Abstract
The first case of the Coronavirus disease 2019 (Covid-19) was announced on 31 December 2019 in China (Phuong, 2021). In the early stages of the virus, South Africa had the largest number of reported cases in Africa, followed by Nigeria (Ozili, 2021). The rapid rate of the spread of the Covid-19 virus and numerous Covid-19-related deaths resulted in a sudden suspension of global economic activities, causing a global recession, to a point where countries forced a total lockdown with people having to stay indoors to avoid being infected (Blank, Hanson, Stein & Sunderam, 2020). The aim of this study is to determine the impact of Covid-19 and the Global Financial Crisis (hereafter, the GFC) on bank performance in South Africa. The two objectives that will help achieve this aim are: Objective 1, to determine the impact on bank performance of the lockdown level 5 in 2020 and of the collapse of the Lehman Brothers Holdings Inc. in 2008 that triggered the GFC (these events symbolise Covid-19 and the GFC respectively); Objective 2 is to determine the impact of key events during Covid-19 and the GFC on banks’ share prices.
This study adopts a panel regression and event study approach for the periods 2015 to 2022 and 2006 to 2013 for analysis of Covid-19 and the GFC respectively. The panel regression includes variables such as ROE, NIM, EFF, INFL, PRIME, SIZE, GDPPCAPITA etc. The event studies conducted for 2020 and 2008 identify the key event and the JSE SA Banks Index is analysed for those periods. The key literature in this study outlines that Covid-19 has had a negative impact on bank performance and the economy at large. However, regression results and event study results imply that the effects of Covid-19 and the GFC on bank performance were not significant. Therefore, in the long run, banks in South Africa will continue to weather crises such as Covid-19 and the GFC.
To the best of my knowledge, this is the first academic study that will compare Covid-19 and the GFC’s impact on South African banks parallel to each other.