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‘Robust profitability’ for SA banks in 2018, says S&P

But high household leverage an on-going concern.

S&P Global Ratings outlook for South African banks remains stable, with robust profitability and sound capitalisation expected in 2018. However, concerns over high household leverage and strained affordability remain. 

“We still believe that domestic households pose the greatest source of risk for South African banks, because of their relatively high leverage and low wealth levels compared with those of other emerging markets,” the ratings agency said.

There has, however, been an improvement in leverage and affordability by households, S&P said in a note comparing local banks to their Brics and emerging market peers.

Source: S&P Global Ratings

Credit losses are expected to be stable with the top-tier banks expected to register losses of between 0.7% and 1%. Low-tier banks and unsecured consumer lenders are expected to register marginally higher credit losses.   

While the ratings agency notes an improvement in household position, it has expressed concern about corporates. “We see possible deterioration in the quality of corporate loan books due to the rising leverage for the past five to ten years (averaging around 10% per year) and weaker profitability.”

It expects the South African economy to grow by 1% this year and by 1.7% in 2019. While such forecasts are weak it expects renewed business and household confidence, brought about by an improved political environment and investor sentiment, to provide some upside. “We believe the cycle is currently at the bottom, but the speed at which growth returns will depend on policy shifts and building of confidence.”

S&P notes that investor sentiment is being driven, largely, by expectations that new president Cyril Ramaphosa will reduce corruption and executive mismanagement, which it termed the “root cause of the country’s dramatically weak growth”.

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The banks have not (OR HAVE) figured out that with more and more electronic banking and internet banking occurring, there will be a plethora of retrenchments. That should (but won’t) reduce our costs at the bank. Remember when they said that the reason for high interest rates on credit cards is because of all the fraud???? Now with pin technology (supposedly much more secure) have the interest rates come down. Hell no!!!!!!!!!!

Want to know why Brazil doesn’t have such high debt ratio? Here it is!

Your medical is taken care of
Your employers must pay to your pension
Many employers actually give you an allowance for groceries
There are government run banks which allow for easier and better credit

These things count and in SA we don’t get squat compared to other nations for our taxes!

Not surprising. Absa cold called me the other day with hard sell to upgrade my package to all inclusive Premium banking for a set monthly amount of R169.
Unfortunately the salesperson was telling big fat lies and it turned out to not be all inclusive – in fact the whole package cost almost double what I was paying for pretty much the same thing. The service is still abysmal. ABSA you suck!

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