Tread carefully, banks told

JOHANNESBURG – South Africa’s banking regulator said on Tuesday the industry is sound and stable and that assets and profits were up but warned banks not to be over-confident about current good fortunes.

“The industry has seen seven out of eight stages of the banking cycle. The vexing question is whether the cycle will be complete to reach stage eight, when overheating of the economy becomes of concern to regulators,” Registrar of Banks Errol Kruger said.He said most of the growth in 2004 advances was on the retail market with mortgages recording the biggest surge at 25,6 per cent to R406,2 billion due to lower interest rates.”That’s where the cycle becomes crucial, we need to guard against people using 20-year bonds to buy assets like cars for instance,” Kruger added.Banks have benefited from South Africa’s lending rates which are at their lowest levels in more than two decades.But banks face margin pressure and the Reserve Bank said interest margins fell by a percentage point between 2002 and 2004 to 3,5 per cent.- Nampa-ReutersThe vexing question is whether the cycle will be complete to reach stage eight, when overheating of the economy becomes of concern to regulators,” Registrar of Banks Errol Kruger said.He said most of the growth in 2004 advances was on the retail market with mortgages recording the biggest surge at 25,6 per cent to R406,2 billion due to lower interest rates.”That’s where the cycle becomes crucial, we need to guard against people using 20-year bonds to buy assets like cars for instance,” Kruger added.Banks have benefited from South Africa’s lending rates which are at their lowest levels in more than two decades.But banks face margin pressure and the Reserve Bank said interest margins fell by a percentage point between 2002 and 2004 to 3,5 per cent.- Nampa-Reuters