Banks across Africa are expected to remain stable in 2016 as resilient earnings, adequate capital levels and deposit-based funding counter rising asset-quality risks, according to Moody’s Investors Service.
“Structural reforms, greater political stability and the longer-term impetus from an emerging middle class will increase the demand for credit,” Constantinos Kypreos, a Moody’s vice president based in Limassol, Cyprus, said in an e-mailed report on Tuesday. African banks’ pretax return on equity is seen at around 21 percent, he said.
While the drop in the price of oil and other commodities has strained economies in Africa, real growth in gross domestic product is still forecast to exceed 4 percent next year, according to Moody’s, making the continent among the world’s fastest-growing regions. Credit risk will also increase, the ratings company said, as rising interest rates and inflation confront consumers in some countries.