Standard eyes Africa for car finance

Soundy says despite the tough environment Standard is looking at ways of growing its vehicle and asset finance book.

These include cross-selling opportunities within the bank and using South Africa as a support base for the company's strategy to grow its vehicle and asset finance book into the rest of Africa.

Statistics from the National Association of Automobile Manufacturers of South Africa released at the beginning of the month show new vehicle sales last month grew 10.5% to 57,845 from 52,326 units last year.

The strong growth has seen big vehicle and asset financiers such as Wesbank and Nedbank's Motor Finance Corporation benefiting over the past few years and contributing significantly to their respective banking groups.

However, Soundy believes the momentum is likely to slow next year.

"There is now a conservative view for 2013 compared with 2012. That is largely based on the fact that for the past three years we have seen double-digit growth," Soundy says.

"We think in 2013 we are going to see single-digit growth. Although the economy is expected to grow, it's not going to be in massive numbers. I expect about 6% and, if we are lucky, 8%.

"I don't see the 10% growth that we had in the past," he added.

The Reserve Bank has revised its economic growth forecast downwards to 2.9% next year and 3.6% in 2014. Previously the economy had been forecast to grow at 3.4%.

Soundy says another big factor is that South Africans have become permanently indebted.

The Reserve Bank's September quarterly bulletin notes that household debt to disposable income in South Africa was 76.3% in the second quarter.

However, Soundy says there are factors that could help to drive growth at a lower pace. "On the other side we do see room for growth in vehicle sales. Interest rates are expected to remain at lower levels."

Interest rates are at a 30-year low, with the prime lending rate sitting at 8.5%. "The second issue that is positive is that vehicle-price inflation has remained lower."

Soundy says vehicle price inflation is just more than 2% compared with overall consumer inflation at 5.6% year-on-year last month.

The other positive factor is that new vehicles are coming on stream, which creates financing opportunities.

On Standard Bank's strategy and his own mandate, Soundy says he is expected to create cross-selling opportunities with other departments.

These include liaising with the personal markets division under Sugendhree Reddy and the business banking division under Zweli Manyathi.

The plan is to offer Standard Bank customers comprehensive solutions and vehicle-asset finance has to be part of that comprehensive offering, Soundy says.

Standard Bank has the lowest market share of the big four banks, with the local market dominated by FirstRand's Wesbank, followed by Nedbank's Motor Finance Corporation, and Absa.

In the full-year to end-June, WesBank contributed at least 20%, or R2.6bn, to FirstRand's normalised earnings of R12.7bn. WesBank grew normalised earnings 40% compared with last year.

Of the R1.1bn in headline earnings reported by Nedbank Retail in the six months to end-June, about R592m came from Nedbank's Motor Finance Corporation.

Standard Bank's vehicle-asset finance book is about R53bn. This compares with R47bn earlier in the year. Soundy says the plan for the future is to maintain the growth achieved this year.

"We want to retain the commercial market while, on the other hand, growing the personal markets," he says.

His other role would be to support Leon Barnard, the overall head of vehicle and asset finance in the banking group.

Barnard will be driving the strategy of growing the vehicle-asset finance book in the rest of the continent.

Soundy said there are opportunities in other African countries.

"We have good relationships with businesses in South Africa that have operations in the rest of the continent," he said.

Standard Bank operates in 18 African countries on the continent.

Source: Business Day via I-Net Bridge