S & P Global Ratings announced that the outlook for all listed South African banks is stable for the first time since 2013. Indeed, in the first weeks in 2018, the South African banking sector has shown signs of stability, although the domestic economy continues to fight against debt.
This performance can be explained by the financial strength of these institutions, which have found a balance between low economic growth and low investor and household confidence in South Africa.
However, for S & P Global, the country is facing weak economic growth, persistent political uncertainty and problems with state-owned enterprises. A situation that continues to affect the confidence of businesses, retailers and investors in South Africa. This will necessarily have an impact on the banking sector and delay a strong recovery in the markets.
“However, South African banks are likely to withstand these challenges thanks to their strong credit rating relative to that of the sovereign. South African banks have been granting credit slowly and with increasing conservatism, while simultaneously building up provisions for capital losses and loans, thanks to the strong long-term profitability of the sector, “notes the agency.
S & P Global said the fund and liquidity fundamentals appear to be stronger for domestic banks than five years ago, as compliance with the Basel III ratios no longer seems to be a problem.
Note that for the agency, despite the positive signs in the banking sector, concerns are hovering over the gross domestic product of the country. “We continue to anticipate weak economic growth for South Africa, although we expect real GDP growth to be improved at 1% still modest in 2018, versus 0,7% in 2017”.
The rating agency said the country’s services-dominated economy barely rose last year, excluding agriculture and mining. Since 2015, South Africa has not created jobs on a net basis. With an annual population increase of about 1,6% per year, the unemployment rate in South Africa rose to 28% in the second quarter of 2017, up from 25% three years ago.
