FNB’s growing appetite for lower-risk clients boosts loan book

Big-six bank FNB, which adopted a lending approach focused on medium- to low-risk clients following the Covid-19 pandemic, has seen an 8% rise in loan advances made to customers, improving the quality of its loan book.

The lender, which is FirstRand’s largest banking unit, said lending advances grew to R507 billion during the six months to December 2022, compared with R470 billion in the previous period.

Parent FirstRand said on Thursday the group remained discerning in pursuing advances growth, as a result of tough competition in the banking sector and a market marked by higher interest rates.

Despite these factors, the growth in advances that started coming through in the second half of the year to June 2022 continued, said FirstRand.

Speaking to Moneyweb following the release of the results, FNB CEO Jacques Celliers said the bank’s appetite is currently saturated within its lower-risk customers, based on various affordability factors that determine customers’ capacity for credit.

“At the moment our growth orientation is focused on low-risk customers in our client base. We’ve got a medium-risk lens, and then there are clearly some customers that are with us that are high risk, and so we are not in the highest [risk] categories,” he added.

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“We think there is enough growth opportunity in our existing good- and medium-risk base that we don’t need to increase into the high-risk base,” said Celliers.

“In fact, when you go look at some of the market actors, we would argue that many of our competitors are going into the high-risk base that we would not have appetite for at the moment.”

Unsecured lending

Advances in the bank’s retail division rose 7%, much of it helped by residential mortgages seeing growth of 8%. The lender also saw growth in unsecured lending, largely driven by card advances and FNB personal loans that picked up.

This was however offset by the continued contraction of the DirectAxis personal loans book, which decreased 4%, as well as the runoff of the Covid-19 relief book.

“Excluding the relief book and DirectAxis, FNB personal loans grew 10% and card advances also increased 10% … Revolving loans increased 2% as risk appetite for this product was tightened,” the company said.

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Celliers said the expectation is that mortgage writing will come down, given higher interest rates, which has the bank pursuing other types of financing such as that for solar needs, which has seen increased demand on the back of the load shedding crisis.

“We think the need for people to for example reconfigure their factories for the solar they need, and whatever solution they need, or to keep their doors open, that’s typically where we’d like to give financing into,” said Celliers.

This article originally appeared on Moneyweb and was republished with permission.
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