Connect with us

Markets

Gloom Gripping South African Economy Spilling Over Into Banks

Published

on

chinese
  • Gloom Gripping South African Economy Spilling Over Into Banks

Barclays Africa Group Ltd. just delivered further proof that South Africa’s economy won’t be climbing out of the doldrums anytime soon.

The Johannesburg-based lender kicked off the earnings reporting season for South Africa’s banks with a decline in total first-half income, the first interim contraction since Maria Ramos took over as chief executive officer in 2009. The stock dropped on Friday, leading declines on the six-member FTSE/JSE Africa Banks Index and extending its losses this year to 14 percent.

The strain of South Africa’s economic contraction also showed in the 10 percent decrease in earnings excluding one-time items at the bank’s main South African consumer unit in the six months through June as lending at its mortgage and credit card businesses shrank. Income from fees on transactions and commissions and deposits dropped 14 percent, while costs increased faster than revenue.

“We expect the economic environment to remain challenging,” Ramos said in an emailed statement. The company also sketched a bleak outlook for the rest of year across its businesses in 12 African countries, predicting “low- to middle-single digit loan growth,” a decline in its net-interest margin, slower revenue growth and higher costs.

South Africa slumped into a recession in the first quarter after all but two industries shrank amid continued political wrangling and policy uncertainty. Barclays Africa’s South African banking operations account for 74 percent of normalized earnings before one-time items.

The country’s foreign-currency debt was downgraded to junk in April after President Jacob Zuma fired his respected finance minister and replaced him with someone who has no financial experience. Unemployment is also at a 14-year high as the governing African National Congress prepares to pick a new party president at the end of the year.

“Key risks facing South Africa in the second half include heightened political and policy uncertainty in the run up to the ruling party’s December elective conference, the potential for the country’s sovereign credit rating to be downgraded further, and for weak business and consumer confidence to lead to a longer, more protracted recession,” Barclays Africa said.

Its Johannesburg-based peer, Nedbank Group Ltd., reports first-half earnings on Monday.

‘Slightly Negative’

“The main risk to our view on Nedbank and on South African banks in general remains the political and economic situation in South Africa,” Henry Hall, a banks analyst at HSBC Holdings Plc in Johannesburg, said in a note on Friday. The lender, controlled by London-based Old Mutual Plc, will report 2 percent growth in earnings per share before one-time items, Hall said.

A 25 basis-point reduction in interest rates last week will also be “slightly negative” for South African banks, Harry Botha, an analyst at Avior Capital Markets, said in a note. Barclays Africa hedges most of its short-term interest rate exposure so it’s probably in the best position followed by Standard Bank Group Ltd., he said.

A 27 percent improvement in impairments following credit losses from two large corporate clients the previous year and 19 percent growth in profit from its African businesses helped boost earnings. The lender reported a 7 percent increase in normalized EPS excluding one-time items to 9.18 rand, beating the 8.80 rand median estimate of four analysts.

“For the remainder of the year, Barclays Africa will place priority focus on its retail and business bank performance in South Africa and on driving opportunities in its businesses outside of South Africa,” the lender said.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Crude Oil

Nigeria Pumps 236.2 Million Barrels in First Half of 2024

Published

on

markets energies crude oil

Nigeria pumped 236.2 million barrels of crude oil in the first half of 2024, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This figure represents an increase from the 219.5 million barrels produced during the same period in 2023.

In January, Nigeria produced 44.2 million barrels of crude oil while February saw a slight dip to 38.3 million barrels, with March following closely at 38.1 million barrels.

April and May production stood at 38.4 million barrels and 38.8 million barrels, respectively. June’s output remained consistent at 38.3 million barrels, demonstrating a stable production trend.

Despite the overall increase compared to 2023, the 2024 production figures still fall short of the 302.42 million barrels produced in the same period in 2020.

This ongoing fluctuation underscores the challenges facing Nigeria’s oil sector, which has experienced varying production levels over recent years.

On a daily basis, Nigeria’s crude oil production showed some variability. In January, the average daily production peaked at 1.43 million barrels per day (mbpd), the highest within the six-month period.

February’s production dropped to 1.32 mbpd, with a further decrease to 1.23 mbpd in March. April saw a modest increase to 1.28 mbpd, which then fell again to 1.25 mbpd in May. June ended on a positive note with a slight rise to 1.28 mbpd.

The fluctuations in daily production rates have prompted government and industry leaders to address underlying issues.

Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), has highlighted the detrimental effects of oil theft and vandalism on Nigeria’s production capabilities.

Kyari emphasized that addressing these security challenges is critical to boosting production and attracting investment.

Kyari also noted recent efforts to combat illegal activities, including the removal of over 5,800 illegal connections from pipelines and dismantling more than 6,000 illegal refineries.

He expressed confidence that these measures, combined with ongoing policy reforms, would support Nigeria’s goal of increasing daily production to two million barrels.

The Nigerian government remains focused on stabilizing and enhancing oil production. With recent efforts showing promising results, there is cautious optimism that Nigeria will achieve its production targets.

Continue Reading

Crude Oil

Oil Prices Steady Amid Mixed Signals on Crude Demand

Published

on

Crude oil

Oil prices remained stable on Thursday as investors navigated conflicting signals regarding crude demand.

Brent crude oil, against which Nigerian oil is priced, settled at $85.11 a barrel, edging up by 3 cents, while U.S. West Texas Intermediate (WTI) crude dipped by 3 cents to $82.82 a barrel.

The stability comes as the U.S. economy shows signs of slowing, with unemployment benefit applications rising more than expected.

Initial claims increased by 20,000 to a seasonally adjusted 243,000 for the week ending July 1, prompting speculation that the Federal Reserve might cut interest rates sooner than anticipated. Lower rates could boost spending on oil, creating a bullish outlook for demand.

Fed officials suggested that improved inflation and a balanced labor market might lead to rate cuts, possibly by September.

“Healthy expectations of a Fed rate cut in the not-so-distant future will limit downside,” noted Tamas Varga of oil broker PVM.

However, rising jobless claims signal potential economic easing, which could dampen crude demand.

John Kilduff of Again Capital highlighted the impact of a slowing economy on oil consumption despite a significant drop in U.S. crude inventories last week.

Global factors also weighed on the market. China’s economic policies remain steady, though details are sparse, affecting investor sentiment in the world’s largest crude importer.

Meanwhile, the European Central Bank maintained interest rates, citing persistent inflation.

An upcoming OPEC+ meeting in August is expected to assess market conditions without altering output policy, according to sources. This meeting will serve as a “pulse check” for market health.

Overall, oil prices are caught between economic concerns and hopes of a rate cut, maintaining a delicate balance.

Continue Reading

Crude Oil

Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

Published

on

Crude Oil - Investors King

Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending