South Africa: Non-Performing Loans to rise in four largest banks

Nov 16, 2016

South Africa’s slow economic growth exposes bank to high default risks.

As South Africa's economy faces sluggish growth, non-performing loans in four big banks will experience a rise in the next 12 to 18 months according to a report published by Moody's Investment Service on 7th of November. Barclays Africa Group, FirstRand, Nedbank and Standard Bank were listed to be affected by this slow growth. According to Nondas Nicolaides, Moody's Vice President and the author of the report, "Sluggish economic growth in South Africa over the next 12 to 18 months will pose challenges for the country's four largest banks." "The subdued South African economy will restrain their lending growth and make it harder for borrowers, especially households, to service their debt repayments," Moody's Vice President, Nondas Nicolaides added. Further to this, from 3.2 percent in June 2016, around 4 per cent increase in the ratios of non-performing loans in the banking sector is expected by the end of 2017 which will diminish profits as it leads to higher provision costs. Amid South Africa's slow economic growth, coupled with high inflation above six per cent and rising interest rates, household income, borrowers' repayment ability and businesses are faced with pressure which will open banks to high default risks.