| Nedbank has provided a taste of what investors can expect from SA banks this year. While it's not pleasant, it can't have been entirely unexpected given the environment lenders find themselves in. Its shares initially fell close to 10% after it released a trading update on Friday, warning that half-year earnings would be at least 20% weaker than last year. Bad debts are likely to rise and it has already restructured billions in loans and assisted close to 10% of its clients who have been affected by Covid-19 and the subsequent lockdown. Sasol has also updated investors on the ongoing impact of Covid-19 and the volatile oil price on its earnings. Like Nedbank, its results for the period to end-June will be down by 20% or more from last year. Unlike Nedbank, however, its shares didn't recover most of their losses on Friday. Also today, Tsogo Sun Gaming will report a big decline in earnings after writing down the value of its businesses by about R2 billion and Atlantic Leaf Properties has agreed to a buyout that will release Vukile Property Fund from its investment in the REIT. Finally, in The Week Ahead, Chris Gilmour looks back at some of the factors that shaped the markets last week and lists some of the companies due to release earnings reports this week, including Coronation Fund Managers, Famous Brands, Pepkor and Nampak. I hope you have a good week. Stephen Gunnion Managing Editor, InceConnect
Take a look at the latest Insights and sector reports From Ingham Analytics. Last week there was yet another interest rate cut. The repurchase (repo) rate was reduced by 0.5% to 3.75%. This is another earnings negative for banking stocks. We have repeatedly warned about exposure to the big four banking stocks in several notes and in "Say buddy, can you spare a dime?" we take this further by assessing what we see as rising systemic risk, including a possible sovereign default with implications for banks. On the topic of banks, check out "Poseidon and the other banking gods" which takes inspiration from Greek mythological god Poseidon (and the 1972 movie the Poseidon Adventure) - pointers for the coronavirus tidal wave impact on the global banking system. | 