Africanbank profits rise after closing the taps

 ·30 May 2024

Africanbank (formerly stylised as African Bank) has posted a multi-million rand profit after introducing stricter lending criteria.

In its consolidated unaudited interim financial results for the six months ended 31 March 2024, the group said that it achieved a net profit of R203 million (H1 2023: R41 million) and a 40% reduction in impairments through a tightening of lending criteria and a shift in its net advances mix.

The group’s customer base also increased by 38% to 5.7 million.

“Despite operating in a tough economic climate, our financial performance for the first half underscores the resilience and strategic progress of Africanbank Group, and these results reflect a turnaround, in contrast to our position at the same time last year,” said Group CEO Kennedy G. Bungane.

The group’s net advances also grew to R32.8 billion, in line with its diversification strategy from R32.4 billion in 2023.

This was boosted by the integration of Grindrod Bank into the Business Banking division after receiving regulatory approval in March. The group said that the acquisition will help it serve underserviced Small, Medium, and Micro Enterprises (SMMEs) and entrepreneurs.

In the Consumer Banking division, Africanbank also expanded its product offerings to accommodate a growing retail customer base.

The group said that the planned introduction of home loans to staff and financing for tech deals, such as handset financing, has also helped enhance the bank’s appeal.

The bank also maintains a surplus liquidity of R7.9 billion in cash reserves, not including statutory asset requirements.

“Africanbank’s steady financial performance demonstrates our strategic shift towards secured lending and revenue diversification. With a growing customer franchise and a surplus liquidity position, we are ready for sustainable growth, underpinned by a strong capital ratio,” said CFO Anbann Chetti.

Interest income did, however, drop by 10% to R3.5 billion due to reduced retail unsecured lending advances in the prevailing economic climate. This impacted loan disbursements and resulted in a net interest margin of 10.2%.

Bungane said that this is the result of a deliberate decision not to expand unsecured lending during the current high inflation and interest rate environment.

Non-interest income grew by 26% to R839 million due to increased customer usage of MyWORLD and Credit Card accounts.

The group’s operating expenses also dropped 3% from the prior period, resulting in a cost-to-income ratio of 58.3%

Bungane said that the second half of the year is looking encouraging, with the expected interest rate cycle easing, better lending growth, and continued transactional services.

Source: Africanbank

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