CAPE TOWN: FirstRand Ltd., South Africa’s biggest bank by market value, said lending may slow if the country boosts borrowing costs as traders expect.
“In the event that interest rates are increased, together with low business and consumer confidence, lending volumes will come under pressure,” Sam Moss, head of investor relations at the Johannesburg-based bank, said in an e-mailed response to questions.
The rand’s slump to a record low has prompted traders to price in at least a 25 basis-point rate increase at each of the next two South African Reserve Bank policy meetings. The currency weakened to as low 14.0682 against the dollar before trimming losses on Monday as commodity prices retreated and concerns that economic growth is slowing in China increased.
Nedbank Group Ltd., the South African lender controlled by Old Mutual Plc, said on Monday market prices may continue to fall until a U.S. Federal Reserve rate increase prompts investors to review their outlook. Following a U.S. interest rate increase, there could be a reassessment of the risks in both emerging and developed markets, with some investors being attracted by lower prices in developing nations, Nedbank said.
“Markets are reacting to a number of significant risks in the world, including over-indebtedness, structural imbalances between emerging markets versus developed markets, geopolitics, the financial stability of Europe and more,” Moss said. “We continue to run our business on a ‘core’ economic view rather than a ‘stress’ economic view, and focus on protecting the balance sheet from unexpected events or shocks.”
