South African banking shares have been on a roller-coaster ride since the 2008 global financial crisis. Despite recovering from this upheaval, our banks have faced trials and tribulations second to none. In the face of these challenges, however, their earnings have been remarkably resilient and have created attractive investment opportunities on a number of occasions. The concentrated market positions of our banks have also allowed for the effective repricing of new loans to compensate for the higher capital requirements enforced on banks in the aftermath of the crisis. The search for higher-yielding loans and the effect of the National Credit Act, which allowed for the granting of larger and longer-term unsecured loans, fuelled the growth of unsecured loans. The attractive returns and ability to cross-sell added insurance products initially had a positive effect on banks’ growth, but ultimately led to overindebtedness of consumers and a rise in bad debts. However, this was constrai...
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