05 March 2010
	More to banking costs Ross Jenvey, Johannesburg

I refer to Evan Pickworth's article "Time for progress" (Money & Investing February 26) on SA's bank charges, which ignores the other leg of banks' revenue. Banks generate revenue out of noninterest revenue (of which bank charges are a substantial part) and net interest income (the difference between borrowing and lending rates). To include in the article a comparison of fees paid for similar transactions in Brazil, Malaysia and Thailand ignores the fact that customers' total cost of banking includes the rate at which they borrow money. In SA, the average net interest margin is about 3,5%, while in Brazil, it's 6%-7%. In Thailand (3,4%) and Malaysia (2,7%), margins are lower than in SA, but once you've taken bad debts into account, margins in Thailand are 2,5% and in Malaysia 1,9%. This compares with SA banks around 2,0%, showing that the cost to SA consumers for borrowing is actually low. This analysis doesn't even include the extra cost in SA associated with crime, which costs the banking sector several billion rand each year. Crime would be a similar problem in Brazil, but it would be much cheaper in Southeast Asia, where crime is less prevalent. Comparisons across countries' banking sectors are complicated, so it's far too simplistic to show only what banks charge on a few fees without looking at the whole picture.