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In spite of depression woes, S’Africa’s banking system gets stable outlook

Published

6 years ago

September 12, 2018

It may not all be sad for news for South Africa’s economy which has just fallen into depression.

Moody’s has changed its outlook for the country’s banking system from negative to stable, the ratings agency said in a report issued on Tuesday.

In its report, Moody’s said the banks’ creditworthiness would remain resilient over the next 12 to 18 months, although they will face weakening operating conditions.

“Slow economic growth will hold back the banks’ new business and revenues,” the report read.

Economic growth is expected to remain weak given poor consumer spending, volatility in emerging market currencies as well as inflationary pressures. Moody’s recently cut the growth forecast for 2018 from 1.5% to between 0.7%.

Moody’s said SA bank credit risk profiles and problem loans would remain stable until the end of 2019. Capital is also expected to remain strong for the period. Further, funding and liquidity conditions will be stable.

However a challenging operating environment will suppress business opportunities and loan demand, exerting pressure on banks’ loan quality. Loan growth slowed to 2.1% in May 2018, compared to 2.5% in May 2017, according to Moody’s.

“We expect growth to remain subdued in 2018/19 because of weak demand, particularly as growth in mortgage loans has slowed. We also believe that banks have further tightened their lending criteria in response to the weak economy, which will further dampen loan growth by making it harder for borrowers to take on new credit,” Moody’s explained.

The lower loan growth is likely to impact net interest income. Increased costs for staff and digitalisation will also drag down net profitability, the report said.

Overall, earnings will be strained by slower revenue growth and higher operating expenses.

Although profitability has remained resilient, the low economic growth, rising competition from larger banks and fintechs could curb pricing power, and drive down revenue growth.

Moody’s expects return on assets and return on equity to come under pressure in 2018/19.

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Nigeria wants $2.25 billion World Bank loan

Published

2 hours ago

April 23, 2024

Ifeoluwa Dada

Nigeria’s Finance Minister, Wale Edun, has revealed that the country is seeking up to $2.25 billion in World Bank loans and expects the bank’s board to approve the request in June.

The move was announced in a statement following the International Monetary Fund/World Bank spring meetings in Washington, D.C as the country also aims to issue diaspora bonds later this year to attract much-need foreign exchange into the country.

The World Bank loans would include $1.5 billion for development policy and $750 million for program-for-results, the statement said. It also said that the bank would meet in June to decide whether to approve the plan in its entirety.

The multilateral body is yet to comment on the revelation at press time.

Nigeria one of Africa’s biggest oil producers has struggled lately mainly over industrial-scale crude oil theft, and troubles getting foreign currency, which caused its naira currency to drop to all-time lows against the U.S. dollar. It has since recovered, though.

Already, the country is on record levels of debt, high unemployment, and large amounts of money from the central bank. However, Edun has insisted that the government had cut the money it borrowed from the central bank in half.

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Ghana’s finance minister anticipates debt restructuring MoU with lenders

Published

15 hours ago

April 22, 2024

Ifeoluwa Dada

Ghana’s Finance Minister has announced that the country’s two main creditors will send him a draft Memorandum of Understanding (MoU) on a restructuring deal in May, signifying a major progress in the country’s debt reform.

Once the MoU is signed, it will make public the deal that was made in January to restructure $5.4 billion in loans with its official creditors, such as China and France.

The restructuring is a big step toward Ghana getting rid of its debt as it works to get out of the worst economic crisis in a generation. It should also allow the country to get more money from its $3 billion IMF program.

Mohammed Amin Adam said he was sure the International Monetary Fund (IMF) and the World Bank would work together at the Spring Meetings in Washington, D.C. In June, the Monetary Fund’s executive board will agree to review its staff-level deal.

From 2023 to 2028, Ghana’s national debt to gross domestic product level was supposed to go down by 15%. This guess says that the number will have gone down every year for six years, ending at 69.96% in 2028.

Ghana didn’t pay back most of its foreign loans in December 2022 because it became too expensive to do so. But now it needs to work out a deal with private holders of about $13 billion in foreign bonds. It has also changed most of its domestic debt.