SA’s big banks are facing tough competition

CAPE TOWN – The banks have managed to hold their own in terms of profitability through the last few years of virtually no growth in the South African economy, but it seems as if that trend might have reached the end of the road.

Standard Bank, second-largest bank by market capitalisation, reported flat earnings for the year to December – not a good result given its size, the fact that South Africa’s banks have a reputation for steady earnings growth, and that the banks are considered by many investors to be defensive havens when markets go awry.

The share closed 1.66percent lower at R150.10 on the JSE on Friday, slightly up on the R148.50 that it closed at the previous Friday. However, the price has been drifting steadily lower from R182.43 a year ago.

Standard Bank has been cutting costs as it battles with revenue growth and cost inflation.

It is also struggling to make money from its joint venture with the London-based Industrial and Commercial Bank of China.