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Barclays’s Absa Sees Share of Loans Drop Amid Bad Debt Fears

Absa Group Ltd., the South African bank controlled by Barclays Plc, said it has restricted lending and lost market share to avoid an increase in bad debts.

“Our personal loan book has remained virtually flat over the past year and our market share in personal loans has dropped from around 30 percent to below 10 percent,” David Hodnett, chief financial officer of Johannesburg-based Absa, said in an e-mailed response to questions yesterday. “Our average loan size has been decreasing.”

South African consumers are finding it harder to repay loans as unemployment rose in the first quarter and higher electricity and fuel prices boost inflation. Absa has focused on existing customers, said Hodnett, after setting aside more money for bad loans last year as credit impairments increased.

“As a bank that has a significant share of the retail consumer market, we will have exposure if a deteriorating economic environment impacts the South African consumer,” he said.

African Bank Investments Ltd., South Africa’s biggest provider of unsecured loans, cut its dividend 71 percent on May 20 after saying bad debts rose more than expected. FirstRand Ltd.’s retail unit and Nedbank Group Ltd. have said they are exercising caution in an environment which may become even harder for consumers should interest rates go up.

Recent analysis of South Africa’s four largest banks, “leads us to a more cautious stance on earnings at all the banks other than FirstRand,” Greg Saffy, an analyst at RMB Morgan Stanley, said in a note to clients. “Retail banking trends remain mixed, corporate and business banking muted.”

Absa, FirstRand, Nedbank and Standard Bank Group Ltd. have all declined this year with the six-member FTSE/JSE Africa Bank Index having dropped 11 percent over the period.

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