Johannesburg - South Africa’s deteriorating economy may lead to an increase in bad loans, according to the administrator of African Bank Investments, the South African lender which plans to restart operations in two months after being nursed back to health since its collapse in August 2014.
“There’s been no unexpected uptick in bad debts, but one is obviously concerned,” Tom Winterboer, African Bank’s administrator, said by phone from Johannesburg on Thursday. The company’s lending practices are now “a lot more conservative,” non-performing loans have improved and the bank is looking at diversifying its clients and its products, all of which may protect it from any large increase in bad debts, he said.
The continent’s most-industrialised economy risks falling into recession this year as plunging commodity prices, weak demand from China and the worst drought in more than a century curbs output and pushes up food prices. At the same time, a 28 percent decline in the rand against the dollar over the past 12 months threatens to fuel inflation, which the central bank has tried to offset by raising interest rates to their highest level since March 2010, further crimping the disposable income of consumers.
African Bank, which in the past targeted low-income earners seeking unsecured loans, is preparing for tougher economic times by aiming for wealthier customers, while considering offering transactional banking in 2017, allowing clients to have their salaries deposited into accounts at the lender. Other Johannesburg-based banks, including FirstRand and Nedbank Group, are looking at ways to cut costs to shore up profit amid an expected rise in bad debts.
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