The latest credit extension figures released by the National Credit Regulator (NCR) last week shows that banks remain firmly in control (85.35%) of South Africa’s consumer credit market.
From one angle this will be welcomed as good news and dispelling the view that non-banking entities, many of which are deemed to be less scrupulous, have captured a significant South Africa’s credit market. The view that peripheral players are capturing the market has fuelled speculation that the country is flirting with a financial bubble, the kind which brought the US economy to its knees.
Another angle would be, if it has actually been banks and less peripheral players which have driven the explosion of the credit market to levels deemed alarming in certain quarters then we must be worried. This applies more towards the unsecured credit market. But the figures do not seem to support this angle.
The NCR’s Consumer Credit Market Report (CCMR) shows that as at September 2013, the total outstanding consumer credit balances or gross debtors’ book was R1.49 trillion.
The bank’s share of total outstanding consumer credit was R1.27 trillion (85.35%). This is followed by the retailers at R37.71 billion (2.53%) and non-bank vehicle financiers at R53.50 billion (3.58%). Other credit providers primarily made of insurers, non-bank mortgage lenders and securitised debt, shared R127.52 billion or 8.54% of the credit market.
The latter figures were different about three years ago. CCMR figures for the first quarter of 2011 showed bank’s share of the gross debtors’ book was seating at 90.08% and is now at 85.35%. A statistically uneducated eye will see significant movement in the role of banks compared to other financiers.
A further scrutiny of the figures shows that South Africa’s gross debtor’s book continues to be overwhelmingly dominated by mortgage finance which is largely a terrain of the banks. Mortgages debtor’s book increased from R799.41 billion for the quarter ended June 2013 to R809.89 billion for the quarter ended September 2013, an increase of 1.31%. At R809.89 billion the mortgages debtors book makes up about 54% of the country’s gross debtors book. The share of mortgages in the gross debtors’ book was standing around 63.5% in the first quarter of 2011 which means its representation has gone down by 9.5 percentage points or 17.5% since the first quarter of 2011.
The most visible factor is the rise in unsecured credit, whose representation in the gross debtors book stood at 6.68% in the first quarter of 2011 and has risen to about 11.2%. In rand value terms unsecured credit has risen from R80.8 billion in the first quarter of 2011 to R167.41 billion at the end of September 2013. Unsecured credit was quoted at R57 billion in the first quarter of 2010.
The latest figures do show marginal (0.39%) decline in the value of unsecured credit debtor’s book from R168.06 billion for June 2013 to R167.41 billion for September 2013. And the value of unsecured credit granted during the third quarter of 2013 decreased to R20.90 billion from R22.06 billion in the second quarter, a quarter-on-quarter decrease of 5.29%.
Whereas the value of new mortgages granted increased by 14.69% quarter-on-quarter from R30.10 billion to R34.52 billion. The latest CCMR also shows that secured credit, which is dominated by vehicle finance, increased from R37.54 billion for June 2013 to R39.91 billion for September 2013, a quarter-on-quarter increase of 6.32%.
Secured debtor’s book, which is dominated by vehicle finance, increased from R300.93 billion for June 2013 to R311.67 billion for September 2013, a quarter-on-quarter increase of 3.47%. The share of secured debtors book in gross debtors book has increased from 18.69% in the first quarter of 2011 to over 20%.
The CCMR also shows that credit facilities debtor’s book, which consists mainly of credit cards, store cards and bank overdrafts, had a quarter-on-quarter increase of 2.27% from R175.90 billion to R179.90 billion. The percentage of credit facilities debtor’s book in the gross debtors book has moved from 10.9% in the first quarter of 2011 to 11.9%.
In general and as stated by the NCR CEO Nomsa Motshegare the figures indicate a moderate increase in the value of new credit granted. Banks remain in control.