African Bank adds 12,000 retail banking accounts on launch

African Bank Group has reported a 19% jump in net profit for the six month period ended March 2019 to R533 million.

Operating profit before foreign exchange and tax improved by 3% to R740 million.

The group highlighted new business initiatives during the reporting period, with a push into retail transactional banking, and further tightening of its credit and loan operations.

Operating costs increased 10% to R1.4 billion from R1.27 billion, primarily as a result of an increase in staff costs to support additional credit disbursements as well as additional recruitment to support the transactional banking and underlying IT structure, it said.

The group added that it is taking a stricter approach to credit underwriting, targeting lower risk customers.

African Bank Group is an unlisted registered bank controlling company, which holds both banking and insurance services. Its shares are privately held by the South African Reserve Bank, the Government Employees Pension Fund, Absa, Capitec, FirstRand, Investec, Nedbank and Standard Bank.

African Bank Limited – a JSE-listed subsidiary of the African Bank Group, which houses its retail products – reported a drop in profit from 2018 to R69 million.

Salient features include:

  • Savings and Investments increased over 100% to R1.5 billion (H1:2018: R680 million);
  • Direct Sales and web channels (R637 million) contribute 11% of total sales ― up from 6%;
  • Credit disbursements increased by 17% to R5.6 billion;
  • African Bank Limited profit decreased 10% to R69 million from R77 million;
  • Group profit after tax increased 19% to R533 million from R448 million;
  • Group Return on Equity improved to 10.9% from 9.6%;

Speaking on its massive growth in savings and investments, the group said it has grown its retail deposits to R1.5 billion.

This retail funding constitutes 8% of the total funding for the group. Depositors have increased to 19,000, while the average deposit has increased to R80,000 (H1 2018: R52,000).

“African Bank continues to actively diversify its funding base, offering market-leading interest rates to retail depositors, including 10.75% per annum, which is equivalent to 13.33% per annum calculated on expiry, for its 5-year fixed term product,” it said.

Transactional banking

The group has made new moves to diversify its business, most recently launching its MyWORLD account in a fresh retail banking push.

According to African Bank, the account provides a platform for sharing within banking families, and has been well-received by customers since its launch in mid-May.

In the first week since launch, over 12,000 accounts have already been opened, it said.

“MyWORLD has significant longer term benefits for African Bank which include access to a new customer base and the retention of existing customers through the offering of a market-leading transactional banking product.

“Access to an increased customer base across their transactional banking products also allows the bank access to better customer data, and in doing so inform its customer strategy,” it said.

Read: African Bank launches ‘cheapest transactional account in South Africa’

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African Bank adds 12,000 retail banking accounts on launch