Global banking confidence remains strong amid weak economy – Ernst & Young
… 2013 will remain tough
Global banking confidence is still strong, despite weak economic experiences according to a new survey.
The survey released this week in January 2013 by Ernst & Young indicates that banking confidence remained strong in the fourth quarter of 2012.
Confidence was particularly robust in the retail segment, according to the 44th quarterly survey conducted by the Bureau for Economic Research in Stellenbosch.
“The confidence readings for banks remained strong, despite weaker income and earnings,” said Emilio Pera, lead Financial Services Director at Ernst & Young.
Titled “The Bank Index”, the survey showed that the overall banking confidence was slightly lower than third quarter levels, falling from 85 index points to 84 points currently, marginally below its 2012 peak in the first quarter.
The survey findings observed that retail banks sharply increased tightening of credit and this was “in line with an uptake in credit impairments”.
“The credit policy tightening was confined to the household segment, whilst business banking credit standards remained unchanged,” it added.
Accordingly, both the retail and investment banks reported a net decline in employee numbers. In the case of retail banks, this was the first time since 2011 third quarter that banks reduced overall numbers.
Emilio Pera said “Confidence levels remain strong, despite very weak economic prospects. Local and global uncertainty with weak growth prospects in the Euro zone, and uncertainty in the USA in the run-up to presidential elections, all contributed to very weak economic activity in South Africa in the fourth quarter of 2012.”
On credit tightening, Pera indicated investment banks have had a relatively “benign” credit impairment environment for a while, and this continued into the fourth quarter.
Ernst & Young says banks expect the new year 2013 to “remain tough”, with revenue growth anticipated to slow even more than it did in the fourth quarter in both retail and investment banking.
By Ekow Quandzie