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Moody's: South African banks' outlook goes back to negative

Staff writer |
Moody's lowered its outlook for the South African banking system to negative from stable, citing deteriorating operating conditions over the next 18 months, sending shares across the sector lower.

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Africa's most advanced economy is expected to grow less than 1 percent this year, hobbled by low commodity prices, drought and political ructions that have unnerved investors.

As of 1338 GMT shares in Barclays Africa were down 2.2 percent, Standard Bank had shed 1.08 percent and Investec was 0.5 percent lower.

"The outlook expresses Moody's expectation of how bank creditworthiness will evolve in this system over the next 12 to 18 months," the annual banking system outlook said.

"The challenging economic outlook will strain borrowers' repayment capacity, fuelling increased asset risks."

Moody's earlier this month kept South Africa's sovereign rating on hold at Baa2 with a negative outlook, two notches above junk.

The ratings agency said it expects the banking system's non-performing loan ratio to rise to around 4 percent by the end of 2017 from 3.1 percent in December 2015 due to pressure on corporates and consumers from rising interest rates and inflation.

It also said profitability in the sector could come under strain due to waning demand for credit and lower business opportunities.

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