Ratings agency Moody’s said yesterday it was maintaining its stable outlook on SA’s banking system, but it was concerned about nonperforming loans. Although loan repayments have improved, there is a risk that if interest rates rise the number of nonperforming loans could increase. "We maintain our stable outlook on South African banks because of (their) resilience and the fact that they performed well in 2011," Nondas Nicolaides, Moody’s senior analyst, said at a briefing in Johannesburg yesterday. "The economic slowdown has not (affected) South African banks to a great degree. The banking system is in good shape.... It’s mainly driven by the strong capital position and good financial performance." In early 2010, nonperforming loans were about 6% of total loans in SA, but this improved last year to 4,7%. Total loans in SA are about R2,5-trillion and nonperforming loans are close to R120bn. "Nonperforming loans are on the high side in SA relative to other emerging markets. From a ratings perspective, further improvement would be a credit positive," Mr Nicolaides said. A more acceptable nonperforming loan ratio would be in the range of 2%-3%.

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