Analysis Of Nonperforming Loans

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Introduction
The basis of understanding something lies in its definition. Investopedia US (2014) defines Nonperforming Loans as “A sum of borrowed money upon which the debtor has not made his or her scheduled payments for at least 90 days. A nonperforming loan is either in default or close to being in default. Once a loan is nonperforming, the odds that it will be repaid in full are considered to be substantially lower. If the debtor starts making payments again on a nonperforming loan, it becomes a reperforming loan, even if the debtor has not caught up on all the missed payments.”
The above definition provides a broad explanation of Non-performing loans. In the banking sector, a NPL is better defined as “the value of nonperforming loans divided by the total value of the loan portfolio (including nonperforming loans before the deduction of specific loan-loss provisions). The loan amount recorded as nonperforming should be the gross value of the loan as recorded on the balance sheet, not just the amount that is overdue.” (The World Bank Group, 2014)

Trends in Non-performing loans in South Africa
Appendix 1 illustrates nonperforming loans as a percentage of total loans, for each quarter from quarter four in 2007 to quarter one in 2013, in South Africa (orange line). The trend of Non-performing loans to total loans is generally between 14%-19%, reaching a maximum of 18.8% in 2009’s third quarter. This is a 2.7% increase from the same years first quarter. The cause of this increase was due to the global recession. The blue bars, representing only Non-performing loans, show an increase of Non-performing loans over the five year period. The trend from 2007 (quarter 4) to 2011 (quarter 2) was fluctuating followed by...

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...vate sector. [Online]. Available: http://www.tradingeconomics.com/south-africa/loans-to-private-sector. [4 April 2014]

Appendix 3

Actual Previous Highest Lowest Forecast Dates Unit Frequency
2628175.00 2583793.00 2628175.00 4051.00 2620944.75 | 2014/02 1965 - 2014 ZAR Million Monthly Current Prices, SA
Trading Economics. 2013. South African loans to private sector. [Online]. Available: http://www.tradingeconomics.com/south-africa/loans-to-private-sector. [4 April 2014]

Appendix 4

Duncan, F. 2013. How big of a problem is unsecured lending for banks?. [Online]. Available: http://www.moneyweb.co.za/moneyweb-financial/how-big-of-a-problem-is-unsecured-lending-for-bank. [3 April 2014]

Appendix 5

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