Hands-off policy by govt

GUIDANCE: RESERVE BANK WANTS MORE DATA

➳ Sasfin’s Shapiro says economic fallout from virus a ‘mystery’.

SA’s banking regulator isn’t ready to withdraw its advice that no dividend payouts be made, unlike counterparts in Europe, as a second coronavirus wave stirs uncertainty over the economy’s outlook. While the Bank of England last week offered UK lenders a path to normality and European Central Bank officials prepare to decide this week on possibly allowing capital-flush firms to make payouts, South Africa has taken a more hands-off approach.

“We have had several banks approach us and our response is: ‘please don’t come to us, we aren’t interested in the merits of the case’,” Deputy Governor of the South African Reserve Bank (Sarb) and chief executive of the Prudential Authority Kuben Naidoo said. “It is the board’s choice.”

The banks are divided over which way they’ll go. Investec Group paid an interim dividend with cash received from an asset manager. Absa has ruled out the likelihood, while Standard Bank and FirstRand, the continent’s largest lenders, have surplus capital that could go to shareholders.

“We would like banks to pay dividends and bonuses at some point, but we are not yet sure where we are with the Covid crisis,” Naidoo said. “It is true that the credit loss numbers are coming down.

“We just want a few more data points before we are sure we are out of the woods.”

Profits have nosedived after banks raised provisions to manage doubtful debts and extended relief to customers hit by restrictions to contain the coronavirus.

While the economy emerged from a recession in the third quarter, output is still down from a year ago.

Dividends aren’t the only things on the agenda. The outlook for lenders from Standard Bank to Capitec is more hazy after the health department declared a second wave of coronavirus last week.

Here are the views from some analysts on dividends, the economy, and the virus:

Patrice Rassou, chief investment officer at Ashburton Investments:

► A second Covid phase accompanied by lockdowns would send the already weak economy into a tailspin. ► The Sarb was right to make sure banks conserved capital this year. I would expect dividends only to start being declared in the second half of next year.

David Shapiro, deputy chair at Sasfin Securities:

► The damage from Covid-19 cannot be grasped until we return to normality. That’s the mystery. ► There are still going to be layoffs across the economy. What happens during rough times is people hold on as long as they can. But eventually you have got to let go.

► There’s still a lot we have to negotiate. We don’t have to be in a hurry to call the bottom.

Craig Metherell, equity analyst at Denker Capital:

► As the banking sector’s fortunes are closely linked to that of the overall economy it has been a relatively difficult period for banks to achieve sustained growth.

► Capitec stands out in this regard as they have carved out a niche segment, continue to be innovative and have outperformed peers in terms of overall growth.