Barclays shifts towards secured lending

KEIKANTSE LESEMELA
Correspondent | Wednesday April 10, 2013 00:00

 

Executives at the country's second biggest bank announced the policy shift when presenting the company's full year 2012 results showing an eight percent increase in impairment charges to P125.7 million. During the same period, the Bank upped its credit risk control framework leading to slim growth of the loan book by three percent to P6.3 billion.

Barclays Finance Director, Lipalesa Makepe, last week told journalists that the shift towards secured lending and the tighter credit policy in retail lending were due to the prevailing tough economic conditions. She said the new move was designed to improve the quality of returns.

'As a result of our experience from the economic pressure and high inflation rate, we want to have security on lending. Although economic conditions will remain challenging, we will continue the momentum on our strategic initiatives which will see us delivering on our commitments to various stakeholders,' she said.

During 2012, Barclays' net interest income grew by a restrained three percent, partly as a result of the move towards secured lending.

'The lower performance on interest income is the result of diversification of our consumer lending portfolio from a predominantly unsecured base to more secured lending on the back of mortgages and personal installment loan in the scheme segment,' executives stated in a results commentary.

Generally, unsecured consumer lending is viewed as a 'high risk, high return' with banks able to charge borrowers higher rates due to the flexible access conditions attached. While Barclays executives did not specify how much of the P6.3 billion loan book is unsecured, the full year results show that retail loans account for 78 percent or P4.9 billion of the total.

In 2012, Barclays earned P835.1 million from retail loans of P4.9 billion, compared to earnings of P88.5 million from loans of P1 billion to the corporate sector. For all commercial banks as at January, unsecured lending accounted for P13.5 billion in January, out of the total consumer loans of P20 billion.

Meanwhile, Barclays' various initiatives to encourage retail savings appear to have borne fruit during the 2012 financial year as deposits rose 12 percent to P3.4 billion.

During the year, the bank revised some of its products and cancelled ATM withdrawal charges while also 'fixing' basics such as technology platforms and refurbishment of the branch network. The bank also continued with its Clearly Barclays initiative which is focused on ensuring that customers pay a fair price for products and services.

'The strategy is meant to encourage ordinary Batswana to save more and reduce the bank's reliance on wholesale deposits, which are expensive and subject to significant margin pressure,' the commentary reads.