Announcements Research

GCR Ratings Expects Interest Rate Cut to Support an Already Resilient Asset Performance

Johannesburg, 19 July 2019 – The South African Reserve Bank (“SARB”) lowered the Repo rate by 25bps on 18 July 2019. While such decrease, albeit moderate, should free up cash for the consumer, it is viewed as positive by GCR Ratings (“GCR”) to the extent that the monies are used towards deleveraging consumers’ debt as opposed to debt-generating consumption.

With a household debt to disposable income ratio oscillating around 75% and a debt service cost to disposable income ratio above 9%, borrowers remain vulnerable to increased expenses and to incurring further debt. It is important to note, however, that the performance of the securitisations rated by GCR across various consumer-related asset classes (in which Equipment lease transactions are included) has remained stable since early 2018. The month-to-month (m.m.) variation in non-performing loans (“NPLs”) in such transactions has been moderate over the period. As expected, such variation is the lowest for Residential Mortgage-Back Securitisations (“RMBS”) (0.02% m.m. increase in NPLs) and the highest for micro loans, although still moderate (0.2% m.m. increase).

Apart from equipment lease and micro loan transactions, GCR does not note a significant change in the m.m variation of NPLs (albeit such variation remains low) since the last increase in interest rates by the SARB in November 2018. With the recent reduction in interest rates, GCR expects the performance of securitisations it rates to be sustained across consumer-related asset classes.

GCR’s Structured Finance rating criteria are available at www.GCRratings.com/criteria. Performance dashboards related to publicly rated transactions are available at www.GCRresearch.com.

ANALYTICAL CONTACTS

Gary Nyoni (011) 784-1771
Surveillance Analyst GaryN@GCRratings.com
   
Yohan Assous (011) 784-1771
Sector Head: Structured Finance Ratings Yohan@GCRratings.com
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