Picture: KEVIN SUTHERLAND
Picture: KEVIN SUTHERLAND

FNB expects to provide even more payment relief to distressed customers as it prepares to implement the new loan guarantee scheme.

FNB and WesBank, two businesses in the FirstRand portfolio, announced on Tuesday that they had jointly approved payment breaks on more than 500,000 credit agreements for 150,000 individuals and small businesses affected by Covid-19.

This follows Absa’s announcement on Monday that it had rolled out its debt relief programme to nearly 400,000 struggling consumers and small businesses.

The banks move is a sign of a wave of financial distress gripping consumers during the lockdown, that has resulted in the shut down of some businesses.

“We expect elevated applications for some time still given expected slower ‘opening up’ realities. Many customers took their time to explore options,” says FNB CEO Jacques Celliers.

The payment relief, together with credit insurance assistance, amounts to more than R4.3bn so far.

Absa said on Monday that 376,000 account holders had taken advantage of payment relief the bank offered, amounting  to R5.8bn in cash flow over three months for customers who have been hit by Covid-19.

Absa differed from FNB’s approach in that it allowed customers to “opt in” with most not having to undergo a vetting process.

Celliers said the bank continues to scale up its support for businesses to help them manage the immediate effect of the lockdown and is offering qualifying customers a payment break by paying installments on their behalf for three months.

“As a result, we have structured our assistance at prime interest rates to alleviate the financial burden and give customers the flexibility to repay the facility over flexible terms,” Celliers said.

FNB’s payment breaks are provided to individual customers across the bank’s full, credit product range, the group said, adding that nearly 127,000 individual customers have been offered contracts on overdraft and credit card facilities, with contracts for relief on personal loan repayments at 83,000 and home loans in excess of 33,000.

More relief will be available when the Treasury, the Prudential Authority, and the banks complete the finishing touches to the new loan guarantee scheme.

“The government guarantee is expected to go live in the next few days once all legal arrangements have been put in place. Operationally, [our] teams are ready to start taking applications,” said Celliers.

The initial phase will see R100bn in borrowing made available to the banks to extend specially designated Covid-19 loans to distressed businesses and consumers. The loans will have standard conditions, will charge an interest equivalent to the prime lending rate, and will not initiate repayment instalments for the first six months. They will then be repaid over as long as 60 months thereafter.

The banks will be insured against losses over 6% of the value of a loan through a guarantee provided by the Treasury.

The loan guarantee scheme accounts for R200bn of the R500bn relief package announced by the president last month.

Update: May 6 2020 
This article has been updated with comment and information throughout.

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