African banks find solace in 12% bond yields as lending dries up
INTERNATIONAL – Measures by some African countries to get money flowing into the real economy aren’t working yet, with banks parking cash in government bonds as the economic slowdown cuts demand for credit.
Lenders have little choice but to invest in government securities as opportunities to deploy unprecedented amounts of liquidity provided by their central banks dry up. Lockdowns aimed at containing the spread of the coronavirus have brought trade to a halt, leaving lenders to focus on helping existing customers with payment holidays or loan restructurings.
“In this kind of environment, where you have weak economic activity and high risk profile, it is very difficult to grow your loan book,” said Omotola Abimbola, an analyst at Chapel Hill Denham in Lagos. “Many banks will want to preserve their capital by taking as little risk as possible and then invest in government securities.”
Source: iol.co.za