You Can Bank on It

SA banks in the news on March 18

There is a saying that goes “you can bank on it,” meaning, to be so sure of something that one can trust. The implication of the saying is that one can trust banks through and through.

However, looking at news from South African banks on March 18, trust in banks is no more a guarantee or unconditionally. There were two news-sources regarding SA banks on March 18: The JSE and the South African Consumer Satisfaction Index (SAcsi) for the country’s retail banks.

Bank stocks on the JSE hammered heavily

The JSE is still staggering amid the impact of Covid-19. At close on Wednesday, March 18, the JSE All Share Index (ALSI) was down by 2 659 points or 6,39% to 38 921 points. This is only two days after a heavy loss on Monday, when the ALSI declined a significant 3 678 points or 8,33%, the sixth biggest one-day crash on record for the JSE ALSI.

The JSE Top 40 decreased by 6,34% or 2 370 points to 35 005 points at close on March 18.

However, the Index for the Bank sector, nosedived by 14,9% on Wednesday, the most on record. The Financials Index decreased by 2 990 points or 11,26% to close at 23 566 points.

One of the reasons for the significant fall in the share prices of SA bank, is a fear of a cash flow crisis, due to the withdrawal of funds on a large scale by foreign investors.

Bloomberg, as reported on March 18, cited the following reasons: “South African bank stocks plunged by the most on record as a battering for the rand stemming from the coronavirus crisis combined with a bleak economic outlook to send the sector tumbling.”

Loss of trust in banks as an investment at present, in share price figures:

  • Capitec tumbled 27,92% or R309.90 and closed at R800 per share. This was the second highest fall in share price on the day and Capitec’s biggest fall since its launch on the JSE in 2002.
  • FirstRand was R6.13 or 14,28% down and closed at R36.80 per share.
  • Standard Bank’s share price decreased by 12,76% or R15.24 and was R104.23 per share at close on March 18.
  • Nedbank dropped by R15.54 or 12,22% per share to close at R111.61. This was Nedbank’s steepest fall since 1997.
  • Absa’s plunge was R10,73% or R11.52 and the share’s closing price was R95.80.

South African Consumer Satisfaction Index (SAcsi) for the country’s retail banks

The SAcsi for Banking (2019) was published on March 18. The index was compiled by Consulta. As stated by Consulta: “The SAcsi for banks is the largest and most comprehensive survey of its kind for the banking sector on a national basis.”

Consulta polled almost 15 000 bank customers on their overall level of satisfaction with six of South Africa’s banks: African Bank, Capitec, FNB, Standard Bank, Absa and Nedbank.

Although three (African Bank, Nedbank and Absa) of the six banks have improved their scores on the Index, the average score for the banking industry declined by 0.6 points (0,76%) from a score of 78.8 to 78.2.

African Bank has dethroned Capitec and is the new leader on the Index. Capitec was for six consecutive years the bank which satisfied customers the most.

The increase of 7.6 points (9,73%) of African Bank is significant and it jumped from 2018’s fourth position to the number one position.

2019 position 2018 position Bank 2018 score 2019 score Move (Points) Move (%)
1 4 African Bank 78.1 85.7 +7.6 +9,73
2 1 Capitec 84.9 84.0 -0.9 -1,06
3 3 Nedbank 79.3 80.2 +0.9 +1,13
4 2 FNB 81.5 79.9 -1.6 -1,96
    Industry average 78.8 78.2 -0.6 -0,76
5 6 Absa 76.3 76.8 +0.5 +0,66
6 5 Standard Bank 77.0 75.3 -1.7 -2,21

 

The average move in points for the six banks is 0.80 points or 1,05%. However, if African Bank is taken out of the equation, the average move in points is a negative of 0.56 points or -0,69%.

Consulta expressed that customer expectations remain extremely high and are likely to keep rising.

“Going forward, banks will need to better understand the nature of these expectations which includes striking a balance between digital convenience, value delivery and human intuition and engagement,” Consulta said.