Confidence in the banking sector on a downward spiral

Zweli Mokgata

Zweli Mokgata

While African banks showed stronger profits than their international counterparts this year, South Africans' confidence in the country's banking sector continues on a downward slide.

The Ernst & Young's banking confidence index for the first quarter dropped to 36 points out of 100, from 50 in the fourth quarter of 2008. The index has been on a continuous plunge since the first quarter of last year when it was at 75 points.

Emilio Pera, pictured, banking director at Ernst & Young, said: "The latest confidence readings in the sector are symptomatic of worsening economic conditions in many sectors of the economy. More retail banks reported contracting profits growth for the period to December, although most investment banks still reported positive bottom-line earnings."

Pera said the situation would not improve as retail and investment banks reported negative profits growth in the first quarter of 2009.

The only bank with positive growth this year was Capitec Bank.

In the rest of Africa, however, the banking has gone largely unaffected.

Nigerian banks, for example, mostly reported very positive earnings with UBA and First Bank growing profits by 17,8 percent and 26 percent, respectively.

Net profit at Kenya Commercial Bank, Kenya's largest bank, was up 41 percent.

The Mauritian bank, MCB, grew after-tax earnings by 36,5 percent, but predicted that the second half of this year would be subdued.