According to a new EY report, low GDP growth has had a large impact on SA banks' earnings.
Low GDP growth in South Africa in 2017 has significantly impacted South Africa’s bank earnings to the slowest growth rate since the 2009 global financial crisis, says EY’s banking sector analysis report, entitled, ‘How will today’s operational challenges create tomorrow’s opportunities?’ The report provides an analysis of South Africa’s six largest banks and an in-depth analysis of South Africa’s banking sector financials.
Ernest van Rooyen, Financial Services Africa Partner at EY, says:
“As with the previous year, 2017 proved to be challenging for banks, resulting in the weakest earnings growth the sector has seen in five years. This is in line with tepid interest and revenue growth, although support from stronger margins and improved impairment charges helped offset some of the impact. We observed higher efficiency ratio largely as a result of weaker income growth.”
Based on the data available for a 12-month period and in line with respective financial year-end results, EY found that most of the key industry metrics grew in low single-digit territory, as a result of weak credit demand and low consumer and business sentiment. Although growth recovered strongly in the second half of 2017, the weak first half of the year had a strong and visible effect on the banking sector’s overall results.
Despite the slower growth in earnings, however, the banks have remained profitable and well capitalised, demonstrating the robustness of the banking sector.
Pictured: EY's Ajith Haripaul