Image: Steve Buissinne
South African banks face the steepest earnings slump in half a century — with some posting losses — as measures to curb the coronavirus drag the economy deeper into recession and lead to a surge in bad debts.
Standard Bank Group reported its sole annual-profit decline in 2010 in the wake of the global financial crisis, while FirstRand’s earnings shrank in 2008 and 2009.
The banking industry should remain profitable if credit-loss ratios are in line with the global financial crisis, when earnings fell by around 30%, and banks continued to pay dividends, said Renier de Bruyn, an analyst at Sanlam Private Wealth.
The banking industry should remain profitable if credit-loss ratios are in line with the global financial crisis, when earnings fell by around 30%
With fairly diversified portfolios, banks could be impacted differently, De Bruyn said.
In research spanning South Africa’s five largest full-service banks, which together own 94% of the industry’s loans, stress testing by PwC, even under the worst scenarios, found the industry will remain resilient through the Covid-19 crisis.
