Bank Stocks on JSE Regain Billions Lost When Zuma Fired Nene

  • Index lost almost $10 billion after minister's Dec. 9 removal
  • Outlook for lenders `more positive,' 360ne Asset Management

South Africa’s banks index rose to levels not seen since before President Jacob Zuma unexpectedly fired Finance Minister Nhlanhla Nene in December, causing lenders including FirstRand Ltd. and the local unit of Barclays Plc to plummet by records.

The seven-member FTSE/JSE Africa Banks Index climbed 3.2 percent on Thursday in Johannesburg to its highest closing level since Dec. 4. The biggest gainers were Barclays Africa Group Ltd., which rose 4.3 percent, and Standard Bank Group Ltd., the continent’s largest lender by assets, which jumped 3.8 percent. The rand, which tumbled after Zuma’s move, has rebounded to be 1.1 percent stronger against the dollar this year.

The day after Nene was removed on Dec. 9 and a little-known lawmaker appointed to the post, the banks index crashed by a record 14 percent. That turned into the deepest two-day decline since the end of apartheid in 1994 as more than 150 billion rand ($9.7 billion) was wiped off the value of bank shares. While Zuma backtracked and named Pravin Gordhan finance minister four days after the Nene announcement, bank stocks have taken more than 10 weeks to recover.

“There are quite a few developments in the last two to three weeks that have been positive for South Africa, the rand and for the banks’ funding costs,” Nico Smuts, an analyst at 360ne Asset Management in Johannesburg, which oversees the equivalent of about $650 million, said by phone. “Those have come together to form a much more positive outlook for the banking sector for the year ahead.”

South Africa’s central bank raised its policy rate by one percentage point in the past year to 6.75 percent to curb inflation, which accelerated at the fastest pace in 17 months in January. More rate increases could be in store, Smuts said.

“The Reserve Bank has preemptively hiked rates,” Smuts said. “So on the basis that the rand is coming back quite a bit, that means if we look 6 to 12 months out, there’s a chance that this inflation pressure will ease and that means less pressure on the consumer, probably less pressure on banks’ loan books and overall quite positive for the performance of the banks.”

The rand gained 1.2 percent to 15.2972 per dollar by 4:34 p.m. in Johannesburg, bringing its advance since January 11, when it fell to a record low, to 9.6 percent.

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