STANDARD & Poor’s (S&P) said on Wednesday bank revenues in SA could be threatened by slow economic growth, high household debts and unemployment.
Sticky impairments from mostly unsecured loans could also potentially affect profits, said S&P’s South African bank primary credit analyst Matthew Pirnie.
"Revenue growth will be slow in this economy for the next couple of years," he said in a joint interview in Sandton with Bernard de Longevialle, S&P’s head of analytics in Europe, the Middle East and Africa region.
Mr De Longevialle said the return on equity for local banks was much higher than that of their European peers. "Their performance has been one of the most strongest in emerging markets ." Mr de Longevialle said South African banks still had some of the strongest balance sheets in emerging markets. However, they would not escape the contagion of the global economic uncertainty and the eurozone crisis.
The CEOs of the big four banks say revenues continue to grow at a modest pace although there is concern about dampened demand for secured loans, rising costs and a possible worsening of credit impairments. Also, economic uncertainty was affecting the confidence of companies, which have cash balances of more than R540bn.
Mr Pirnie said a sustained economic downturn could force banks to consider "repositioning" and restructuring poorly performing mortgage portfolios, which would affect profits. While restructuring was inevitable it did not solve the "problem of nonperforming loans".
"Unsecured lending is an issue and has been growing quite robustly. But consumer indebtedness has been going up and consumers are affected by joblessness and inflation which is edging its way up," Mr Pirnie said.
S&P also said in a new report the global banking industry was still clouded by uncertainty four years after the collapse of Lehman Brothers. "The global economic recovery remains precarious and the eurozone has fallen back into recession," the report said.
"Banks are still in restructuring mode with some on government and central bank life support, especially those in western Europe," S&P’s report said.