Nedbank credit demand on rise again

SA’s fourth-largest bank by assets says demand for credit has returned to pre-lockdown levels as consumers seek to take advantage of record low interest rates and pent-up demand flowing from the severe lockdowns imposed earlier this year.

Nedbank provided a trading update for the 10 months ending October that stated advances growth had increased 3% at its retail and business banking division from the 1% reported at the interim stage.

The increase is being driven by a recovery in loan application volumes across all its lending products even as the bank tightened its lending criteria.

“Home loans, vehicle finance, personal loan and card applications have now fully recovered to above pre-lockdown levels, in part driven by pent-up demand given the impact of lockdown on home loans and vehicle finance, and in part supported by the 300basis-point reduction in interest rates,” the group said.

Despite more conservative loan extension, the bank has increased market share in the personal loans category up until the end of September.

The same could not be said for corporate lending, where like its peers, Nedbank is seeing stationary loan growth as corporates repay loans taken during the height of the crisis and the bank itself becomes more selective in the credit risk it takes given that some industries have not fully recovered subsequent to reopening.

This means while the decline in net interest income was less than expected, the bank has not altered its fullyear guidance in which it expects net interest income to fall by up to 5%.

Similarly, the bank has not revised its guidance for bad debt expenses for the full year, which are expected to fall within 150-185 basis points, or 1.5%-1.85% of its average loan book for the year, a moderate decline from the 1.94% reported at the interim stage.

By comparison, the group’s bad debt charge for the first half of last year came in at 0.71%.

Nedbank ’ s relatively large exposure to commercial property lending appears to be holding up well, aided by the fact that underlying rental collections from its listed clients rose to 94% in October.

The level of arrears remains low — just R40m on the loan book itself.

In terms of Nedbank’s R79bn relief portfolio, which provided instalment relief to its retail customers, R9bn is in arrears.

Some clients have requested additional relief as at the end of October, with the large majority having come to the end of the relief period and resumed payments.

Nedbank ’ s share price fell 0.58% to R120.90 per share on Wednesday, and is 43.5% lower year-to-date.