S.Africa's big banks say up to a fifth of borrowers may not qualify for relief during virus

by Reuters
Monday, 30 March 2020 11:19 GMT

JOHANNESBURG, March 30 (Reuters) - South Africa's biggest retail banks say that around 15-20% of their lending books do not definitely qualify for coronavirus relief measures announced by the banks last week, though more could be done if the government were to provide fiscal support.

Banks contacted by Reuters on Monday said customers who would not qualify were those whose loans were already impaired prior to the outbreak. Others who had fallen behind on payments, for instance, may be able to access support, but this was not guaranteed.

The sector announced industry-wide parameters for support last week, saying it will, on a case-by-case basis, help customers that were in good standing and up to date on their payments prior to the virus outbreak, with options including payment deferral, debt restructuring or bridging loans.

Lenders subsequently faced some criticism for not doing more to help customers in trouble after the introduction of a 21-day lockdown late last Thursday brought the bulk of Africa's most industrialised economy to a shuddering halt.

Jacques Celliers, CEO of FNB, a division of lender FirstRand and the largest retail bank in South Africa, said around 70-80% of its lending book would definitely qualify under the current relief measures.

"We're going to have to spend more time with our authorities to see what capacity the fiscus (government coffers) could have to help us support more customers," he told Reuters, adding the current measures covered what the bank could afford by itself.

Nedbank said around 80% of its book would definitely qualify. For Standard Bank, that figure was slightly higher, with around 5% of its book - those in the most serious impairment category - definitely not qualifying, Funeka Montjane, CEO of personal and business banking South Africa, said.

Absa said 85% would qualify with no exceptions, while 8% did not qualify whatsoever.

Celliers and Montjane said this would already prove costly for the lenders.

The borrowers affected by the decision are those businesses and consumers already in some degree of trouble, and most likely to be pushed over the edge by the impact of the outbreak.

Many across the country were already facing difficulty after the economy slipped into recession in the final quarter of 2019 following years of lacklustre growth. Impairments jumped across the big four lenders last year.

In other countries facing lockdown, like Italy or the United Kingdom, customers' mortgages have been guaranteed by the government or large cash injections have been announced. But South Africa's cash-strapped government does not have the resources to prop up the economy in this way.

Cas Coovadia, managing director of the Banking Association of South Africa, said last week the sector shouldn't go further without action from the government, because it could not jeopardise its own credibility.

(Reporting by Emma Rumney; Editing by Susan Fenton)

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