SA bank shares have been among the favoured stock picks of local fund managers for much of the past year, but many argue that local lenders still offer good investment value, despite a rapidly darkening global and local economic backdrop.
With local interest rates tracking global borrowing costs higher, SA bank stocks are expected to benefit as the endowment effect induced by tighter monetary policy enables them to earn higher revenues from their loan books. However, the question is whether banks can continue to grow earnings — both from interest income and other sources — faster than their costs in an environment where rising food prices are stoking inflation-driven growth fears...
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