Banks will have to put greater focus on collections as consumer pressures continue

Repo rate to remain at 8.25% until May as inflation spikes, dashing hopes of rate cut, with consumers turning to credit for groceries as middle-class South Africans spend 73% of income on debt.

Economists now foresee the first 25 basis points cut to 8.00% only in the second half of the year, on the back of a rise in annual consumer inflation to 5.6% in February, from 5.3% in January and 5.1% in December, as reported by. South Africa’s repo rate is expected to fall to 7.5% in November, loosely translating to three consecutive cuts in meetings from July to the end of the year.

The combined credit loss ratio for the big four banks increased to the top end of their through-the-cycle ranges at 102bps as their combined income statement credit risk charge increased 26.6% from R42.5-billion in the 2022 financial year to R53.8-billion in the 2023 financial year. Total non-performing loans increased 21%, comprising 5.4% of gross loans and advances. A bank’s credit loss ratio measures the amount of credit losses it experiences relative to its total credit exposure.

Source: Loan Digest (loandigest.net)

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