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SA banks stable, despite headwinds

Sep 18 2013 16:22 Sapa

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Company Data

FIRSTRAND LIMITED [JSE:FSR]

Last traded 43.35
Change -0.15
% Change 0.00
Cumulative volume 4008806
Market cap 244.40bn

Last Updated: 22/08/2014 at 04:25. Prices are delayed by 15 minutes. Source: McGregor BFA

STANDARD BANK GROUP LIMITED [JSE:SBK]

Last traded 138.20
Change -1.09
% Change -0.01
Cumulative volume 1714287
Market cap 223.64bn

Last Updated: 22/08/2014 at 04:27. Prices are delayed by 15 minutes. Source: McGregor BFA

NEDBANK GROUP LIMITED [JSE:NED]

Last traded 232.70
Change -1.8
% Change -0.01
Cumulative volume 312515
Market cap 119.60bn

Last Updated: 22/08/2014 at 04:27. Prices are delayed by 15 minutes. Source: McGregor BFA

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Johannesburg - The South African banking system remains stable and well-positioned, despite international headwinds, a major professional services firm reported on Wednesday.

"Notwithstanding some international headwinds, the South African banking system has remained stable and the banks are adequately well-capitalised, with solid returns on equity (ROE)," PricewaterhouseCoopers (PwC) said.

"We expect South Africa's banks to continue on a cautious growth path."

The financial results of South Africa's four major banking groups remained positive, in spite of the challenging local and global economic climate.

These, and other findings, were contained in PwC's South Africa Major Banks Analysis: Finding Strength in Adversity, which also looked at common trends and issues shaping the financial industry.

The big four

The report combined the local currency results of Absa, FirstRand [JSE:FSR], Nedbank [JSE:NED], and Standard Bank [JSE:SBK], and observed the outlook for the banking industry and the economy for the six months that ended on June 30, 2013.

It found that combined headline earnings were up 11.5%, at R23.7bn, with an average ROE of 16.1%.

Impairment charges were up 6.7%, total operating income was up nine percent, and operating expenses up 6.6%.

There were differences in the performance of the individual banks.

Core earnings increased 12.4% to R47.6bn in the first half of 2012, and 5% in the second half of the year.

Banking reforms

"Regulatory reform is regarded as the most significant and pressing issue in the banking industry..." PwC Africa banking and capital markets leader Johannes Grosskopf said in a statement.

The report showed growth in earnings was enhanced by an increase in net interest of 11.7% and in non-interest revenue of 6.4%.

"The banks have managed to continue growing their net interest margin amid the stagnating economy, the low interest rate environment, and changes made to the composition of the balance sheet," Grosskopf said.

The banks reported a combined gross loan growth of 7.2% from corporate lending, card lending, overdrafts, instalment credit, and leases.

Housing credit growth continued to be weak as consumers took advantage of low interest rates to repay debt.

Salaries grow

Salaries had grown at a rate of 7.5% on an annual basis.

"Attracting and retaining the right talent remains a priority on the boardroom agenda," Grosskopf said.

"This is even more of a challenge as authorities continue to look for alternatives as to how to regulate rewards in the sector."

He said cost control was an imperative for banks, which wanted to reduce their cost bases by five percent in each of the next two years.

Banks would continue to invest in information technology, and innovation remained a priority for the industry to attract new customers, he said.

Offshore expansion into Africa remained in play, with each bank taking a different approach, said Grosskopf.

"We have seen an increase in reporting on the banks' rest of Africa operations, and it will be interesting to see more information as strategies mature," he said.



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