The Johannesburg Stock Exchange. File picture: Siphiwe Sibeko
JOHANNESBURG - Analysts  this week said that  improving business confidence might see corporates and consumers appetite to borrow again this year, boosting banks profitability but that the entrance of new banks this year will rattle the big banks.

Neelash Hansjee, the banking analyst at Old Mutual Equities, said improving confidence in South Africa could provide a significant boost to growth in South Africa and the banks as lending and activity is stimulated. 

“New entrants aim to take market share via cheaper products and better service as they are built on new systems without any legacy drag,” Hansjee said.
The banking sector is set for a major shakeup this year with the expected introduction of at least three new banks; Discovery, Tyme and the South African Post Office are all expected to launch banks this year. 

Michael Jordaan, the former head honcho of FNB, recently launched a new digital-only bank called Bank Zero that is expected to be operation by year-end.  

Hansjee said Bank Zero would be an interesting addition given Jordaan’s banking innovation background.

“Any competitor adopting new technologies and business models should always be taken seriously. Especially as it has no legacy cost base (branch and infrastructure costs). We have to wait and see how many customers they win.”

South Africa's banks have enjoyed a stellar start to the year on the back of a bouyant rand which began late in December in the wake of ANC elections.  
By Friday, FirstRand's share price had strengthened more than 30 percent in the past month, Standard back was 24 percent stronger, while Barclays Africa was up 22 percent in the past month. Nedbank has strengthened 28 percent so far this year and Capitec was up 14 percent and Investec. 

Asief Mohamed, the chief investment officer at Aeon Asset Management, said he expected Discovery Bank to attract clients from other banks and put pressure on profits. 
“Based on past experience investors have very high expectations of Discovery Bank in offering a compelling value prepositions to existing Discovery clients and attract new clients from competitors,” Mohamed said. 

He further said at this stage he did not expect the SA Post Office to be ready to compete effectively with existing banks.

“For Tyme, the value proposition must include a loan product. Capitec has an entrenched position in the segment they focus on. Tyme may struggle to compete and to attract clients if they do not offer a compelling loan product.”

The Banking Association South Africa (Basa) this week warned that the contents of the mooted draft National Credit Amendment Bill would have a direct financial impact. 
The draft Bill permits a person who as at 24 November 2017 earns less than R7500.00 per month and who owes less than R50000 in unsecured debt relating to Credit Agreements to make an application to the National Credit Regulator for debt intervention. 

Cas Coovadia, Basa’s managing director, said the bill would require changes to the banks’ policies to ensure South African Reserve Bank compliance.

“If losses incurred by banks increase significantly because of consumers defaulting on their credit agreements, access to credit could be significantly restricted for poor and or low-income consumers, due to the significantly higher cost of credit,” Coovadia said.