Johannesburg - South Africa's African Bank Investments said on Wednesday its full-year profit was likely to fall by as much as 63 percent, hit by higher provisions for bad debts and a loss at its furniture unit.
Abil, as the bank is known, has felt the squeeze as its target market of low-income borrowers struggle to repay their loans, due to sluggish growth and chronically high unemployment in Africa's biggest economy.
It said last month it would raise up to 4 billion rand ($408 million) via a rights offer to shore up its balance sheet and would sell its retail furniture business.
Abil said it expected full-year headline earnings to fall by 58 to 63 percent.
Headline earnings, the main profit measure in South Africa, exclude certain one-time items.
It said it would increase the amount of money it sets aside to cover bad loans, which could shave as much as 500 million rand off its earnings.
Abil also said it expected a headline loss of 200 million rand at its Ellerines furniture unit.
It bought the furniture business as a vehicle to extend more credit to low-income shoppers, but is now looking to sell that unit.
The bank said its recent share price decline - its shares are down about 54 percent this year - was also costing it money due to hedges related to its long-term incentive plan.
Every one rand change in the share price resulted in an additional charge of 16 million.
Abil did not give further details on the hedge or the nature of the plan, although long-term incentive share plans are frequently used for executive remuneration. - Reuters