SA’s banks have made their rainy-day provisions. Now, they must wait and see whether the funds set aside will be enough to manage a potential torrent of bad debt and ease pressure on their earnings in coming months.
“If you look at recent activity post lockdown, there is an improving trend,” he said. Write-offs in private-equity investments reflect a tough economy “on the ground.” Profit before provisions at Absa “certainly surprised the most and showed management have been on the right path,” while Nedbank reflected a challenging period.
Jan Meintjes, portfolio manager at Denker Capital: The major banks have approached provisioning differently, but none of the methods is wrong, he said. Those that front-loaded provisions more aggressively, such as Absa and FirstRand, are likely to show lower credit costs ahead.