THE BOTTOM LINE
Who would bet on banks right now? Well, it’s not a bad shout
The JSE banking index has fallen 6.6% this year, but there are surprisingly strong hopes for a recovery
With a mixed bag so far from Absa and Nedbank, the focus in the SA banking sector has shifted to Standard Bank’s interims on Thursday and FirstRand, which is due to release its annuals soon.
FirstRand would like to improve on its 7% earnings growth at the half stage in December, while Standard wants to continue its good showing last year. It grew headline earnings 14% in 2017.Absa reported flat interims while Nedbank delivered a 27% rise in headline earnings.
The stakes are particularly high for Absa because Nedbank is breathing down its neck in the market cap race. Absa’s market cap is at present about R140bn with Nedbank close behind at R132bn. Absa’s share price is down 12% for the year, while Nedbank has risen 1.1%.
Nedbank’s performance was off a low base, linked to an improved performance from Ecobank. Absa is ramping up its extension of credit after years of subdued numbers, now that the Barclays yoke has finally be lifted. With growth in home loans of 14%, and with vehicle financing rocketing 19%, the future looks bright for Absa, provided there is no increase in bad debts.
Some problems remain for the sector as a whole. The pool of bank customers is not really growing against a background of tepid economic growth and sky-high unemployment.
But local banks are moving in the right direction and there is hope for some recovery in the banking index this year. The index is down 6.6% for the year so far.