Standard Bank Group Ltd. and Nedbank Group Ltd. are the largest lenders to mining companies in South Africa, where two months of labor disputes have shut operations, killed more than 40 people and left thousands without jobs.
The two are also the most exposed to the platinum industry, where the strikes began in August, Greg Saffy, RMB Morgan Stanley’s banks analyst, said in an interview yesterday. Standard and Nedbank, in drawn and undrawn loans, committed more than 9.7 billion rand ($1.1 billion) and 6.2 billion rand respectively to platinum mines in the first half, he said.
South African banks last year loaned more than 154 billion rand ($18 billion) to the country’s mines, according to the Pretoria-based central bank’s data. By June this year, according to company reports, Standard advanced 75.5 billion rand to the industry, Nedbank about 19.5 billion, FirstRand Ltd. 16.3 billion and Absa Group Ltd. less than 10 billion rand.
“It’s overly simplistic just to look at the industry exposures and try to conclude who is more at risk as the quality and strength of each counterparty is very different,” Mike Brown, chief executive officer of Nedbank, said in an e-mailed response to questions. “We remain especially vigilant around monitoring all our mining exposures and have not as yet noticed any unusual credit related behavior among our clients.”
Erik Larsen, a spokesman for Standard Bank in Johannesburg, declined to comment.
South Africa’s economic outlook is deteriorating “rapidly,” Reserve Bank Governor Gill Marcus said on Oct. 10. Manufacturing, which makes up 15 percent of the economy, contracted 1 percent in the second quarter as a debt crisis in Europe cuts demand for exports. The central bank lowered its growth estimate for this year to 2.6 percent and Moody’s Investors Service downgraded the nation’s debt last month.
“As you go into economic tough times, the risks increase,” Saffy said. “It’s not just mining. The logistics and construction industries are also under pressure and small and medium enterprises are not having the best of times. A banker’s worst nightmare is when a corporate defaults.”
None of South Africa’s so-called big four banks would comment on whether or not they are increasing their provisions for bad debts amid the mining strikes and the slowing economy.
Standard Bank is South Africa’s largest lender, and Nedbank the fourth-biggest.
Labor unrest in the platinum industry began with a strike at Lonmin Plc on Aug. 10. Protests spread to companies including Gold Fields Ltd., AngloGold Ashanti Ltd., Kumba Iron Ore Ltd. and Anglo American Platinum Ltd., the world’s largest producer of the metal. Amplats, as it’s known, fired 12,000 workers on Oct. 5 and said it had already lost 700 million rand in revenue because of stoppages. So-called junior mining companies such as Aquarius Platinum Ltd. have also had to curb operations.
Standard Bank fell 0.3 percent to 104.76 rand by the close in Johannesburg, while Nedbank rose 1.5 percent to 180.95 rand.