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Standard mortgage strategy pays off

19 Aug 2016

Although it saw a 16% rise in credit impairments for the six months to June, Standard Bank has not burnt its fingers on home loans, unlike rivals that reported results recently.

Its strategy to remain in the mortgage-lending market when other banking participants were pulling out in 2011 had paid off, the South African bank's retail and business CEO, Funeka Montjane, said.

"That strategy allowed us to write good-quality business," she said after the release of the group's results on Thursday, 18 August.

Credit impairment charges rose to R5.8bn, from R5bn in the half-year, although these declined 12% in the retail home loans portfolio.

Reserve Bank data shows growth in mortgage lending waned in the 2011 year after the boom years before the 2009 recession. Mortgage advances that comprised 57% of an overall increase in total loans and advances in 2007 plunged to 18% of the overall increase in 2011.

Standard Bank is SA's largest provider of home loans.

Barclays Africa, the secondlargest provider, reported a 77% increase in soured mortgage loans for the half-year period, while Nedbank said total default advances had increased 10% as home loan, vehicle and credit customers failed to pay.

The mix of strategy, prudent mortgage origination and customers managing their money well had contributed to the positive performance in a subdued economic environment.

Credit losses - total bad debts as a percentage of gross loans - in mortgages in the retail and business bank at home and abroad fell to 0.67%, from 0.8% in June 2015.

"Although "¦ Standard Bank's mortgage (credit loss ratios) moved down and peers moved higher, the peers - Nedbank and Barclays - are moving off extremely low levels, and are in fact still materially lower than Standard Bank," said Meyrick Barker, investment analyst at Kagiso Asset Management.

Nedbank's home loans credit losses were 0.19% in June, while Barclays Africa posted 0.44%.

Across the entire Standard Bank group, credit losses rose to 1.05%, from 0.99% - mainly in vehicle and asset finance, card, and corporate loans.

Group CEO Sim Tshabalala said the impairments had risen most noticeably in the rest of Africa businesses and in the corporate segments, with the highest exposure to commodity prices, but had improved domestically and in home loans.

The group's overall credit performance remained commendable in a tough economic environment, Tshabalala said.

Standard Bank reported earnings 5% higher at R10.9bn, with headline earnings of 680c a share. Tshabalala said a better second half was within reach, with mining and manufacturing posting recoveries.

Asked if the group was enjoying the same co-operation in Nigeria, where subsidiary Stanbic IBTC has been unable to release its financial statements due to a standoff with the Financial Reporting Council of Nigeria, Tshabalala said he was confident of a resolution.

He assured shareholders Stanbic was sound and profitable, even as headline earnings in the West Africa region had dropped 23% to R599m due to bad debts.

Source: Business Day

Source: I-Net Bridge

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