Bank stocks reflect client views

IT OUGHT to cheer consumers that their sentiments about their banks — good and bad — feed through clearly in the share prices of these banks on the JSE.

This fact will surprise the sceptics, especially as it runs counter to experience overseas.

A US survey by the American Customer Satisfaction Index this year found that “customer service scores have no relevance to stock market returns”.

As BusinessWeek lamented, “the most-hated companies perform better than their beloved peers”, pointing out that “your contempt really, truly doesn’t matter to these companies, with no influence on the bottom line”.

And yet, in South Africa, it seems this isn’t true. If you compare the winners in the inaugural Bank of the Year survey, the top performers also performed best on the JSE, while the laggards trailed the pack.

Take Capitec, the winner in most categories. Over the past five years, Capitec’s share price rocketed 570% as people shifted bank accounts to the small Stellenbosch-based bank.

On the JSE, FirstRand’s share price vaulted 235% over the past five years, which accords well with the fact that its retail banking arm, First National Bank (FNB), was second to Capitec in the rankings.

FirstRand’s car-finance arm, Wesbank, came in tops for best car-loan product, edging out BMW and Standard Bank.

FNB raced to the lead when it came to best home-loan product, ahead of the upstart SA Home Loans and then Nedbank.

FNB’s success comes despite some customers clearly not liking the bank’s irritating “Steve” adverts, a marketing campaign that one customer described as “the biggest scam story I have ever come across”.

Nedbank, third in our bank of the year rankings, was also the third-best performer on the stock market using a five-year time horizon, as its share price climbed 171%. Fourth was Standard Bank, and its stock climbed 64%, while Absa was last of the mainstream banks, and its share price climbed 43% in that time.

While it might seem that the share-price performance for even the worst of the banks was pretty healthy, it should be remembered that 2008 and 2009 were an awful period for banks as their stocks plunged to new lows when the global credit crisis spread into South Africa.