Bad debt will weigh on WesBank

CHALLENGESIncoming FirstRandCEO Alan Pullinger
CHALLENGESIncoming FirstRandCEO Alan Pullinger

WesBank’s vehicle asset finance is expected to be weighed down by bad debt write-offs until June before the unit returns to growing its profit.

The local retail vehicle asset finance is the key part of WesBank, which forms part of the FirstRand group, when it comes to the company’s profits.

“It is possible at the end of the year – as of July 2018 – that we will have an abnormally high bad debt number. We are obviously working hard to get that number down,” WesBank group CEO Chris de Kock said in an interview this week.

A bad debt cannot be recovered and is then written off.

“Post that, the next financial year starting in July 2018 – we are confident we will be back on the growth path – this is because the business we have been writing for the past two to two and a half years has been really good quality.”

De Kock attributed the rising bad debts at its vehicle asset finance unit to three factors.

“We are of the view that in the past three or four years the macro [environment] has been deteriorating in South Africa and putting the consumer – particularly the middle-market consumer under more and more pressure. There is increased stickiness in the arrears numbers.”

Second, customers are becoming increasingly desperate to keep their cars, De Kock said.

“So they are finding legal ways to drive the car for a longer period without necessarily paying for it.”

This ultimately means that when WesBank goes through the legal process of repossessing vehicles the car’s recoverable value is less.

Third, WesBank had a “data issue”, De Kock said.

“So we relied – up until June or July last year – exclusively on scorecards and customer data that were supplied to us by one of the bureaus ... They introduced a new system at the beginning of last year and that system caused some mayhem on their side – so they sent through to us incorrect data ... Over a protracted period we wrote business that we shouldn’t have written and we didn’t write business that we should have written.”


Among the challenges that incoming FirstRand CEO Alan Pullinger anticipates facing is the “South African narrative”, which he expects will “test the system”.

“Which is exciting as there is going to be some change,” he said in an interview.

Pullinger takes over from Johan Burger, who retires this month on April 1.

“The land debate that is out there – that is something that is thrown into the mix. There is no question that some of the tectonic plates are being shifted. We need to play a leadership role in this. People are looking to big business.

“We need to sit down and have honest conversations around them. Unfortunately, in land there is so much emotion and there’s almost a fanatical approach that says we won’t even sit down and talk about it.

“Equally it fires up a more militant sort of political approach to this thing.

“As South Africans we are all in this boat together ...

Slowly but surely we will find an outcome but not if the debate becomes extremely polarised.”

The key thing that Pullinger would like to achieve during his tenure as FirstRand CEO would be to “hand over the business in a better shape than what it is today”.

“That is not going to be an easy task. There is a lot of positive momentum in the business,” he said.

“The slowdown in WesBank is a market, cyclical story. We are pretty sure that will come back.”


First National Bank (FNB) was ready to take on any of the four new banks, set to be launched in the months ahead, and the bank was comfortable with its position, FNB CEO Jacques Celliers said this week.

Discovery Bank, Tyme Digital, Bank Zero and the Post Bank will launch this year.

“We like competition ... It keeps us on our toes – makes us concentrate and innovate. We have a proper track record of responding to competition.

“Once you are through the hype cycle – of new entrants – you can see what they are offering and then you have an opportunity to respond,” Celliers said in an interview.

“Whatever gadget they come up with – I can build in a weekend.

“Are we prepared to reinvent ourselves all the time? Our track record stands for it ... We are here for the competition. We are not focusing on them. We are focusing on our own game.

“To build a customer base in banking is hard. We’ve tried to do that in a few countries. There is a lot of money to put into platforms, a lot of history and reputation. There are always opportunities,” he said.

“Capitec started small but became big. Big doesn’t come overnight – it takes time.

“But if they have the stamina and runway and they are really serious about it and it’s not just a fad – who knows, they may be formidable over time.

“Where we are now – we are very comfortable about our strategies.”

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