The South African banking sector has been given a positive forecast for 2008 in Moody's Investors Service's Banking System Outlook report.
The report compliments ‘the big four’ - Standard Bank, Absa, FirstRand and Nedbank - saying the banks have significant scale, well-focused strategies, are well organised and technologically advanced with services and products more akin to those found in developed rather than developing markets.
"We consider South African banks able to preserve their current financial fundamentals, and do not expect any dramatic changes in the competitive environment,“ says Constantinos Kypreos Senior Analyst and author of the report.
Moody’s, an independent provider of financial research and information, also noted the strong financial performance of the major banks as well as their earning power, asset quality, capitalisation and good risk management systems and procedures.
These positive factors are somewhat offset however by rising interest rates, liquidity and funding issues and high credit concentrations, says the report.
"South African banks also face a number of challenges, including a rising interest-rate environment, high credit concentrations and related-party exposures," cautions Mr Kypreos.
Moody's expects that a robust performance in the corporate and investment banking sectors could mitigate the negative impact on retail/consumer lending of hikes in interest rates over the past 18 months totalling 400 basis points and full implementation of the National Credit Act in June 2007.
Moody's also noted that some of the strengths underpinning the 'big four' are present in the smaller banks, specifically African Bank and Capitec Bank.
For more information about the report visit Moody's.
Steuart has done some 500 talks on South Africa's progress since 1994 and SA's prospects for the future' 
