Nedbank credit demand recovers
• Consumers seek to take advantage of record low interest rates
Nedbank, SA’s fourthlargest bank by assets, says demand for credit has returned to pre-lockdown levels on pent-up demand and as consumers seek to take advantage of record low interest rates. 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.
SA’s fourth-largest bank by assets says demand for credit has returned to prelockdown levels as consumers seek to take advantage of record low interest rates and pent-up demand flowing from the severe lockdowns imposed earlier in 2020.
Nedbank provided a trading update for the 10 months ending October that stated advances growth 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 prelockdown 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 300-basis-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 of corporate lending, where like its peers Nedbank is seeing stationary loan growth as corporates repay loans taken at the height of the crisis and the bank 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 full-year 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 150185 basis points, or 1.5%-1.85% of its average loan book for the year, amoderate reduction from the 1.94% reported at the interim stage.
By comparison, the group’s bad-debt charge for the first half of 2019 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. Arrears remain 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 on Wednesday. It is 43.5% lower year-todate.