Standard Bank Research Team
Standard Bank
Corporate credit accelerates to 13.6%y/y
Despite base effects, private sector credit extension (PSCE) rose, unexpectedly, to 8.7%y/y in June from 8.3%y/y in May, due to the strength of corporate credit, which accelerated to13.6%y/y in June from 13.0%y/y in May. Household credit growth was flat at 4.3%y/y (fig 1).
Except for instalment sales credit, bills and overdrafts, growth in all other categories of corporate credit improved in June (fig 2). General loans and advances rose to 17.3%y/y.
Total quarterly credit growth slowed marginally from 8.5%y/y in Q1 to 8.4% y/y in Q2, after averaging 7.9%y/y in 2013. Growth in corporate credit averaged 12.3% in Q1 and 13.0% in Q2, while household credit averaged 5.2% in Q1, slowing to 4.4% in Q2 (fig 11). Household credit growth averaged 8.3%y/y in 2013. All categories of household credit slowed on a quarterly basis, except for credit cards, which remained at 15.3%y/y.
Monthly household credit growth levelled out in June after having slowed over the preceding four months. This is due to an improvement in secured credit growth, to 3.8%y/y from 3.6%y/y in May. Household unsecured credit growth slowed to 5.9%y/y in June from 6.7%y/y in May (fig 4).
Household mortgage growth rose marginally to 2.4%y/y in June from 2.2%y/y in May (fig 5). YTD banks have lent R12.1bn worth of mortgages, more than any other category (fig 7).
Household instalment sales credit also improved, to 10.6%y/y in June after slowing to 9.9%y/y in May. This may have been on the back of favourable base effects. We note in figure 6 that a decline in instalment credit growth over the next 12 months would be consistent with the trend observed in motor vehicle sales.
Growth in household overdrafts eased for a third consecutive month to 12.2%y/y in June from 12.6%y/y in May. During times of stress, consumers tend to access existing but under-utilised credit facilities, and the loss of growth momentum in overdrafts may signal that these existing facilities are approaching full utilisation. Reduced risk appetite on the part of banks to increase exposure to unsecured forms of credit may limit further growth in this category (fig 8).
The remaining categories of household unsecured credit slowed as well, exacerbated by unfavourable base effects. Adjusted for Edcon, credit card growth slowed to a seven month low of 14.6%y/y from 15.3%y/y in May, and (unsecured) household general loans and advances slowed to 1.9%y/y in June from 2.8%y/y in May.
Q1:14 M3 money supply growth was 6%y/y, which is 1.9ppts less than Q1 nominal GDP growth of 7.9%y/y. This indicates tighter monetary conditions versus the preceding quarters as can be seen in figure 9. Monetary conditions may be even tighter in Q2:14 due to the deceleration in M3 to 2.8%y/y.
Household credit growth will likely remain muted over H2:14, with the continuation of monetary policy tightening
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