Private sector credit grew by 3.68% year on year in February, easing from 4.59% in January, according to data released by the Reserve Bank on Monday.
This means that though borrowing by businesses and households continued to rise, it did so at a slower pace than in the previous month. While corporate lending remained the primary driver, the overall pace of credit growth moderated.
“The moderation can be attributed to the bills and investments category, which contracted by 9.2% month on month, the steepest drop since January 2011 when it was down by 15.3%,” Nedbank economists said.
This marked another month of year-on-year credit expansion. Total month-on-month private sector credit remained effectively unchanged from January.
The headline number was weighed down by sluggish household demand and conservative corporate drawdowns even though both segments posted modest gains: month-on-month corporate credit rose 0.97% and household credit was up 0.55%.
Private sector credit extension measures the total amount of loans, advances and credit extended to both households and corporations. It is a barometer of financial sector activity and real economic momentum reflecting how willing banks are to lend and how confident businesses and consumers are to take on debt.
Credit growth has largely disappointed on the downside at the start of 2025.
— Nedbank economists
The 3.68% year-on-year growth fell short of Nedbank’s expectation of 4.5%, despite the bank projecting that corporate lending would be buoyed by base effects.
Household credit also came in at 2.75% year on year just below the bank’s forecast of 3%. This is down slightly from 2.87% in January, the slowest pace since March 2017.
“Consumers remain cautious in taking on additional debt despite lower interest rates and stronger real incomes,” Nedbank said in a note.
Growth in home loans slowed to 2.2%, after holding steady at 2.3% for four consecutive months, while overdrafts contracted for the second straight month, down 0.7% year on year.
Instalment sales and leasing finance also softened, despite earlier signs of a recovery in vehicle sales. However, credit card usage remained robust, rising 8.4% annually but down marginally from 8.8% in January. This indicates that consumers are still relying on credit to supplement spending, Nedbank said.
The bank noted that bill and investment growth eased to 0.4% annually following a notable 11% jump in January. All the other credit categories were mixed.
Leasing finance increased by 21.7% year on year (from 6.9%) while instalment sales (5.7% from 5.9%) and other loans and advances (4% from 4.4%) eased further.
Mortgages were steady for a third consecutive month at 3.2%.
Business confidence remained in depressed territory in the first quarter of 2025. Domestically, growth remains subdued, while globally policy uncertainty remains elevated.
— Lara Hodes, Investec economist
Despite the weak start to the year, Nedbank economists expect conditions to improve gradually.
“Credit growth has largely disappointed on the downside at the start of 2025. On the household front, consumers appear a lot more cautious about taking on additional debt despite the easing in interest rates and lower inflation,” the bank said in a note.
“While the repo rate has eased notably from its peak of 8.25%, it is still trending 125 basis points above its pre-pandemic level of 6.25%, indicating that rates remain quite restrictive. Nonetheless, lower inflation, and an improved growth and employment outlook should bolster consumer confidence, allow lenders to ease credit standards and thus encourage growth in the coming months.”
Credit to corporates rose by 5.13% year on year, still outpacing household lending but slightly below January’s 5.33%, “weighed down by overdrafts”, Nedbank noted.
Overdrafts slowed to 7% from growth of 11.5% in January. Month-on-month, corporate credit rose 0.97%.
According to Investec economist Lara Hodes “credit uptake by corporates which constitutes over half of total private sector credit extension fell to 4.5% year on year from 6.1% year on year logged in January”.
She said the investment category, which makes up about 13% of corporate credit, contracted by a marked 9.5% month on month in February.
“Business confidence remained in depressed territory in the first quarter of 2025. Domestically, growth remains subdued, while globally policy uncertainty remains elevated,” she said.
Nedbank economists noted that credit card usage by companies was up 11.1%, “the highest since May 2024”.
“General loans edged slightly, up to 4.3%, following a notable slowdown in January, indicating some recovery in private fixed investment.”
According to Nedbank, credit growth is set to remain modest amid spare capacity, but conditions are expected to recover more meaningfully later in the year as improved growth outcomes boost confidence and support private sector investment.
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