South Africa’s banks look set for a boost in revenues as the ongoing economic recovery allows the central bank to start raising interest rates again. The South African Reserve Bank raised its benchmark repo rate by 25 basis points in March to 4.25 percent, the third straight rate hike, due to increased inflation risks. Standard and Poor’s (S&P) noted in late February that Nedbank Group, one of the country’s biggest lenders, had forecast a 1.5-billion rand ($93 million) increase in net interest income should a 100-basis-point rate hike be implemented. Other banks have posted similar projections. “Lenders benefit from higher interest rates because they can quickly raise costs for borrowers while being slower to boost rates for savers,” S&P noted.
On May 8, Zimbabwe’s president, Emmerson Mnangagwa, issued an order to the country’s banking sector to cease all lending to the private sector and government departments. Thanks mainly to a weakening currency, Zimbabwe’s inflation has begun rising prodigiously once more this year, with annual prices for April increasing by 96 percent, up from the 61 percent recorded at the beginning of the year. As such, the ban on lending has been authorised to “minimise creation of broad money that is prone to abuse for purposes of manipulating the exchange rate for financial gains, and to allow current investigations”, the president confirmed. There have been widespread reports of companies borrowing large amounts of Zimbabwean dollars that have been used to purchase and then sell US dollars when the exchange rates have depreciated.
According to the chief executives of Nigeria’s biggest lenders, there has been an exodus of top tech talent from the banking sector in recent times, with the industry facing mounting competition for skilled labour from tech start-ups. A meeting between bank chief executive officers and staff from the central bank was held in mid-April, during which the topic was discussed. “So many of our very experienced talents, especially in the area of software engineering, are either leaving the industry or leaving the country,” Abubakar Suleiman, chief executive officer of Sterling Bank Plc, said after the meeting. Suleiman described the exodus as a “great resignation”.
Tech start-ups have been able to attract increasing quantities of funding from global investors and, as such, have improved their terms of employment for prospective talent. Indeed, a hefty $5 billion was raised in 2021 by Africa-focused start-ups, with the bulk of those funds going to companies specialising in digital and mobile payments and lending.
Moody’s upgraded its outlook for the Omani banking system to “stable” from “negative” on the back of a marked improvement in the banks’ operating environment. The ratings agency expects loan growth in Oman to accelerate as the economy recovers, and strengthening business and consumer confidence increases demand for credit. Moody’s also predicts that Oman’s banking profitability will remain steady, and lenders will be able to maintain solid capital buffers. “Deposit growth will continue to lag loan demand, keeping funding flows relatively tight,” Moody’s added. “Overreliance on government deposits remains a key risk for the banks. They have ample liquid resources, however, which are adequate to cover their market funding exposure.”
Fitch Ratings, meanwhile, revised its outlooks for eight Saudi banks from “stable” to “positive” and affirmed their Long-Term Foreign and Local-Currency issuer default ratings (IDRs) at “BBB+”. The banks—Riyad Bank, Saudi British Bank (SABB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Saudi Investment Bank (SAIB), Bank AlJazira (BAJ) and Gulf International Bank-Saudi Arabia (GIB SA)—have been deemed to be well supported by the Saudi Arabian authorities’ strong ability and willingness to assist domestic banks irrespective of size, franchise, funding structure and level of government ownership. The high contagion risk among domestic banks is an added incentive for the state to support any Saudi bank in need to maintain market confidence and stability.
At almost the same time, however, Fitch downgraded seven Qatari banks’ IDRs and removed them from Rating Watch Negative (RWN). “The rating action reflects the Qatari banking sector’s increased reliance on external funding and recent rapid asset growth, which Fitch believes has weakened the sovereign’s ability to provide support to the system, in case of need,” the ratings agency noted. “Fitch does not believe the current higher oil prices will substantially benefit these metrics over the rating horizon.”
Egypt’s net foreign assets (NFAs), which represent banking-system assets owed by non-residents net of liabilities, declined by 169.7 billion Egyptian pounds ($9.17 billion) in March, according to the central bank, the sharpest decline since the coronavirus crisis broke out in February 2020. NFAs dropped sharply to -221.3 billion pounds at the end of March from -51.69 billion pounds a month earlier, the sixth month of declines from the +186.3 billion pounds recorded at the end of September. In response to the rapid outflow of foreign currency, in part triggered by an investor exodus following Russia’s invasion of Ukraine, the Central Bank of Egypt decided to devalue the pound by 14 percent on March 21, which also contributed to March’s significant NFA decline.
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