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We take a look at banking sector data released by the South African Reserve Bank which shows that South African banks are really struggling compared to a year ago. And all of this was brought upon by the Covid-19 pandemic that has gripped the country since March 2020. Impaired advances increased by over 40% over the last 12 months, or by over R65 billion when stated in Rand value.
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Profitability of South African Banks for November 2020 compared to a year ago
The image below provides details on South African Banks profitability during November 2020 and November 2019. During November 2019 the banks of South Africa made a profit of R85.6 billion, and a year later in November 2020 banks made a profit of R38.99 billion. So profits of South African Banks declined by -54.4% over the 12 month period.
Return on equity of South African Banks declined from 14.8% in November 2019 to 7.68% during November 2020, a decline in the return on equity of South African Banks of -47.4%.
On the positive side for banks they managed to curb their operating expenses a bit, with it declining from R175.13 billion in November 2019 to R172.33 billion in November 2020. That is a decline of R2.8 billion in banks operating expenses, or stated otherwise, banks operating expenses declined by -1.5% over the course of the last 12 months
Return on equity of South African Banks declined from 14.8% in November 2019 to 7.68% during November 2020, a decline in the return on equity of South African Banks of -47.4%.
On the positive side for banks they managed to curb their operating expenses a bit, with it declining from R175.13 billion in November 2019 to R172.33 billion in November 2020. That is a decline of R2.8 billion in banks operating expenses, or stated otherwise, banks operating expenses declined by -1.5% over the course of the last 12 months
Profitability of South African Banks for November 2020 compared to a year ago
Credit Risk of South African Banks for November 2020 compared to the prior year
The image below shows South African Banks Credit Risk data as published by the South African Reserve Bank. There has been a very sharp increased in impaired advances for South African Banks. During November 2020 impaired advances came in at R229.5 billion compared to R163.6 billion in November 2019. That's an increase of R65.93 billion over the last year, or stated differently impaired advances increased by 40.2% over the last 12 months.
So impaired advances now makes up 5.03% of gross loans and advances, compared to it being 3.79% of total gross loans and advances in November 2019.
So impaired advances now makes up 5.03% of gross loans and advances, compared to it being 3.79% of total gross loans and advances in November 2019.
Credit Risk of South African Banks for November 2020 compared to the prior year
Basically profitability of South African Banks are declining sharply, while at the same time impaired advances (loans not being paid back) has increased by just over 40% over the last 12 months. And the worrying part is that these metrics will probably get a lot worse before it gets better. So banks, bank managers, bank shareholders and regulators should be concerned with the current state of South African Banks