Corporate demand spurs credit growth
June 19, 2007
By Ethel Hazelhurst
Johannesburg - Credit demand from individuals continues to slow, while demand from non-individuals is keeping total credit growth high, according to Nico Kelder, an economist at the Efficient Group.
The discrepancy is striking in the case of mortgage loans.
Total growth in mortgage credit in the 12 months to April was nearly 28 percent to R723 billion. Meanwhile, credit extended to non-individuals, a category that includes companies, some trusts, close corporations and public enterprises, grew 54 percent to R209 billion.
But loans to individuals, off a much larger base, grew less than 20 percent to R514 billion, compared with growth in individual mortgage loans of 33.7 percent in January 2006, Kelder said.
The surge in mortgage finance to non-individuals is partially explained by a R27 billion reclassification by one of the major banks from the individual to the non-individual category in June 2006, which would have distorted growth figures in the year to April.
"We found errors had been made when accounts were opened and conducted a data cleanup to rectify them," said Janneman Smit, consultant to Absa for regulatory reporting.
However, even if the R27 billion is stripped out of the figures, growth in non-individual mortgages, at 34.4 percent, was still far higher than growth in lending to individuals, which "would have amounted to 25.8 percent if the R27 billion was added back in", said Kelder.
The surge was unlikely to be due to an increase in commercial property purchases by the corporate sector, said a banker involved in the commercial property market. He said loans in that market were likely to have grown at between 20 percent and 25 percent.
Some of the growth could be due to companies tapping mortgage finance to expand capacity instead of other types of funding mechanism, according to Mark Sardi, the head of investment banking at Nedbank.
"Mortgage finance would typically be classified as senior debt - in other words it's secured against an asset - which could [be] cheaper than other types of debt," Sardi said.
But he said it was only one of many funding methods available to companies investing in capital expansion, all of which were cheaper than finance available for consumption.
Kelder said firms might have slowed the "increase in their overdraft use but increased the rate at which they accumulate their other loans".
He suggested that "expansion plans of both the private as well as parastatal sector [are] pushing the non-individual mortgage market higher".
Support for the theory that companies are borrowing to increase capacity comes from figures on installment finance. Loans to individuals are up 11 percent. On the other hand, loans to non-individuals are more than 19 percent higher.
Kelder's figures show that the market where individuals are more active is leasing, because "monthly repayments are slightly easier than on installments".
Kelder's analysis highlights the Reserve Bank's monetary policy dilemma.
The central bank has raised it repo rate from 7 percent to 9.5 percent since June last year, to restrain consumer credit and curb inflation.
But the hikes are also penalising corporates and parastatals, which are borrowing to expand production capacity and critical infrastructural projects.
While strong consumer demand boosts inflation - because too much money chases too few goods - increases in capacity moderate inflation by increasing the supply of goods that are available.
|
|
