SA bank assets still growing

THE top five local banks were still growing despite grappling with the downturn, Errol Kruger, the registrar of banks in South Africa, said on Thursday.

This was apparent from the figures on the big five banks’ total assets in August, which he released.From a year earlier, Standard Bank’s total assets rose 12,3 per cent to N$814 billion, while Absa added six per cent to N$678 billion. FirstRand swelled 2,2 per cent to N$561 billion and Nedbank rose 3,2 per cent to N$500 billion. Investec’s total assets rose seven per cent to N$182 billion.Absa’s Patrick Wadula said the asset growth in the period was due to loans and advances adding 4,5 per cent.A Johannesburg analyst said asset growth was encouraging, adding that Standard Bank and FirstRand had faster growth outside South Africa, ‘and Absa Capital has been doing well lately outside South Africa’.Ursula Nobrega of Investec attributed the growth in assets to a moderate rise in advances and a strong surge in cash and liquidity.Sam Moss of FirstRand described the group’s asset growth as moderate. This reflected the subdued demand for credit, which was moderately offset by investment in treasury instruments.Erik Larsen of Standard Bank said the bank only commented on numbers at annual and interim results. ‘Or when something material happens,’ he said.The data came after Moody’s Investors Service downgraded the five banks’ financial strength ratings to reflect the effect of crumbling operating and macroeconomic conditions on their financial fundamentals.The downgrade also reflected a slowdown in business growth and more challenging funding conditions.Mardig Haladjian of Moody’s said South Africa had been resilient to the crisis, but weakening macro-economic conditions were putting pressure on the banking’s financial fundamentals and on asset quality and profitability.Last week Moody’s senior bank analyst Constantinos Kypreos said operational conditions were tougher than they used to be.Moody’s said non-performing loans had increased significantly in the past two years and this had hit the profitability of these banks.Leading banks had limited dependence on market and foreign currency funding, but they were dependent on wholesale deposits.But Simon Ridley of Standard Bank said Moody’s might be harsh in its assessment of the sector’s reliance on wholesale deposits. He said: ‘Fierce competition for retail deposits… has resulted in (many) deposits routed to banks via other savings gatherers… Although classified as wholesale deposits, these funds are typically stable sources of funding.’Standard Bank and other local banks had low leverage compared with global benchmarks and had a relatively low loan-to-deposit ratio.Both these measures showed a conservative approach to liquidity and capital management, bolstered by large pools of surplus liquidity. Other banks did not wish to comment on the Moody’s downgrade.- Business Report