S&P warns about risks to South African banks

May 01, 2016

They could struggle to make profits in the next few years.

South Africa's banks could struggle to make profits as the economy is expected to remain weak for the next few years and credit risks rise, credit ratings agency Standard & Poor's (S&P) said in a new report seen by Reuters.

It said consumers are facing rising interest rates, unemployment of around 25 percent and high debt levels.

"We continue to believe that domestic households pose the most significant source of risk for the banks because of their relatively high leverage and low wealth levels compared with other emerging markets."

In addition, S&P said that lending to corporates is slowing, and will "struggle to reach the average 10 percent growth rates accomplished over the past five years."

The ratings agency sees external and domestic economic factors putting pressure on the credit costs of South African banks into early 2017.ADNFCR-2976-ID-801817705-ADNFCR