South African Banks Maintain Profit as Bad Loans Rise

Net income rose 20 percent to 31.8 billion rand ($4.2 billion) at the end of December from 26.4 billion rand a year earlier, the Pretoria-based banking registrar said today in the South African Reserve Bank's annual report. Bad loans jumped 56 percent to 29.4 billion rand compared with a year earlier.

``Profitability remained favorable during 2007'' even as ``adverse economic developments both in South Africa and internationally had a negative impact,'' the regulator said. ``The impact on consumers could be clearly observed by the sharp increase in non-performing loans and overdue ratios.''

Policymakers, led by Governor Tito Mboweni, have lifted South Africa's key lending rate 10 times since June 2006 to a five-year high of 12 percent to curb inflation. The central bank lifted interest rates four times in 2007 to 11 percent.

Returns on regulatory capital amounted to 18.1 percent at the end of December 2007 compared with 18.3 percent a year earlier. The capital-adequacy ratio for the banking sector was 12.78 percent at the end of December 2007, above the minimum requirement of 10 percent and higher than the 12.29 recorded a year earlier.

South African banks were ``isolated from the turmoil in international markets'' as they had ``no direct exposure to the subprime mortgage market,'' the regulator said. The international franchises of South African banks had limited exposure to subprime assets, it said.