South Africa’s biggest banks will stay profitable even as global economic growth slows and the European debt crisis worsens, according to Moody’s Investors Service.
“We expect profitability to be sustained, despite subdued credit growth,” the ratings company said in a report published today. In the next 12 to 18 months bad debts should remain stable at about 5.5 percent of gross loans and there shouldn’t be any “major asset quality deterioration,” the ratings company said. The outlook for South Africa’s banking system remains stable, Moody’s said.
While Africa’s largest economy dipped into a recession in the wake of 2008’s global financial crisis, lenders such as Standard Bank Group Ltd. and Barclays Plc’s (BARC) Absa Group Ltd. (ASA), remained profitable. Since then the banks have accumulated capital, tightened lending, targeted growth across Africa and started to compete for clients in South Africa’s low-income market where Capitec Bank Holdings Ltd. (CPI), the country’s fastest- growing bank, has profited.
Among emerging markets “the South African banking system is definitely one of the strongest,” Nondas Nicolaides, a vice president and senior analyst at Moody’s, said in a phone interview from Cyprus today.
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