Banks vs Traditional Insurers & Financial Services Providers: Which is the Smarter Investment in South Africa?
- Vuyo Mabandla
- Dec 22, 2025
- 5 min read
By Mzovuyo Mabandla,
Financial Adviser at Liberty, Standard Bank Century City, Cape Town.
A client asked me last week: What's the real difference between putting your money into banks vs companies like Liberty/Sanlam that do insurance and financial services?
It's a good question many everyday South Africans are thinking about, especially with things like the recent interest rate cuts by the South African Reserve Bank (SARB) and a bit more hope after the 2024 elections. In our country, both banks and insurers are big names on the Johannesburg Stock Exchange (JSE), and people often see them as safe ways to grow money. But they work in different ways, have their own risks, and do better or worse depending on what's happening in the economy. This can affect how much your investments grow, whether you're a young worker in Cape Town saving for a house or someone retiring in Johannesburg looking for steady income.
As a registered financial adviser under the Financial Advisory and Intermediary Services (FAIS) Act, I'm here to give clear, fair info to help you decide.
Remember: This is just general info and not advice just for you. Investing has risks, like losing money, and what happened before doesn't mean it'll happen again. You must always talk to a qualified financial adviser to see what fits your own situation, goals, and how much risk you're okay with. Now back to it!!
How They Make Money: Lending vs Protecting and Growing Money
South African banks, like Standard Bank, Absa, Nedbank, FirstRand (which owns FNB), and Capitec, mainly make cash by lending money. They take your deposits and lend it out to others at higher rates, earning from the difference (called net interest margins or NIM) plus fees for things like card payments. For example, when interest rates were high in 2023–2024, banks like Capitec made more because borrowing cost more, helping people get home loans or car finance (SARB, 2025).
On the other hand, insurers and financial services companies like Liberty, Sanlam, and Old Mutual focus on pooling risks, offering insurance, and managing investments over time. They take premiums from customers, invest that money in things like shares, bonds, and property, and pay out when claims come in. This worked well during COVID-19, when insurers helped people with health claims and their investments bounced back as markets improved (Old Mutual, 2021; Liberty Annual Report, 2024).
This matters for someone like a self-employed electrician in Table View: You might like banks for quick access to cash, but insurers for long-term backup if you can't work due to injury.
What Risks Do They Face?
Both are watched closely by regulators, but their problems are different. Here's a simple comparison:
What to Watch | Banks | Insurers (like Liberty) |
Main Risks | People not paying back loans (especially in tough times), changes in interest rates, slow economy | More claims than expected (like from illnesses), ups and downs in investments |
Interest Rates | Higher rates help profits but make loans harder to get; lower rates (like SARB's recent ones) squeeze profits | Higher rates mean better returns on bonds; low rates make it hard to cover long-term promises |
Big System Risks | Higher, like running out of cash fast as seen in some global bank issues | Lower, because they deal with long-term money without quick deadlines |
Rules | Strict rules on keeping enough cash ready (Basel III) | Rules to make sure they have money for claims (Solvency Assessment and Management or SAM) |
For instance, during the 2020 COVID lockdowns, banks in SA had to set aside more money because businesses like spaza shops couldn't pay loans back, hurting their books (PwC Major Banks Analysis, March 2025). Insurers handled it better by paying out billions while staying strong, thanks to spread-out investments (Financial Sector Conduct Authority, 2021).
How They've Been Doing in South Africa (as of December 2025)
Lately, both have shown they can handle tough times. In November 2025, S&P Global Ratings gave South Africa better credit scores ('BB' for foreign money and 'BB+' for local), which helped banks like Absa and FirstRand, and insurers like Liberty and Sanlam, look more solid with less inflation around (S&P Global Ratings, November 2025; Business Day, November 2025).
Profits are growing slowly but surely. Banks saw their main earnings rise by 5.9% in early 2025, thanks to people spending more (PwC Major Banks Analysis, March 2025). Insurers expect premium growth of about 2.6% in 2025, dropping to 1.7% in 2026, as folks want more protection in shaky times (Middle East Insurance Review, November 2025). Overall, the money sector might add 1-2% to our economy's growth in 2025–2026, helped by cheaper loans and okay wage rises (Swiss Re, October 2025; Deloitte, December 2025).
Things are mixing now: Some insurers are starting banks, like Discovery Bank, and banks sell insurance. This gives more choices for everyday people.
Good and Bad Points for Investors
Banks – Good Points:
Regular payouts (dividends) when things are going well.
Tied to SA's economy picking up, like new roads and jobs from the Government of National Unity.
Easy to buy and sell on the JSE.
Banks – Bad Points:
Hit hard by bad times, like load-shedding hurting small businesses.
More rules on holding cash can slow growth.
Insurers – Good Points:
Steady over long time because investments are spread out.
Helps against rising prices through shares.
Strong backups to get through rough patches.
Insurers – Bad Points:
Can drop if stock markets fall.
More claims during disasters, like KZN floods.
Which One Should You Pick?
It's not always one or the other lots of people mix both for a balanced setup. Banks might be for you if you think the economy will bounce back soon, like more loans after elections. Insurers are great if you want growth that lasts and some protection.
Quietly, places like Liberty stand out by giving full services, from protecting your income (like in true stories where clients got over R1 million during health problems) to smart investments like tax-free savings or retirement plans. Being part of Standard Bank since 2022, Liberty makes it easy to mix banking and insurance, helping folks like single moms or office workers plan without hassle.
The Main Point
In SA's changing world, banks push short-term growth in the economy, while insurers help keep and grow wealth over years. Knowing this lets you build investments that fit your life whether raising kids in Soweto or retiring in Durban.
Again, this is just general info given honestly. Markets can shift, and investing has risks.
For advice that's tailored for you, reach out to me, a FAIS-registered financial adviser.
If this gets you thinking about your money, DM me or click here. We can talk about making a plan that works for you.
Mzovuyo Mabandla Financial Adviser Liberty, Standard Bank Century City December 22, 2025
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