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Standard Bank, the largest in South Africa lender for assets, says wWhile initial indications are that loan collection has improved in the third quarter, relative to the previous quarter, requests for cost reductions have also increased.
Lockdowns continued to ease or lift in the areas it operates in during the third quarter, the bank said in an update on Tuesday (October 20). However, in South Africa, the growth forecast remains unchanged from those provided in August, that is, real GDP is expected to contract 8.5% in 2020 and expand 4.5% in 2021 .
“While real GDP is also expected to contract on average in all the countries in which we operate in sub-Saharan Africa (excluding South Africa), the contraction is expected to be much less severe than in South Africa,” said Standard Bank.
It noted that the group’s earnings attributable to common shareholders for the nine months to September 30, 2020 were 52% lower than the comparative period, while the group’s overall earnings were 39% lower than in the comparative period.
The group’s net asset value has grown 5% so far this year, Standard Bank said.
By September 30, 2020, the South African Personal and Commercial Banking (PBB SA) customer support portfolio had decreased from R107 billion as of June 30, 2020 to R61 billion, it said.
In past due accounts, in which the paid vacation period granted had expired and the relief had not been extended, the average monthly payment rate was> 95% for guaranteed portfolios (mortgages and VAF),> 90% for loans. unsecured wallets (card and personal unsecured) and 100% for business loans.
Of the extended portfolio, where the paid vacation period granted had expired and the relief period had been extended, 83% were insured, the lender said.
Highlighting other positive signs, Standard Bank said attractive house prices and lower interest rates in South Africa supported sales activity and, in turn, mortgage disbursements in the quarter.
Period after period, the growth of unsecured personal and commercial banking portfolios continued to outpace that of guaranteed portfolios.
The significant year-to-date interest rate cuts are a growing drag on margins and net interest income (NII), according to the group. “In South Africa, we do not expect any further interest rate cuts this year, after cumulative cuts of 300 basis points through the end of July 2020. We expect a 25 basis point increase in 2021.”
“Credit trends to date are in line with our expectations,” said the lender. While initial indications are that collection has improved in 3Q20 compared to 2Q20, claims for cost reduction have also increased, he said.
“The latter, combined with broader customer stress, resulted in an increase in delinquent loans and additional impairment charges such as balances transferred from stage 1 or 2 to stage 3.”
Standard Bank said the risk remains that the environment will deteriorate and that the portfolio will perform worse than currently expected; for example, due to new waves of infections, subsequent closures, and new job losses.
“Going forward, the Covid-19 pandemic, along with global economic weakness, elevated uncertainty and depressed sentiment, is expected to negatively impact employment, income and equality globally,” he said.
Read: Standard Bank is increasing some operations
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