‘We've certainly seen strong cost management with ... the combined cost-to-income ratio’: Francois Prinsloo – PwC.
SIMON BROWN: I’m chatting now with Francois Prinsloo, PwC Africa’s Banking and Capital Markets leader. Francois, I appreciate the early morning time. The major banks’ numbers are all out. All in all, in the report that PwC put out last week the line that really I think stands out is the ‘underlying strength of South Africa’s major banks’. Our banks are strong and the results certainly indicate that strength within their structures and systems and profitability.
SIMON BROWN: You mentioned costs. One number that stood out to me, and to preface this I remember a conversation I had with Jaco Marais probably 13 years ago around cost to income, and he said with the new Basel rules and the like post the great financial crisis, he’s like low 50 percents are probably off the table. But in a high-inflation environment, their cost-to-income’s down, averaging 52.2%. That to me was perhaps one of the standouts in a tough year and in an inflationary year.
SIMON BROWN: Absolutely. And of course the tough part has been impairments. That is sort of at the upper end of through-the-cycle levels, 102 basis points – not unexpected. And truthfully, again, considering the inflation, considering the pressure on consumers, interest rates, they are managing it incredibly well.
I think the last point just around credit is probably around the sovereign risk. We’ve seen in certain African territories – in the likes of Ghana and Zambia and Malawi – increased sovereign risk with the result that credit risks increase across those portfolios.
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