bank enters a resolution process.
The requirements will be introduced gradually over six years. Banks are expected to meet 60% of their base requirement by the end of 2028 and achieve full compliance by the end of 2031.
The new framework is expected to strengthen the resilience of the banking system by ensuring that banks have additional resources available to absorb losses during periods of severe financial stress.
Fitch Upgrades Banks Amid Stronger Credit Profiles
The latest assessment follows Fitch’s decision in June 2026 to upgrade the Long-Term Issuer Default Ratings of the banks and their holding companies to ‘BB’ with a Stable Outlook from ‘BB-’ with a Stable Outlook.
The upgrade followed a sovereign rating upgrade and reflected an easing of the constraints imposed by South Africa’s sovereign credit profile on the standalone credit strength of the banks.
Fitch said the Stable Outlooks on the banks’ Long-Term IDRs mirror the outlook on the sovereign’s Long-Term IDR.
For Stanbic, Absa and FNB, the assessment provides a significant confidence boost as geopolitical tensions continue to threaten global economic stability.
Banks Face the Storm With Stronger Foundations
Although the US-Iran conflict could continue to create inflationary and economic pressures, Fitch’s assessment suggests South Africa’s largest banking groups are entering the period with substantial financial defences.
Strong capital, healthy liquidity, diversified franchises and resilient profitability could help the lenders absorb potential shocks.
The coming months will nevertheless remain critical as inflation, interest rates, economic growth and geopolitical risks continue to shape the operating environment.
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