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Rising oil prices linked to the escalating conflict in the Middle East could lift inflation and complicate the interest rate outlook for South Africa.<\/p>\n
This is the word from First National Bank chief executive Harry Kellan, who spoke to Moneyweb after the lender\u2019s recent annual results announcement.<\/p>\n
Read:
Over R2trn JSE wipeout
Oil soars above $100 as Iran war forces more production cuts
Iran conflict puts the emerging-markets revival to the test<\/p>\n
On Monday morning, Brent crude surged past $100 a barrel after major Middle East producers cut output, pushing prices sharply higher amid the conflict in Iran and the Gulf region.<\/p>\n
Because South Africa is a net importer of oil, a sharp rise in global crude prices pushes up the local fuel price and ripples through the broader economy.<\/p>\n
Kellan says the economic effects of the conflict \u2013 particularly through higher fuel costs \u2013 may take time to filter through to consumers and the banking system.<\/p>\n
Oil, inflation and interest rates<\/p>\n
Higher oil prices, combined with a weaker rand, could eventually push up inflation. The local currency has already come under pressure in recent weeks.<\/p>\n
\u201cOnly weeks ago, the rand traded near R15.90 to the US dollar, but it has since moved closer to the R16.70 level,\u201d Kellan says.<\/p>\n
\u201cHow much of this is expected panic and how much of this is real, you can never say.\u201d<\/p>\n
Fuel price hikes tend to filter through the broader economy, although the link between fuel costs and food inflation is not direct.<\/p>\n
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\u201cThere is a correlation to food, but it\u2019s not one-for-one,\u201d Kellan says.<\/p>\n
Listen\/read: $100 oil risks reigniting food inflation<\/p>\n
Interest rate expectations could also shift if inflation accelerates. South Africa recently adopted a 3% inflation target, a move Kellan says was always expected to involve some adjustment for the economy.<\/p>\n
FNB\u2019s house view was for two more 25-basis-point interest rate cuts, but the global environment has become more uncertain.<\/p>\n
\u201cYou can\u2019t blame the Reserve Bank if they don\u2019t cut at the next MPC [Monetary Policy Committee] meeting.\u201d<\/p>\n
At this stage, however, he believes an interest rate hike remains unlikely unless inflation pressures become entrenched.<\/p>\n
\u201cI don\u2019t think the Reserve Bank will see the current circumstances and inflation as a long-term view. They might just tolerate a little bit of inflation as transient.\u201d<\/p>\n
From a banking perspective, the earliest sign of consumer stress is typically changes in employment, Kellan says.<\/p>\n
\u201cThe first thing is always job losses and job cuts. That\u2019s your leading indicator,\u201d he says.<\/p>\n
Banks often see shifts in payroll activity before official employment data is released.<\/p>\n
\u201cWe haven\u2019t seen anything yet. Actually, we are seeing a slight increase.\u201d<\/p>\n
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Solid growth for FNB<\/p>\n
Against this backdrop, First National Bank (FNB) \u2013 part of FirstRand Limited \u2013 reported solid growth in earnings, lending and customers in its latest results.<\/p>\n
FNB\u2019s normalised earnings increased 8% to R13.12 billion, while profit before tax rose 7% to R18.6 billion.<\/p>\n
Growth was largely driven by the South African business, where profit before tax climbed 10% to R16.9 billion. In the broader Africa, profits dropped from R1.93 billion in 2024 to R1.69 billion in 2025.<\/p>\n
Core lending advances rose 5% to R606.4 billion, while deposits grew 6% to R1.06 trillion.<\/p>\n
Listen\/read: FNB, RMB and WesBank \u2018did what they promised\u2019 \u2013 FirstRand CEO<\/p>\n
Credit quality improved slightly during the period. The credit impairment charge declined marginally to R4.97 billion, while the credit loss ratio improved to 1.65%.<\/p>\n
Non-performing loans decreased to 7.51% of advances from 7.70% previously.<\/p>\n
Read:
FirstRand eyes Ghana, Nigeria growth as lender seeks scale
FNB opens lending taps in growth push at home<\/p>\n
Customer growth was a key driver of performance. FNB\u2019s active customer base increased 4% to 12.6 million, including 10.18 million customers in South Africa and 2.42 million across the rest of Africa.<\/p>\n
#Higher #oil #prices #cloud #interest #rate #path #FNB<\/p>\n","protected":false},"excerpt":{"rendered":"
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