Business News, page 20

Repayment patterns of home loans reflect financial pressure facing consumers

HOME loan repayment patterns of consumers on the R900 billion in outstanding debt on mortgage loans was reflecting the financial strain consumers were experiencing.

Carel Grönum, the managing executive of Absa Home Loans, said yesterday that the percentage of customers who paid more than their required monthly instalment reduced to 16 percent in July this year from 21 percent last year and 33 percent in 2012.

However, Grönum said Absa Home Loans had a three-year plan to expand its lending business “with strong growth aspirations in a responsible manner in selected target markets”.

Grönum said this would be partly achieved by changing its credit risk policy.

He said Absa Home Loans was the the first business unit to approach the bank’s risk committee to request “more credit risk to reduce the overall risk in the book”.

“In the past we predominantly based our credit limits on collateral risk,” he said.

“I asked for more collateral risk or more high loan to value to manage my consumer/customer risk better.”

Grönum said this had resulted in Absa Home Loans reviewing its total scorecards and adjusting its loan to value tables to provide for the higher risk it was now permitted to take on.

He added that the reduction by Barclays shareholding would unlock opportunities for Absa Home Loans to do things differently, increase its local ownership and to foster an ownerbased entrepreneurial culture.

“We may also remove some regulatory cost that will present us with an opportunity to modernise and harmonise our systems.

“We have the opportunity now to determine our destiny and to make our own decisions that is truly to the advantage of our business and our customers,” he said.

Grönum said the dream of the business was to fund homes for 30 000 families this year, adding that its market share of the flow of new business picked up from a low of 15 percent in November to 18 percent.

He said the business made a loss of R1.5bn four years ago, but its operating model had been changed together with the leadership and the business had been derisked.

Grönum said their non-performing loans reduced from R28.8bn in December 2012 to R11bn in June this year.

As a ratio non-performing loans, total loans and advances reduced from 12.45 percent in December 2012 to 4.5 percent in June this year.

“We improved our turnaround time from application to grant from 14 days to below four days with some of our applications granted within hours,” he said.

Grönum said Absa Home Loans’ properties in possession book was reduced from 172 to 92 properties in a year.

“We have a market share on stock of 25 and on-flow our market share is 18 percent.

“We expect the book to decline, but due to aggressive retention strategies and early green sprouts from a change in our credit policy we could counter the decline in our book to only 1.1 percent yearon-year. “Our profit before tax for the half year to June was R1.072bn,” he said. - Roy Cokayne