African Banks Are Outperforming Global Peers – McKinsey

Africa’s banking sector continues to outperform global peers on profitability, supported by elevated interest rates, resilient lending activity and rising fee income, according to McKinsey & Company. However, currency depreciation is significantly muting reported dollar growth, creating a gap between underlying performance and headline figures.

The consultancy finds that African banks generated a return on equity of 19% in 2024 and 17% in 2025, well above the global banking average of about 10% over the same period. Globally, the sector delivered stable but slower growth, with revenues reaching approximately $5.9 trillion in 2025 and ROE holding steady at around 10%. The contrast highlights the stronger earnings momentum in African markets compared with more mature systems where margins remain structurally compressed.

McKinsey notes that African banking is also expanding its economic footprint. The sector increased its share of GDP by 0.4 percentage points between 2020 and 2024, reflecting deeper financial intermediation across key markets.

However, the report stresses that foreign exchange effects are obscuring the scale of growth. While local currency revenue expansion averaged 17% annually, dollar-denominated growth was far weaker due to depreciation pressures across multiple currencies. Revenues rose from $81 billion in 2020 to $99 billion in 2024, representing 5.2% annual growth in dollar terms, before accelerating to 7% in 2025 as macro conditions improved, lifting total industry size to about $107 billion.

Concentration and regulatory pressure drive consolidation

Despite strong growth, Africa’s banking sector remains highly concentrated. Five markets, South Africa, Egypt, Nigeria, Morocco and Kenya, accounted for roughly 70% of total revenues in 2024. This concentration underscores the uneven development of financial depth across the continent and the dominance of a small number of large banking systems.

South Africa remains the largest market, generating $26.4 billion in revenue, followed by Egypt at $18 billion, Nigeria at $8.7 billion, Morocco at $6.9 billion and Kenya at $5.9 billion. Industry experts expect this hierarchy to remain broadly stable, although regulatory shifts are likely to accelerate consolidation in smaller and mid-sized markets.

In Kenya, new central bank capital requirements scheduled for 2029 are expected to push smaller lenders toward mergers or acquisitions. This is likely to increase cross-border expansion and trigger further consolidation as banks attempt to achieve scale and absorb compliance costs.

South Africa’s market, by contrast, is already structurally consolidated. Revenues are forecast to grow at about 2% CAGR, reaching roughly $30 billion by 2030. Four banks, Standard Bank, FirstRand, Absa and Nedbank, control about 82% of the market. Growth is increasingly driven by diversification beyond traditional lending into payments, digital banking and regional expansion.

Egypt is also on a strong growth trajectory. Banking revenues expanded at a CAGR of 10% between 2018 and 2024, reaching $18 billion, supported by rising financial inclusion and regulatory reform. McKinsey projects a further 11% CAGR through 2030, taking revenues to about $34 billion.

Technology and SME lending as next growth engine

The next phase of expansion is expected to be driven by technology adoption and deeper penetration into underserved segments, particularly small and medium enterprises. McKinsey estimates that about 88% of SMEs in markets such as Egypt lack access to traditional banking services, representing a large structural credit gap.

Banks are increasingly expected to address this gap using data integration across tax records, payments systems and point-of-sale platforms. This would allow automation of credit decisions and reduce approval times from weeks to a matter of days, shifting lending from relationship-based models toward data-driven underwriting.

Artificial intelligence is also emerging as a key efficiency lever. McKinsey estimates that generative AI could generate between $200 billion and $340 billion in annual productivity gains across global banking, with African institutions well positioned to benefit due to higher baseline inefficiencies in onboarding, fraud detection and credit operations.

“The story of African banking is no longer just one of emerging potential, but of proven performance, innovation, and resilience, creating a solid base from which to build toward 2030,” notes the McKinsey report.

Even so, the report warns that sustaining current profitability will require structural adaptation. Banks will need to manage currency volatility more effectively, pursue consolidation to achieve scale and invest in data-led operating models. Without these adjustments, competitive pressure and macroeconomic volatility could gradually normalize returns toward global averages over the medium term.

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