{"id":416032,"date":"2017-09-08T05:29:22","date_gmt":"2017-09-08T05:29:22","guid":{"rendered":"https:\/\/ghana-mma.com\/2017\/09\/08\/south-african-banks-are-reining-in-loans\/"},"modified":"2017-09-08T05:29:22","modified_gmt":"2017-09-08T05:29:22","slug":"south-african-banks-are-reining-in-loans","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2017\/09\/08\/south-african-banks-are-reining-in-loans\/","title":{"rendered":"South African banks are reining in loans"},"content":{"rendered":"

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South Africa\u2019s four biggest banks, pummeled by political wrangling and enmeshed in the country\u2019s economic malaise, are increasingly shying away from their main role: lending.<\/p>\n

\u201cCredit extension is going to be low for the next two to three years, unless we see some real recovery in economic growth,\u201d FirstRand Ltd. Chief Executive Officer Johan Burger said by phone from Johannesburg on Thursday. \u201cSouth Africa\u2019s growth prospects remain weak and uncertain.\u201d<\/p>\n

Banks are reining in lending as President Jacob Zuma\u2019s administration struggles to reignite growth in the continent\u2019s most industrialized economy and cut unemployment, which has reached a 14-year high. Business confidence is at its lowest level since 1985 in the wake of efforts to diminish the central bank\u2019s independence, eight failed opposition attempts to unseat Zuma and confusion over new mining rules.<\/p>\n

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FirstRand, the continent\u2019s largest lender by market value, on Thursday reported net interest income growth of 7 percent for the 12 months through June compared with an increase of 18 percent in fiscal 2016. Standard Bank Group Ltd., Barclays Africa Group Ltd. and Nedbank Group Ltd. all published first-half results in August that showed a similar pattern. While earnings are still increasing, helped by cost-containment and lower impairments, it\u2019s getting tougher to keep the momentum going.<\/p>\n

Increases in revenue will be muted over the next 12 months as lending slows, said Adrian Cloete, banks analyst at PSG Wealth in Cape Town.\u00a0While the lenders aren\u2019t expected to slump into losses, earnings growth will be \u201cat a lower rate than the last few years,\u201d as improvements made in bad debts turn into a \u201cheadwind,\u201d meaning costs will have to be reduced, he said.<\/p>\n

FirstRand doesn\u2019t expect to see improvements in impairment levels and is focusing on expanding smaller parts of its business like insurance and investment management to diversify earnings, the CEO said. \u201cWhen you don\u2019t have a lot of top line growth, cost management becomes critical.\u201d<\/p>\n

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A 25 basis-point interest rate cut by South Africa\u2019s central bank in July won\u2019t be enough to kick start a big improvement in lending, Burger said. That month, policy makers reduced the benchmark rate for the first time in five years, projecting the economy will expand 0.5 percent in 2017.<\/p>\n

S&P Global Ratings and Fitch Ratings Ltd. cut the nation\u2019s foreign-currency credit rating to junk in April after the president fired his respected finance minister and replaced him with someone with no financial experience.\u00a0A succession battle within the ruling party over who will succeed Zuma as president of the African National Congress in December has also spurred infighting and hindered the delivery of government services.<\/p>\n

It\u2019s only a matter of time before local-currency debt is slashed to junk, according to Adrian Saville, chief executive officer of Cannon Asset Managers in Johannesburg, which will further burden the banks as their cost of funding rises.<\/p>\n

To counter that FirstRand is going to \u201ctry and pierce the sovereign ceiling\u201d by building access to offshore funding so it doesn\u2019t need to rely on the South African government\u2019s credit rating, Burger said. For confidence and growth to return, the country needs ethical leadership, policy certainty, and careful fiscal management, while issues such as the skills shortage, improving education and making it easy to do business also need to be addressed, he said.<\/p>\n<\/div>\n

\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\u0642\u0627\u0644\u0628 \u0648\u0631\u062f\u067e\u0631\u0633<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa\u2019s four biggest banks, pummeled by political wrangling and enmeshed in the country\u2019s economic malaise, are increasingly shying away from their main role: lending. \u201cCredit extension is going to be low for the next two to three years, unless we see some real recovery in economic growth,\u201d FirstRand Ltd. Chief Executive Officer Johan Burger […]<\/p>\n","protected":false},"author":0,"featured_media":416033,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-416032","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business"],"yoast_head":"\nSouth African banks are reining in loans - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2017\/09\/08\/south-african-banks-are-reining-in-loans\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"South African banks are reining in loans - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"South Africa\u2019s four biggest banks, pummeled by political wrangling and enmeshed in the country\u2019s economic malaise, are increasingly shying away from their main role: lending. \u201cCredit extension is going to be low for the next two to three years, unless we see some real recovery in economic growth,\u201d FirstRand Ltd. 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