SA banks get thumbs-up from Moody’s

30 November 2011

Ratings agency Moody’s has kept the outlook for South Africa’s banking system stable, citing the continuation of benign macroeconomic conditions and solid capital buffers.

“The improved operating conditions in the last two years have had a positive impact on the banking sector’s performance, with almost all rated South African banks registering improved results in 2010 and first half of 2011, owing mainly to lower provisioning costs,” the agency said in a statement this week.

South African banks have largely escaped the crisis experienced by global financial institutions.

“The South African banking sector’s balance sheet is solid, with an overall tier 1 ratio of 12.07% and an equity-to-assets ratio of 7.15% as of June 2011,” said Moody’s.

South African banks also have a sizeable buffer to absorb liquidity pressure as the system’s loans-to-deposits ratio has improved, down to 93% in June 2011 from 100% in March 2008, it said.

The agency expects South Africa’s economy to grow by 3.2% in 2011 and around 3.0% in 2012, compared with 2.9% in 2010 and 1.7% in 2009.

Earlier this month, Moody’s downgraded South Africa’s debt outlook from stable to negative, in the face of what it saw as low growth prospects, strained public finances and rising poverty and unemployment.