South Africa’s banking system remained stable during 2005 and banks in general were sound and continued to benefit from South Africa’s economic health, the bank supervision department of the South African Reserve Bank said in its annual report released on Thursday.
Banks are well capitalised, and the average risk-weighted capital-adequacy ratio for the banking system as a whole was 13,3% at the end of December 2005, it said.
“Growth in the total balance sheet remained strong throughout 2005. By the end of December 2005, the total assets of banks — comprising, amongst other things, money, loans and advances, investment and trading position and non-financial assets — had increased by 12% [measured over a period of twelve months], to a level of R1Â 677,5-billion (December 2004: R1Â 489,4-billion),” it added.
According to the report, mortgage advances showed the strongest growth of the various types of credit. At the end of 2005, the five largest banks (one of which is internationally owned) represented about 89,6% of the total banking sector, whereas small local banks constituted 2,2% of total banking-sector assets, and other international banks constituted 8,6% of the banking sector.
Total non-bank deposits increased by 21,1% over the 12-month period ended 31 December 2005 (December 2004: 20,5%). The composition of non-bank deposits remained largely unchanged during 2005.
“Profitability indicators, however, declined somewhat during 2005. By the end of December 2005, the average return on net qualifying capital and reserves [smoothed] was 14,4%, down from 14,7% in December 2004, whereas the return on assets [smoothed] decreased from 1,2% in December 2004 to 1,1% in December 2005.
The efficiency of the banking sector also started showing signs of a decline during the year under review, weakening from 63,9% in December 2004 to 66,3% in December 2005,” the bank stated.
Throughout 2005, however, South African banks maintained adequate levels of liquidity. In December 2005, banks’ liquid assets amounted to 119,7% of the liquid assets required to be held, compared with a level of 116,8% in December 2004.
“Besides banks experiencing strong asset growth in their core products, gross amounts overdue also improved during 2005, from 1,8% in December 2004 to 1,5% in December 2005. Banks’ provisioning against these non-performing loans was adequate,” the report said. — I-Net Bridge