Business News, page 20

Re­pay­ment pat­terns of home loans re­flect fi­nan­cial pres­sure fac­ing con­sumers

The Star Early Edition - - BUSINESS REPORT -

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

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