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Cape Town - Early last month saw a positive shift when ratings agency Moody’s revised the country’s banks from a previous negative to now stable.
Nondas Nicolaides, a vice-president and senior credit officer with Moody’s announced in October that banking has maintained a high level of return on equity, indicating that the sector is using investors funds effectively.
Nicolaides further noted that there is an expected rise in non-performing loans (NPLs) stemming from conquered growth in the economy and higher interest rates.
Independent research and analysis done by the Oxford Business Group (OBG) found that banks continue to strengthen their position through better risk management practices and capital adequacy levels.
Firm foundations
Nedbank CEO Mike Brown, told OBG that the banking sector was well positioned to overcome economic and regulatory headwinds and take advantage of opportunities as they present themselves.
“If you look at coverage levels against NPLs, they are at all-time highs, capital levels in the banks are also at records levels, so banks enter this cycle with loan books in good shape and provisions high,” said Brown.
Although growth in some segments of the economy, such as small and medium-sized enterprises, has been more affected than others, opportunities in the infrastructure and renewable energy sectors persist, which should result in solid growth in banks’ books, said Brown.
Cautious approach
Furthermore OBG found that overall credit levels rose marginally, according to figures released by the National Credit Regulator in late September.
The report’s findings indicate that lenders are taking a more conservative approach towards extending credit, with easing in the growth rate of unsecured loans and a higher rejection rate for credit applications, said OBG.
Upon conclusion the OBG found that although the number of consumers with impaired credit records rose to 10.53m over the quarter, the number of impaired accounts fell by to 21.7m out of a total of 82.2m, marking another step in efforts to bolster risk management.
