• S&P expects loan growth and asset quality to improve across most African markets
• Strong growth is forecast in Egypt, Morocco, and Nigeria, with a mild recovery in South Africa
• About 50% of rated African banks carry a positive outlook

The outlook for African banks remains broadly positive in 2026, supported by economic and financial conditions favorable to loan growth and improving asset quality in most countries, S&P Global Ratings said in a report published on Monday, February 2.

Titled Africa Banking Outlook 2026: favorable conditions support loan growth and asset quality, the report expects stronger economic growth in most of the five countries where the 22 banks rated by the agency operate. Robust growth is forecast in Egypt, Morocco, and Nigeria, while a modest recovery is expected in South Africa, driven by steady progress on economic reforms, rising infrastructure investment, and stronger consumption. In contrast, the lack of meaningful economic reforms continues to weigh on Tunisia’s economic outlook.

More broadly, geopolitical risk, a key concern for credit conditions in emerging markets, has not had a significant impact on the macroeconomic performance of African countries so far. However, the region remains vulnerable to geopolitical tensions that could disrupt trade routes, affect commodity prices, and undermine investor or consumer confidence.

Mixed margins, but solid banking fundamentals

S&P Global Ratings also expects African banks to offset the negative impact of declining interest rates through higher loan volumes and lower credit losses. Greater diversification of business models is expected to help stabilize profitability at South African banks.

While customer deposits are expected to remain the main source of funding, S&P anticipates differences in profitability across countries. Moroccan and South African banks are expected to show resilient profitability, supported by higher volumes and lower risk costs. These factors should offset the normalization of market-related gains in Morocco and margin compression in South Africa.

By contrast, a sharp decline in interest rates expected in Nigeria and Egypt, as inflation eases, is likely to lead to a gradual decline in bank profitability. This trend should be partially offset by lower credit losses. Tunisian banks are expected to maintain relatively stable profitability, despite ongoing challenges related to structural inefficiencies and persistently high risk costs.

Asset quality across African banks is expected to stabilize or improve moderately. Lower inflation and interest rates should support household disposable income and debt repayment capacity. However, asset quality at Nigerian banks remains vulnerable to volatility in energy and foreign exchange markets, as 50% of loans are denominated in foreign currencies and about one-third are exposed to the hydrocarbons sector.

Moroccan and Tunisian banks continue to report higher non-performing loan (NPL) ratios than their peers, largely due to a legacy of problematic loans. Regulatory reforms have also progressed slowly in both countries, limiting efforts to clean up bad loans. Morocco, for example, lacks a secondary market for non-performing loans, while Tunisia needs a more flexible framework to allow more aggressive loan write-offs.

Ratings assigned to African banks covered by S&P Global Ratings vary widely across the continent, ranging from “BB” for large South African banks such as Nedbank and FirstRand to “CC” for a small Nigerian bank facing capitalization challenges, Ecobank Nigeria. About 50% of these ratings carry a positive outlook, mainly in Nigeria and South Africa. For other banks, stable outlooks often reflect improvements in their risk profiles in 2025. S&P upgraded the ratings of 10 of the 22 banks it assesses over the past year.

Walid Kéfi