Crack open the piggy bank
SA banks’ Covid provisioning has left them cash flush and a good shareholder bet — even if higher interest rates add to the country’s economic blues
18 August 2022 - 05:00
Higher interest rates are a blessing and a slight curse to banks. Or at least, that’s the case under “normal” conditions when a central bank does its bit to cool an overheated economy.
But when interest rates need to be hiked, and the economy is as brittle as SA’s, the curse can easily change from “slight” to “severe”. Fragile balance sheets — both those of consumers and businesses — may cost banks dearly when these customers start to miss payments or close shop. This is where SA banks find themselves: operating in a beaten-down economy with globally induced inflation firing on all cylinders...
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