SA’s largest banks face rising problem loans as low economic growth takes a toll on consumer income and affects their ability to repay. But Moody’s expects credit risks to remain manageable. In a report released on Monday, the ratings agency said it expected nonperforming loans in the domestic banking system to increase to about 4% by the end of 2017, from 3.2% in June this year. This is expected to affect profitability as banks hike provisions for bad debt. "Sluggish economic growth in SA over the next 12 to 18 months will pose challenges for the country’s four largest banks," said Moody’s vice-president Nondas Nicolaides, who wrote the report. "The subdued South African economy will restrain their lending growth and make it harder for borrowers, especially households, to service their debt repayments," Nicolaides said. The agency found the loan books of the four largest banks were skewed towards residential mortgages, but these would suffer "modest" credit losses because of more p...
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