The ratings are based on the following key factors:

The accorded ratings reflect the bank’s established domestic franchise value, improving asset quality/performance and risk appropriate capital cushioning. These are, however, partially offset by the uncertainties surrounding a stable and continuing global economic recovery- given the impact of a regression on Africa.

Despite its impact being nothing more than theoretical at present, the plethora of regulatory changes currently being debated must be kept in mind. The basic items here include: capitalisation - the proposed changes touch on what can be classified as capital, as well as how much is needed (to be boosted by the addition of a capital conservation, procyclicality and countercyclical buffer); liquidity - details a strong preference for longer-dated funding to increase banks’ short-term resilience (to be monitored by the net stable funding and liquidity coverage ratios); other risk measures - improved monitoring and limitations on leverage, counterparty exposures and provisioning models (new accounting treatments are also being brought in); oversight - several matters have been tabled by the Treasury, although which proposals will stay is still unclear. Naturally, the banking sector’s readiness for all these changes should be tracked/considered for any risk assessments.

Although repayment pressure continued to drag on portfolio performance, the overall position remained sound. Borrowers benefitted from a reduction in market interest rates, which helped combat some of the erosion in disposable income, thereby aiding an improvement in on-time repayment rates and the remedy of instalments that have fallen in arrears. The improved client performance experience is also reflected in the year-end ratios.

Reflecting the challenges of a still recovering environment, as well as the bank’s own conservative strategy, real revenue growth was restricted to only a few income statement lines - albeit, the relatively diversified nature of the bank’s revenue streams, as well as lower impairment costs, has helped to grow bottom line profits.

Click here to read the full report...>>