S&P: South African banking supported

Standard & Poor's said that strong growth and the absence of exposure to subprime mortgages should continue to support robust profitability and asset quality in the South African banking market through 2008 and into 2009.

Yet, the agency said that banks also face growing macroeconomic and political risks from rising inflation in an overheating economy and from the uncertainty over the presidential succession in 2009.

S&P noted that balancing these opposing forces over the coming months will be the central challenge for the four domestic banks that together hold more than 80% of South Africa's banking assets: Absa Bank Ltd. (Api unsolicited rating), FirstRand Bank Ltd. (foreign currency BBB+/stable/A-2, local currency BBB+/positive/A-2), Nedbank Ltd. (BBBpi unsolicited rating) and Standard Bank of South Africa Ltd. (BBBpi unsolicited rating).

"GDP growth rates of 5%-6% in South Africa over the past five years, as well as deregulation in the banking sector, have contributed to strong earnings growth for the banks," said S&P credit analyst Jerome Chui.

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