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Feb 3 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings believes the performance of assets backing South African structured finance will be resilient across all asset classes in 2014 amid a stalling domestic economy. Fitch consequently expects the South African structured finance transactions it rates to perform within base case assumptions.
Borrowers continue to benefit from a low interest rate environment, which has helped offset lacklustre growth in South Africa. The comparatively low interest environment provides consumers and businesses with respite and aids debt serviceability across asset classes.
The recent interest rate increase of 50bps by the South African Reserve Bank was earlier than expected. However, Fitch believes that only substantial increases in the interest rate would have a meaningful impact on the performance of structured finance transactions. Any material additional tightening of monetary policy, as a result of continued steep depreciation of the rand and inflationary pressures, may change the stable outlook for the sector.
There has been substantial growth in the unsecured lending market since 2010, which peaked in 2Q13. However, the proportion of accounts classified as current had fallen to 62.4% in 3Q13 from 71.1% in 3Q12. Although Fitch does not rate any South African unsecured lending transactions, it expects asset performance to be stable to negative in light of regulatory pressure and the deteriorating macro-economic environment.
The SA government could introduce a credit amnesty, which would clear certain negative credit records held with the bureaus, but Fitch believes this could bring uncertainty to both secured and unsecured lending. Unsecured lenders are more likely to be affected given their reliance on credit bureau information and lack of internal records for new customers. Fitch expects a limited impact on the transactions it rates as loans were underwritten based on fuller credit histories and originated with larger institutions with access to internal historical data.
The report, ‘2014 Outlook: South African Securitisations’ is available at www.fitchratings.com or by clicking on the link above.
Link to Fitch Ratings’ Report: 2014 Outlook: South African Securitisations