With clients being unable to repay loans, banks are reporting a massive surge in provisions for bad debt, according to a Business Insider report.
The report noted that all the projected bad debts might not materialize.
It said Absa could be among the worst hit during the crisis, with Capitec having the highest level of non-performing loans.
Business Insider said Absa’s home loans’ impairment charge – a provision for potential write-offs – grew by ‘an unbelievable’ 1,090% to R1.750bn in the six months to end-June, while vehicle and asset finance credit impairments rose 289% to R2.129bn. The impairment charge on credit cards and overdrafts jumped by 156% to R5.107bn. Absa gave payment relief on loans to customers representing R217bn, or 22% of total loans.
This contributed to a 93% fall in headline earnings to R559 million, and the bank says it probably won’t pay a dividends this year.
The report noted that Standard Bank last week reported a 44% fall in its headline profit to R7.5 billion, warning that impairment charges for potential bad debts in its personal and business banking division rose to R8.6 billion – 2.3 times more than the charge for the same period in 2019.
Nedbank and FirstRand (which owns FNB) had still to report their detailed results, but both warned of large increases in credit impairments as widespread retrenchments and business bankruptcies wreaked havoc on debt repayments.
Nedbank CEO Mike Brown called on the government to show ‘material progress’ in implementing structural reforms in the upcoming Medium-Term Budget Statement.
The impact of Covid-19, coupled with the lack of progress in implementing structural reforms, had accelerated South Africa’s unsustainable trajectory.
‘Urgent action on growth-enhancing structural reform and reducing policy uncertainty is required to boost confidence, investment and growth and therefore reduce the impact of the crisis on already unacceptably high unemployment levels. It is vital that Medium Term Budget Statement shows material progress on these matters,’ he said.
Business Insider also reported that landlords across the country were struggling to get tenants for their properties, or to collect rent.
It said data from Tenant Profile Network (TPN), the largest credit bureau tracking tenant payment behaviour in the country, showed that more than 11% of rental properties were now vacant. This was a 50% increase in empty properties since the start of the year.
Meanwhile, the Unemployment Insurance Fund (UIF) had to halt payments to workers who lost their income due to the Covid-19 crisis as its systems were investigated by the Auditor General’s office, and steps taken to increase financial controls.
Minister of Employment and Labour Thulas Nxesi told Parliament the payments would be resumed soon.
It was reported that the Temporary Employer/Employee Relief Scheme (TERS) payouts had been hit by fraud, with one group of fraudsters receiving a payment of R5.7 million which was intended for 1 400 workers.
The UIF had also picked up thousands of claims submitted on behalf of dead South Africans, and found that 100 000 fake ID numbers were used in claims.
In South Africa, positive cases grew yesterday by 2 684 to a cumulative total of 615 701 (with 525 242 recoveries). Deaths rose by 194 to 13 502.
The highest tally of cases is in Gauteng (207 610), followed by KwaZulu-Natal (111 096), the Western Cape (104 997) and the Eastern Cape (85 472).