African Bank has published interim results for the six months ended March 2021, reporting a net loss after tax of R135 million.
This it noted, was significantly better than a loss of R358 million in the prior year, as the upfront higher credit impairments raised a year ago were sufficient to account for the increased risk of default.
“The South African economy continues to be negatively impacted by the aftermath of the first and second waves of the Covid-19 pandemic and the stringent national lockdown measures which were implemented in 2020,” African Bank said.
Key aspects of the African Bank results include the following:
- Credit impairment charge: R850 million (H1 2020: R1 909 million);
- Net customer advances balances: R16 698 million (H1 2020: R18 995 million);
- Cash deposits and financial investments, including surplus liquid assets: R5 530 million (H1 2020: R5 393 million);
- Retail customer deposits, including transactional banking balances: R8 622 million (H1 2020: R3 819 million); and
- Total capital adequacy ratio: 42.7% (H1 2020: 36.6%).
African Bank is a 100% subsidiary of African Bank Holdings (ABH), which reported a return to profitability in the six month period, showing a 196% increase to R152 million.
New loans disbursed showed a 32% increase in H1 21 compared to last six months ended September 2020.
“Various credit-granting criteria were tightened during our 2019 and 2020 financial years, due to the ailing local economy observed in the second half of 2019, and the outbreak of the novel coronavirus pandemic in South Africa in March 2020.
“As a consequence, the level of disbursements granted to our customers were substantially reduced in the second half of the financial year ended 30 September 2020 and continued to be subdued in the current six month reporting period, ending 31 March 2021,” it said.
Conservative credit granting continues, however credit criteria has relaxed of late, the group said.
ABH reported an improved credit loss ratio of 6.1%, from 12.9% a year ago, with a total capital adequacy ratio of 43.6% (H1 2020: 40.1%).
Total net revenue (including insurance income) reduced by 12% year-on-year, from R3.03 billion, to R2.66 billion.
Customer balances continued to remain conservatively provided for, with a coverage ratio of 38.1% (H1 2020: 35.2%), higher than the prior period due to migration of customers to higher provisioning stages as a result of an ageing advances book, it said.
Despite the muted and challenging operating environment, the group said its balance sheet remains highly liquid, with strong available cash resources of R8.0 billion (H1 2020: R5.4 billion); representing an increase of 48%.
Gustav Raubenheimer, chief financial officer of African Bank Holdings said during the half-year in review, the group advanced both organic and inorganic growth drivers by shortlisting two acquisition opportunities to gain economies of scale while expanding the group’s customer base.
He said that the group continues to increase the marketing exposure of its MyWORLD product, leveraging more than 558,000 accounts and encouraging further take-up of these accounts by introducing an overdraft product later this financial year.
“For the 2021 half-year, the African Bank Group continued the positive trend of a steady return to profitability after our H1 2020 loss of R158 million, which reversed to a profit of R131 million at H2 2020.
“Our interim results for the current reporting period reflect a higher profit of R152 million; representing a year-on-year improvement of 196%. The Group’s return on equity (RoE) was a resultant positive 2.9% compared to H1 2020’s negative 3.0%,” he said.
Newly appointed CEO, Kennedy Bungane said that during the first six months of the 2021 financial year, the executive management team accelerated various important initiatives to place the bank on a strengthened platform to execute on its strategy through a two-pronged implementation approach of: ‘protect the current’ by managing the factors within our control from digitalisation and automation to streamlining redundant areas of the business and driving broader transformation; and ‘growth’ by moving closer to finalising core acquisition, sales and distribution arrangements.