SA Banks shy of risky sectors: SIM

JOHANNESBURG – South Africa’s big four banks were shying away from lending to manufacturers, retailers, property developers and transport firms as these sectors were currently under strain, a Cape Town-based portfolio manager confirmed yesterday.

Patrice Rassou of Sanlam Investment Management (SIM) told Business Report that these sectors were seen as exposed to risk because of high input costs (manufacturing), high oil prices (transport), a drop in consumers’ discretionary income (small retailers), a slowdown in consumer spending (big retailers) and high interest rates (property developers). “This is not good at all because companies facing the crunch may not get help from the banks that are supposed to be helping out,” Rassou said.Business Report reported this week that Seardel’s local bankers had appeared to issue a “serious indictment” on the clothing and textile firm by refusing to retain its borrowing facilities if it did not raise N$250 million in a rights offer.The new terms were spelt out to shareholders last month after Seardel announced in June that it would launch a N$300 million rights offer.Seardel blamed its predicament on the slowdown in retail trade, cheap imports and higher financing costs.It said lenders felt that Seardel needed more money.Steve Meintjes, a senior analyst at Imara SP Reid, agreed that bankers were now looking at some sectors with a “jaundiced” eye.”They would be careful in certain sectors,” Meintjes said.”Because of the times we are in, when companies approach bankers they would have to come with a clear, convincing case.”Vic van Vuuren, the chief operating officer of Business Unity SA, said there was a feeling that the banks, in their interactions with organised business, were becoming selective in their lending strategies.”This is not good because it may affect the sustainability of some companies, particularly smaller enterprises.It would also prevent other small entrants from entering the world of business,” Van Vuuren said.Sam Moss, the director of investor relations at FirstRand, admitted that there were sectors where the third-biggest local bank might exercise caution.”We may request more collateral when lending or maintain a higher level of surveillance if they are a current customer,” Moss said.”But there are no sectors we would currently not do business with.”We are at this time most comfortable with those sectors exposed to government initiatives, such as construction and other non-cyclical industries.”Sim Tshabalala, the chief executive of Standard Bank South Africa, would not pinpoint any sector but said its lending was informed by country and economic dynamics, along with industry dynamics.”We also look at customer relationship and risk.We also take into account profitability.”Patrick Wadula, the head of media relations at Absa, said Absa Corporate and Business Bank had always had a sector focus to create an in-depth understanding of any industry.”The purpose of the sector focus is not aimed at supporting one sector over another, but to provide a more tailored service and financial offering.”Lending decisions are generally based on the underlying security, risk and ability to service a loan.The underlying criteria would remain the same, despite the sector a business operates in,” he said.Nedbank could not be reached for comment.Business Report”This is not good at all because companies facing the crunch may not get help from the banks that are supposed to be helping out,” Rassou said.Business Report reported this week that Seardel’s local bankers had appeared to issue a “serious indictment” on the clothing and textile firm by refusing to retain its borrowing facilities if it did not raise N$250 million in a rights offer.The new terms were spelt out to shareholders last month after Seardel announced in June that it would launch a N$300 million rights offer.Seardel blamed its predicament on the slowdown in retail trade, cheap imports and higher financing costs.It said lenders felt that Seardel needed more money.Steve Meintjes, a senior analyst at Imara SP Reid, agreed that bankers were now looking at some sectors with a “jaundiced” eye.”They would be careful in certain sectors,” Meintjes said.”Because of the times we are in, when companies approach bankers they would have to come with a clear, convincing case.”Vic van Vuuren, the chief operating officer of Business Unity SA, said there was a feeling that the banks, in their interactions with organised business, were becoming selective in their lending strategies.”This is not good because it may affect the sustainability of some companies, particularly smaller enterprises.It would also prevent other small entrants from entering the world of business,” Van Vuuren said.Sam Moss, the director of investor relations at FirstRand, admitted that there were sectors where the third-biggest local bank might exercise caution.”We may request more collateral when lending or maintain a higher level of surveillance if they are a current customer,” Moss said.”But there are no sectors we would currently not do business with.”We are at this time most comfortable with those sectors exposed to government initiatives, such as construction and other non-cyclical industries.”Sim Tshabalala, the chief executive of Standard Bank South Africa, would not pinpoint any sector but said its lending was informed by country and economic dynamics, along with industry dynamics.”We also look at customer relationship and risk.We also take into account profitability.”Patrick Wadula, the head of media relations at Absa, said Absa Corporate and Business Bank had always had a sector focus to create an in-depth understanding of any industry.”The purpose of the sector focus is not aimed at supporting one sector over another, but to provide a more tailored service and financial offering.”Lending decisions are generally based on the underlying security, risk and ability to service a loan.The underlying criteria would remain the same, despite the sector a business operates in,” he said.Nedbank could not be reached for comment.Business Report

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