Nice PR, but are the banks actually helping their customers?
Banks were quick to proffer Covid-19 relief, but for clients to get actual help has proved another matter entirely
The lockdown ordered by President Cyril Ramaphosa to stop the spread of Covid-19 has thrown the country’s largest banks — and millions of their clients — an unprecedented curveball.
SA reported its first case of Covid-19 on March 5; just three weeks later the nation was placed in lockdown.
Anecdotal reports suggest that many small business owners are not receiving the support that banks have been quick and vocal to announce.
After all, the country’s lenders have the backing of the Reserve Bank, which has relaxed capital requirements.
The measures allow banks to roll over loans for affected consumers and businesses without having to post additional capital, a significant step in providing the industry with the space to manoeuvre in what is expected to be a financial calamity.
With this leeway in place, the banks agreed at a high level to offer consumers and businesses the flexibility to reduce or defer repayments for up to three months during the crisis.
But whether relief is getting to clients — hundreds of thousands of small business owners among them — is another matter entirely.
One of them, Mark George, who employs 80 staff across businesses in the legal services, transport, hospitality and construction industries, says applying for relief with the big four banks has been a nightmare.
"We pride ourselves on our impeccable credit record. From the time the lockdown was announced, we started making inquiries about payment holidays and the like. Absa took our details but haven’t come back to us. Standard Bank say they are still reviewing our application. Nedbank said they would provide us with a moratorium where repayments would be added to the end of the term, but we would be placed on what looks like some kind of debt review. WesBank did give us some leeway by allowing us to just pay the interest on our personal vehicles, but not on our revenue-generating trucks," says George.
The group’s main banker, FNB, is also a client of George’s legal services business. He says even when they showed FNB the invoices for money they were owed, the bank appeared unwilling to assist. "We had to threaten them to take our main bank account away before they would reconsider. They have still not come back to us," George says.
Things don’t look much more efficient in the public sector either. George has made applications to the Unemployment Insurance Fund and the government’s SME fund. "Relief is not easily accessible. Everyone says they want to help and assist, but when you go through the motions it seems like it’s very difficult. It has been a real eye-opener."
Clearly, the banks have yet to marshal resources to cope with the demand.
FNB says the response to the measures has been overwhelming.
"According to the bank’s provisional analysis, in the first week after announcing Covid-19 relief measures it was receiving 1,000 requests per hour on its app and FNB.mobi channels from retail and business banking customers," it says.
About 80% of those requests were from individuals inquiring about Covid-19 solutions in relation to home loans, personal loans, overdrafts and credit cards.
Roughly 17% were from business clients inquiring about cash flow relief, alternative funding and resource support.
"Since April 1 [to April 5], our provisional analysis is that approximately 34,000 FNB retail/individual customers who applied last week may qualify for cash flow relief and credit insurance," the bank says.
Like FNB, Nedbank has had high levels of inquiries in respect of debt relief.
Absa says call volumes regarding its retail credit products have increased substantially since the lockdown.
"Call volumes have increased 104% for personal loans, 7% for cards, 335% for home loans and 198% for vehicle finance, with payment relief the top query raised by customers," says Christine Wu, managing executive for customer value management at Absa’s retail and business banking division.
But the official line appears to be a world away from the struggles that business owners like George are experiencing.
Absa, for one, says the "uptake" from commercial clients has not been that substantial yet.
The bank expects requests for payment relief concerning commercial asset finance and mortgage-backed business loans to gain momentum this month and next.
Absa has also shrugged off criticism that its customers have been unable to get through to its call centre agents, though it admits it has reduced the number of people in its contact centres.
"We have continuously been monitoring volumes, and while an increase was experienced over month-end, this was more or less in line with volumes during similar periods," it says.
Bizarrely, Standard Bank says volumes to its call centres have generally been in line with prior periods. But it has seen a sharp increase in the number of users adopting its digital channels, "with new registrations up more than 50% compared to the same period a month ago".
But the desperation is almost palpable, judging by the volumes of applications received by the Oppenheimer and Rupert initiatives.
In the space of two days, the separate schemes received over 20,000 applications for far more than the R2bn they had committed.
So what is officially available to bank clients whose incomes have dried up?
From April 1 to June 30, relief measures apply to clients who have displayed "sound banking behaviour", such as honouring their repayments consistently.
These include no instalments or repayments over the next three months, a preferential interest rate and no initiation fees on any relief granted.
But, interest and fees will continue to accumulate.
Relief, such as it is, has been patchy and seemingly unco-ordinated.
Standard Bank, for example, announced that students would receive a three-month reprieve from any repayments on their student loans, which would include a 0% interest rate over the period.
Similarly, small businesses — those with a turnover of less than R20m per year — were granted three months’ worth of instalment relief between April and June, though fees and interest will continue to accrue.
This was extended to low-income earners, or those earning less than R7,500 a month.
Nedbank’s blanket relief has involved cutting the minimum credit card repayment to 2.5% of the outstanding amount as well as allowing clients with fixed deposits to access up to R200,000 without paying penalties.
Absa has extended cover on its retrenchment benefits to pay the minimum instalment on credit agreements for up to three months if clients don’t earn an income.
Clients seeking relief from FNB will need to describe how the lockdown has impacted cash flows and make arrangements on a bespoke basis.
Fresh out of reporting season, the country’s big four banks all had one thing in common: a sudden uptick in bad debt numbers.
Back then, bank executives were confident that, at the very least, they would be able to contain credit loss ratios to their internal limits.
But that was pre-Covid-19.
No one is making such assertions now.