Africanbank sees ‘green shoots’ for South Africa

Africanbank has seen its profits improve, with the group seeing signs of life for the South African economy.

In its financial results for the year ended 30 September 2024, Africanbank said that although the tough operating environment in South Africa continues, there are early signs of green shoots and improvements.

The group saw its net profit jump slightly from FY23’s R521 million to RY24’s R523 million.

The group said that it saw a steady financial performance in a tough economic environment, while it grew its customer franchise and diversified its balance sheet for further growth.

“The execution of our ‘Excelerate25’ strategy is on track and has proven successful in building resilience in our business, scalability of our capabilities and sustainability of the
Bank,” said Africanbank Group CEO Kennedy G. Bungane.

“The extended pre-IPO timelines will derisk and safeproof the ultimate IPO post-FY27.”

The group’s interest income declined by 4% to R7.0 billion (FY23: R7.3 billion). The group said that this is primarly because of the deliberate strategy of subdued growth in unsecured personal loans and the slower-than-expected conversion of the Business & Commercial approved loans.

It added that the shift to the lower-yielding credit card and overdraft products, as well as the integration of the lower-yielding secured lending in Business & Commercial, resulted in the net interest margin declining to 9.7% (FY23: 10.9%).

The cost of funding was still well-managed at 7.9% (FY23: 7.4%) despite the average repo rate rising by 77 basis points over the financial year.

Non-interest income grew by 14% to R1,537 million (FY23: R1,345 million) as usage of the transactional MyWORLD and credit card accounts increased.

Non-interest income (net of related card and transaction fee costs) grew by 14% to R1 537 million (FY23: R1 345 million) as usage of the transactional MyWORLD and credit card accounts by customers increased, and value-added services offered by the Group through the expanding Alliance partnership customer base were consumed,

Net insurance income increased by 14% to R821 million (FY23: R718 million) and included the IFRS17-related updates.

Operating expenses also dropped by 1% compared to the prior year, with a cost-to-income ratio of 58.7% (FY23: 57.2%) as the group continues with its significant investment and integration phase.

African Bank has paidSasfin about R3.26 billion for its Capital Equipment Finance and Commercial Property Finance businesses.

The group said that the acquisitions of the Commercial Property Finance and Capital Equipment Finance businesses were concluded in August and November, respectively.

Sas fin’s CPF & CEF businesses concluded in Aug’24 and Nov’24

Credit impairment charges improved by 20% to R2,709 million (FY23: R3 262 million).

This led to a drop in the credit loss ratio to 6.3% (FY23: 8.0%) due to the book diversification to secured lending, management’s actions of refining the credit granting criteria, leading to conservative disbursements, and improving the collections and rehabilitation processes.”

Several credit providers have expressed caution about overextending credit in South Africa amid the challenging economic environment.

Read: Landlords shocked by ‘surprise’ R2,200 fee in South Africa