Big banks put the brakes on unsecured lending

The cutback follows recent risk assessments by the banks and could be also in response to concern by the government and the National Credit Regulator that too many indebted people were borrowing money.

Credit experts say some people borrowed to repay existing loans they already had‚ particularly with micro-lenders and clothing retailers. Bankers said they were also concerned about the high ratio of household debt to disposable income‚ which exceeded 76%.

NCR data shows unsecured credit's share of capital was R21.95bn for the quarter to end-March - an increase of 31% on the previous corresponding quarter.

Michael Jordaan‚ the CEO of First National Bank‚ said the unsecured loan market was expected to slow down mostly owing to market saturation and tighter bank lending criteria.

Peter Schlebusch‚ the CE for personal and business banking at Standard Bank‚ said the bank was slowing down the issuing of unsecured loans even though it continued to focus on qualifying customers.

"We are watching defaults closely and have definitely tightened our risk appetite in some marginal businesses in unsecured lending. It is sort of fine tuning our risk‚ based on recent and new information‚" Schlebusch said on Monday.

Arrie Rautenbach‚ the head of Absa retail markets‚ said consumer education about bad and good borrowing practices was essential. He said for example customers should be told that financing secured assets with unsecured loans was "not a good practice".

Mike Brown‚ the CEO of Nedbank‚ said the Old Mutual owned group was "in good shape" to deal with any macro-economic challenges in SA‚ which analysts said could include worsening of loan defaults.

Absa's outgoing deputy CEO Louis von Zeuner also said consumer education was key‚ particularly as the spending season approached. "Educating and supporting the customer through tough times becomes more and more important‚" Von Zeuner.