Strong outlook for SA banks: S&P

29 January 2008

Ratings agency Standard & Poor’s says the outlook for South Africa’s banks is robust, with strong growth and minimal exposure to subprime mortgages likely to support profitability in 2008 and 2009, Business Day reported on Tuesday.

At the same time, S&P cautioned that the country’s banks “also faced growing macro-economic and political risks from rising inflation in an overheating economy and uncertainty over the presidential succession next year,” Business Day said.

S&P noted in its report – “South African Banks Balance Robust Growth With Rising Risks in 2008” – that SA’s banks have enjoyed strong earnings growth over the past five years, thanks to deregulation in the banking sector coupled with national gross domestic product (GDP) growth rates of 5% to 6%.

According to Business Day, S&P predicted that growth in SA’s banking sector would “slow somewhat” in 2008, due to relatively high inflation and interest rates.

However, “with significant infrastructure projects coming on stream, partly in preparation for the 2010 World Cup, we still expect this year to be a positive year for bank revenues,” said S&P credit analyst Jerome Chui.

SAinfo reporter

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