African banks achieved a 17% return on equity in 2025, nearly double the global average, according to a McKinsey analysis. The sector’s profitability stood out, with returns climbing to 19% in 2024, fueled by strong interest margins, rising fee income, and rapid digital adoption.
The performance was underpinned by high interest rates in key markets, robust loan growth, and a growing share of non-interest revenue. Payments, fees, and trading activity contributed more to earnings than traditional lending in several cases. The analysis warned that some of these gains might fade as interest rates fall in the coming years.
Currency depreciation and inflation in several markets reduced growth when measured in U.S. dollars, obscuring the underlying strength. Over the past five years, banking revenues expanded significantly in local currency terms, driven by credit growth and increased use of formal financial services. The gains appeared smaller when converted to dollars.
A key change in the report involved the composition of bank revenues. Non-interest income, including fees and commissions, grew faster than lending income. This shift aligned with global trends but accelerated in Africa due to the rise of digital payments, mobile money platforms, and agent banking networks.
These channels cut distribution costs and allowed banks to reach unbanked populations efficiently. Transaction data, mobile usage patterns, and digital footprints began replacing traditional collateral-based lending. The approach created new lending opportunities while transforming credit risk assessment.
Growth remained uneven across the continent. Currency volatility, inflation, infrastructure gaps, and regulatory differences continued to affect performance in several markets. The analysis noted that strong overall growth hid significant variation between countries and institutions. South Africa, Nigeria, Egypt, Kenya, and Morocco led regional performance, while smaller markets expanded quickly from a lower base, indicating potential new opportunities.
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The sector significantly increased its footprint within the economy, showing the growing role of banks in driving financial inclusion and economic activity across the continent.
As interest rates decline, banks may see pressure on net interest margins. This could push them toward fee-based income, partnerships, and operational improvements.
The findings indicate that while the continent’s banks have outperformed global peers, maintaining that advantage will depend on adapting to economic shifts. Structural changes in digital lending and non-interest income could shape the sector’s future, provided banks address challenges like currency instability and regulatory differences.
The 19% return on equity in 2024 reflected deeper operational changes.
An impact fund in Denmark recently expanded financing for small businesses in Somalia, demonstrating similar efforts to support growth in underserved markets.
