ASSESSING BANK QUALITY IN A COMPLICATED COVID-19 ENVIRONMENT

though there are19 locally registered banks doing business in South Africa, the banking sector continues to be dominated by five players, which together hold the majority of all assets in the sector. Any retail investor looking to pick a performer among local banks will almost certainly be weighing up their options from the big five.

The banking sector has been under significant pressure for years, with expectations of economic recovery in SA continually deferred. In the second half of 2019, PwC, in its Major Banks Analysis report, said banks are sensitive to stresses in the domestic economy and the broader global economic context. Lacklustre growth meant heightened credit risk and subdued economic activity across all customer segments, which contributed to earnings pressure, the report said. And that was before Covid-19 and lockdown laid waste to remaining economic activity.

According to the South African Reserve Bank’s (SARB’s) sectortrends report from February, shortly before Covid-19 entered our consciousness, the sector controlled just more than R6tr