CEO Michael Jordaan

FNB adopts a helpful stance to ease consumers’ financial strain
 
First National Bank (FNB) CEO, Michael Jordaan, says the latest 50 basis point interest rate hike by the Reserve Bank reflects a deterioration in the country’s economic conditions due to forces beyond our control.

With the prime lending rate increased to 15.5% in June and Reuters reporting that the market expects inflation to peak at 11.3% in the next quarter on the back of a weak rand, rising crude oil and food prices and the potential hike in Eskom tariffs, the South African economy is facing uncertainty and volatility due to the credit crisis and heightened investor scepticism.

Our policy makers have responded by firming rates. Unfortunately, it is not clear that we have absorbed the full reach of these developments. With FirstRand expecting the second half of the year to continue presenting a challenging operating environment, the loan quality (according to Moody’s) will continue to deteriorate, leaving the household sector most vulnerable.

FNB customers are, therefore, well advised to take a conservative view to their financial circumstances and make the necessary adjustments within their means. FNB is the first bank to come to the party in June in the interest of aiding their indebted customers.

To assist customers during this period, FNB has launched an advice-driven campaign which will empower them to make the best of their money amid the deteriorating interest rate outlook, compounded by rising fuel and food costs.

'We at FNB recognise that the average South African consumer is financially stretched right now. Through this campaign, we will be differentiating ourselves by talking to our customers about effective ways of handling their financial affairs,' says Jordaan.

South African banks are worried, and with good reason, that the credit-pinch consumers are in could increase bad debt. Interest rates have already risen to such a degree that it could henceforth have a negative effect on the earnings of banks because of an increase in bad debt.

Jordaan says it is not only the responsibility of borrowers who are in this situation. Even the careful borrowers who allowed for marginal increases could be in a pinch after the latest hike. A large proportion of the struggling borrowers do not understand the effect on their financial position.

'An extension of FNB’s brand positioning of HELPFULNESS, the campaign is informed by the current economic down-turn and seeks to empower banking customers with appropriate instruments to beat the cycle by aligning their financial behaviour with the changing times,' adds Jordaan.

The campaign stands on key legs, among which are:
 
Transact
Use banking channels that cost you less, like free cellphone banking, online banking, ATM instead of branch, own bank’s ATM, and manage your finances by InContact - FNB’s free SMS and e-mail notification service.
 
Save
Investments turn interest rate hikes into good news for savers. To get the rate hike to work for you, consider fixed deposit accounts as a way to grow your money.
 
The Restart Fixed Deposit from FNB allows you to restart your investment at the latest rate once during your 13th month investment term. And as the rate goes up, you can reset your Restart Fixed Deposit at the new interest rate and earn more money on your lump sum.
 
Borrow
Saying 'NO' might be the best thing that your bank could do for you right now!
 
Now is the best time to reduce your debt. You can do this by changing your spending habits. For example, using your credit card wisely, paying off the full amount outstanding on your credit card each month to save on interest charges.
 
Avoid borrowing to cover your daily expenses and save to buy big items. Use cash to strengthen your bargaining position at the point of sale, thus saving on interest repayments.
 
FNB urges borrowers to carefully review their budgets to find sustainable levels of income and expenditure. Financial distress cannot be simply apportioned to excessive credit. Even prudent lenders and borrowers who built in buffers of prime plus three or four percent could now find themselves in a challenging position.
 
FNB’s rates adjustment
 
Following the most recent rate announcement, FNB will lift its prime lending rate by 0.5% from 15% to 15.5% with effect from Friday 13 June 2008. Interest rates for new and existing FNB home loans will also be increased by 0.5% from this day.
 
FNB revises its savings and investment rates during weekly rates reviews and communicates updated interest rates on its website and in branches.

For more information contact FNB directly on +27 11 548 2006 or visit www.fnb.co.za