How long will bank shares shine?
Earnings and revenue are likely to be constrained among the big six in 2017, but analysts say higher dividends will remain intact
Bank earnings will remain under pressure in 2017 following constrained loan growth in 2016 and the absence of other significant revenue drivers, but analysts say the shares have further to run and that dividends will remain elevated. Amid a struggling economy, the big four banks plus Capitec and Investec grew total combined advances just 4.1% in 2016 to R3.6-trillion. This was the weakest loan growth in five years, according to EY. Lending in the rest of Africa declined nearly 11%, while in SA retail lending was constrained. As a result, headline earnings growth in 2016 among SA’s six largest banks was at its weakest since 2009, EY said. Earnings growth in 2017 was likely to remain in the low single digits, said Renier de Bruyn, investment analyst at Sanlam Private Wealth. Advances growth would remain depressed in 2017, as demand for credit among consumers and companies waned, said Harry Botha, an analyst at Avior Capital Markets. Higher interest rates in 2016 boosted banks’ net int...
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