South African Banking Sector Indicators — June 2020

1. Balance Sheet Size

The South African Commercial Banks Balance Sheet continued to contract, this time by 10 billion rands, which is better than the 75 billion contraction in April/May. Once again, the contraction direction is consistent with a contraction in Nominal GDP.

The contraction of 0.15% month-on-month is not significant given these corona virus times. The balance sheet size is OKAY. Nothing to worry about yet.

The Central Bank balance sheet also decreased by 22 billion rands whilst the Commercial Banks balance sheet decreased by 10 billion rands. Both these changes do not signify fundamental changes to the economy because the magnitude of change is small.

Both the central bank balance sheet and commercial banks’ balance sheet are well managed and under control, even though the central bank appears to have liquidated 17 billion rands worth of SDRs and foreign currency, possibly to help temporarily finance the corona virus budget.

2. Balance Sheet Structure

The deposit proportion of the balance sheet continues to increase. As we predicted last month, deposits make up 70% of the Commercial Banks balance sheet.

Naturally, without using any sophisticated techniques, we can forecast the trend to continue with July’s deposits making up 71% of the balance sheet.

The nature of the composition changes is tilted towards shorter term deposits. This increases the fragility of the banking sector.

3. Deposit Base

The deposit base is expanding month after month. This can be viewed as in increase in the monetary base. The increases are still modest and there is nothing to worry about as yet.

The deposit base has increased by 500 billion over the past year. This is an increase of just above 10%.

4. Foreign Currency Funding

Foreign currency funding continued to decrease. The decline of 10 billion in June was lower than the decline of 34 billion in May. Declining foreign currency funding is generally reflective of the risk sentiment attached to the country.

However, the declines, as shown below seem to be a normalization after a spike in March/April.

5. Loans and Advances

Loans and advances decreased by a billion rands, which is not that significant. Negative loan portfolio growth indicates tighter lending standards being implemented by banks.

Once again, there is an element of normalization to the original level.

6. Non-Financial Assets

There was a decrease of 3.3 billion rands in total commercial banks non-financial assets, an item we do not normally analyze on a month-to-month basis because it is usually stable.

Non-financial assets are made up of Tangible Assets and Intangible assets. There was a slight change in tangible assets of less a billion rands. The major change was in Intangible assets, which changed by above 2 billion rands.

Without pointing fingers at specific banks, the entire sector had to write-down computer software worth 2 billion. The results on the next set of earnings reports should be way lower than what most analysts would predict. These are the important clues you get from analyzing sectoral data on a month-to-month basis.

Revaluing assets and writing-them-down, especially software, is a very prudent and noble undertaking. The book values of these assets would have been grossly overstated in the first place, thus necessitating these massive revaluations.


SA’s commercial banks are largely safe. There is very little evidence to suggest that there could be serious currency devaluation pressures or inflationary pressures on the horizon emanating from excessive money supply increases. Both the Commercial Banks balance sheet and the Central Bank balance sheet are well managed and under control.

Till next month.




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Ryan Gosha

Ryan Gosha

Financial Analyst, Cloud Accountant, Citizen Data Scientist, FPL Boss