Absa – the latest of the country’s big retail banks to release information about its payment relief programme – says it is expecting more customers to ask for help.
It launched its payment relief programme on 30 March 2020, as many consumers and businesses struggled to service their debt during the lockdown.
In the first month of the programme, the bank helped more than 376 000 account holders who opted to take the three-month payment relief option offered to them by the bank.
Absa will be providing R5.8 billion in payment relief between April and June for those who have already asked for it, the bulk of which will be going towards home loans. But most people needed relief for unsecured debts like credit cards and personal loans, even though those accounted for a smaller portion of the R5.8 billion.
“What we’ve seen is that right across the spectrum, whether a customer earns R10 000 a month or R100 000; when their cash flow is disrupted, it has an immediate impact because their expenses are in line with what they earn. So, it doesn’t mean that the top end of the market doesn’t feel it as much. It’s been right across,” said Bongiwe Gangeni, deputy CEO of Absa Retail and Business Banking.
She added that it is not only in South Africa where consumers are struggling with their cash flows because of Covid-19. In fact, Absa, which has operations in 12 other African countries, has similar country-specific programmes in other markets.
She said a “sizeable” number of business owners also struggled to cope with the sudden cash flow disruption caused by Covid-19 lockdown, and in most cases they needed more than just the standard three months of financial relief banks are offering.
“Some of them want a more bespoke solution. A lot more of our business banking customers come and say, my circumstances are different. I may want additional lending,” added.
All of the country’s big retail banks announced payment relief programmes in March and Nedbank was the first to share its experience last month, saying that 130 000 customers had approached it to take up the opportunity by 14 April.
Standard Bank also announced last week that it granted instalment relief to nearly 150 000 clients to the value of R1 billion per month.
Gangeni said banks are now in a better position to advance more relief, should more people need it after the SA Reserve Bank (SARB) relaxed liquidity requirements and treatment of non-performing loans caused by Covid-19. She said the easing of regulations by the SARB will help banks remain liquid even in the face of falling collections, but the profitability of banks will ultimately be impacted by this.
“When we release our results, we’ll all get a bit more sense on what the book looks like. But it’s fair to say at this point that there is no question that banks are going to be impacted to varying degrees…But we are not worried at all at this point in time about our levels of liquidity,” she said.
When most banks first announced their repayment relief programmes, South Africa was still only looking at a 21-day lockdown period. With the lockdown now in its fifth week and with no end in sight, Gangeni said banks realise that more consumers and businesses who did not take up the relief opportunity in March or April, may need it now.
Absa was also “reaching the end” of ironing out details of how it will participate in the R200 billion loan guarantee scheme that President Cyril Ramaphosa announced has been established to help small businesses earning less than R300 million in turnover a year, she said. The bank expects to roll out that loan scheme towards the end of this week or next week.