African banks have delivered some of the strongest profitability in global banking in recent years, with average return on equity (ROE) reaching 19% in 2024 before easing to 17% in 2025.
The performance was nearly twice the global banking average of about 10% in both years, according to McKinsey’s March 2026 report, From Potential to Performance: A Snapshot of African Banking.
The figures mark a notable shift for Africa’s banking industry, which has long been discussed in terms of its growth potential. In recent years, that potential has translated into higher revenues and stronger returns, although the performance has also been supported by conditions that may not persist indefinitely.
Africa’s Banking Returns Rose Sharply
African banks’ average ROE increased from about 9% in 2020 to 19% in 2024, representing a 10-percentage-point increase over four years.
Africa’s 2024 ROE was the highest among major global regions. Latin America followed at about 16.3%, while the Middle East recorded approximately 13.6%. Europe stood at about 10.9%, North America at 10.3%, Asia excluding China at 9.3%, and China at about 8.7%.
Globally, banking ROE remained around 10% during the period. Africa’s profitability subsequently moderated to 17% in 2025, as interest rates began easing across several major markets.
The decline did not erase the gains made during the previous years. Instead, it highlighted how much of the recent improvement had been linked to the interest-rate environment and other favourable market conditions.
Banking Revenue Crossed $100 Billion
The improvement in profitability was accompanied by rapid growth in the size of Africa’s banking market.
McKinsey estimates that African banking revenues reached $99 billion in 2024 and increased to approximately $107 billion in 2025, taking the sector above the $100 billion mark for the first time.
Between 2020 and 2024, banking revenues grew at an annual rate of about 17% on a constant-currency basis, compared with approximately 7% globally.
Currency depreciation, however, reduced the growth recorded when revenues were converted into US dollars. On that basis, African banking revenues increased from about $81 billion in 2020 to $99 billion in 2024, equivalent to a compound annual growth rate of approximately 5.2%.
Five Markets Dominate African Banking
Despite the continent-wide growth, banking revenues remain concentrated in a handful of markets. South Africa, Egypt, Nigeria, Morocco and Kenya accounted for about 70% of Africa’s banking revenues in 2024, according to McKinsey.
South Africa was the largest market, generating approximately $26.4 billion, or more than a quarter of the continent’s banking revenues. Egypt followed with $18 billion, Nigeria with $8.7 billion, Morocco with $6.9 billion and Kenya with $5.9 billion.
Together, the five markets accounted for roughly 67% of total African banking revenues in 2024. At the same time, McKinsey identified double-digit growth in several smaller markets, suggesting that banking activity is not limited to the continent’s largest financial systems.
Higher Interest Rates Boosted Bank Earnings
One of the biggest drivers of the recent profitability surge was the rise in interest rates across major African economies. Higher policy rates allowed banks to earn wider net interest margins, increasing the income generated from lending relative to the cost of deposits and other funding.
Markets such as Nigeria and Egypt experienced particularly high interest rates during the tightening cycle. Banks also benefited from loan growth and increased income from trading and foreign-exchange activities.
As interest rates started to decline in several major markets, however, the boost to bank earnings began to weaken. This was reflected in the fall in average African ROE from 19% in 2024 to 17% in 2025.
Fees and Digital Payments Are Becoming More Important
African banks are also increasingly generating revenue beyond traditional lending and deposit-taking. Fees, commissions, payments, foreign exchange and trading activities have become important sources of income, with non-interest revenue growing alongside the expansion of digital financial services.
Mobile money, digital payments, agent banking and card transactions have allowed banks to reach more customers while increasing transaction volumes.
The expansion of digital channels has also changed how banks distribute their products. Rather than relying entirely on physical branches, banks can use digital platforms and agent networks to serve customers and build additional revenue streams.
Digital Banking Is Helping Banks Reach More Customers
Financial inclusion has been another source of growth. Expanding demand for credit from individuals, small and medium-sized enterprises and large companies has increased banking volumes. Digital credit scoring and alternative data have also created new ways for financial institutions to assess customers and extend credit.
Digital adoption has simultaneously helped banks reduce some distribution costs and increase transaction activity.
However, African banks continue to face relatively high operating costs. McKinsey estimates that the industry’s cost-to-assets ratio was 2.6% in 2024, roughly twice the global average of 1.3%.
Banks Improved Cost-to-Income Ratios
African banks nevertheless improved their cost-to-income ratio to about 49% in 2024 and 2025, below the global average of approximately 51.1%. The improvement means banks generated more revenue relative to their operating expenses.
McKinsey cautions, however, that much of the improvement came from stronger revenue growth rather than major reductions in underlying costs. The difference between Africa’s cost-to-assets ratio and the global figure therefore leaves room for further efficiency gains.
Technology, automation and artificial intelligence could become important tools for reducing the cost of serving customers and running banking operations.