NEDBANK Lesotho extended loan payment relief measures amounting to M477 million to its Lesotho clients to cushion them against the Coronavirus (Covid-19) induced financial crisis.
This was revealed by Nedbank’s Group’s Africa region’s managing executive, Terence Sibiya, in an exclusive interview with the Lesotho Times yesterday.
Dr Sibiya spoke to this publication in the wake of the release of the Nedbank Group’s financial results for the first half of the year.
Nedbank’s Africa region includes countries such as South Africa, Namibia, Eswatini, Mozambique, Zimbabwe, Angola, Kenya and Lesotho.
Dr Sibiya said the Group’s earnings had declined by a massive 69, 2 percent in the first half of 2020 compared to the same period last year due to the effects of the Covid-19 pandemic.
“The first half of 2020 has been particularly difficult primarily because Covid-19 was unexpected and nobody predicated the impact it would have on clients and banks in the regions we operate in,” Dr Sibiya said.
He said the global impact of the Covid-19 financial meltdown is comparable to that of the global financial crisis (GFC) of 2008.
“We have named this crisis the great lockdown crisis but fortunately most banks including the Nedbank group were well capitalised with strong liquidity ratios so the impact has not been as severe on our liquidity and capital as it was during perhaps during the global financial crisis (GFC) of 2008.”
He said they had responded to the Covid-19 induced crisis by providing loan payment relief measures “including debt restructuring and payment holidays for our affected clients”.
He said the support had so far been extended to 375 000 clients with M119 billion worth of loans or 15 percent of the total loan book.
“During the period, the group provided payment relief across the portfolio. The support included M30, 5 billion for clients in corporate and investment banking, M78, 4 billion in retail and business banking.
“In the case of Lesotho, we have processed 163 applications for payment relief, debt restructuring and payment holidays that amounted to M477 million.”
He said the group had shown resilience despite the impact of Covid-19.
“Nedbank experienced a lower return on equity (ROE) as headline earnings declined given the impact on clients of the difficult macroeconomic environment and the Covid-19 crisis.
“While it is disappointing to report large reductions in ROE and headline earnings, we consider this as a resilient outcome in extraordinarily difficult circumstances.
“Impairments increased significantly, driven by the impact of Covid-19 on consumers and businesses and the deteriorating South African macroeconomic environment.”
He said the group had developed strategies to navigate the uncertain future posed by the Covid-19 pandemic.
“In South Africa you will appreciate that the gross domestic product (GDP) is declining at around seven percent and banks are linked to the performance of the economy. Therefore, it is difficult to predict what will happen given the fact that we do not know when the Covid-19 will likely to end.
“However, we have put in place measures to forecast what likely impairments may come our way. So, we have built up capital buffers to that effect.
“We have also managed our credit book and impairments to predict what jobs may be expected in a particular sector and come up with provisions to absorb any impairments that may occur.”
He said they had also responded to the pandemic by encouraging their clients to migrate to their digital platforms instead of using the conventional banking methods which potentially exposed them to the pandemic.
“One thing that has proved extremely useful for our clients during this period is our clients’ migration to digital platforms. Health and safety protocol requirements such as social distancing were met by moving to our digital platforms. A lot of our products are offered through the digital applications so that people do not necessarily have to touch each other. We have packaged our digital offering in a way in that has proven to be a match winner for us,” said Dr Sibiya.