Johannesburg - Barclays Africa’s loan growth slowed slightly in the third quarter from the first half due to a flat retail lending environment in South Africa.
“Our revenue growth slowed slightly in the third quarter, reflecting low economic growth and regulatory changes,” the group said in its results for the period ended September 30.
Barclays Africa shares dropped 0.74 percent to close at R153.65 on the JSE yesterday.
Ron Klipin, a portfolio manager at Cratos Wealth, said South African banks were finding it very difficult to operate in an environment where there was low gross domestic product (GDP) growth. “There is a lack of appetite to borrow in these circumstances, in addition banks have tightened lending criteria while corporates are sitting with a lot of liquidity and not investing,” he said.
Slashed forecast
Finance Minister Pravin Gordhan in his medium-term budget cut the country’s GDP growth forecast to 0.5 percent this year. Klipin said: “I think Barclays Africa could grow earnings by single digit growth of between 6 percent and 8 percent in this time of slower and low economic growth,” Klipin said.
Barclays Africa, which is separating from its London-based parent Barclays, has seen its net interest margin widening year on year, but it declined slightly from the first half, largely due to the impact of National Credit Act (NCA) lending caps in South Africa.
The act aims to protect consumers from over indebtedness by placing greater responsibility on credit providers to lend money to consumers in a fair and responsible manner. The bank intends to cut back on costs of doing business going forward.
“Overall costs continue to be well managed. Our credit loss ratio improved noticeably from the first half, reflecting the usual seasonality in our retail books in South Africa and a substantial decline in CIB’s (Corporate and Investment Bank’s) charge,” the group said. Revenue growth in the rest of Africa continues to exceed South Africa’s, despite wealth, investment management and insurance experiencing a drag from its operations outside South Africa.
Despite showing a slowing down in loan growth, the bank was encouraged by the CIB loan growth, which remained strong.
Brad Preston, the chief investment officer at Mergence Investment Managers, said the update contained few surprises. “The guidance of return of equity to come down slightly from the 17 percent last year is in line with previous guidance. While revenue growth is slowing it is expected to still exceed cost growth.”
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