Johannesburg - Shares in African Bank Investments Limited (Abil) fell the most in six weeks yesterday after South Africa’s largest provider of unsecured loans said full-year profit would halve as bad debts rose and the bank curbed lending growth.
Abil shares slumped as much as 7 percent in intraday trade and ended 4.51 percent lower on the day at R15.26.
The stock has lost 53 percent so far this year, making it the worst performer on the 165-member all share index.
Group headline earnings would probably drop as much as 63 percent in the year to September, Abil said.
Furniture and appliances retail unit Ellerines might post a loss excluding one-time items of about R200 million, while an increase in bad loan provisions of between 2.5 percent and 3.5 percent would reduce banking unit earnings by as much as R500m, Abil said.
Sales at Ellerines were expected to fall by 15 percent.
“I don’t think anyone expected it to be that bad,” Harry Botha, an analyst at Avior Research, said yesterday.
“It’s a tough time for them and the ratings agencies will be taking note,” Botha added.
Consumer spending has been under pressure as inflation accelerated to its fastest rate in four years in August and economic growth slowed.
Abil also had to make provisions for staff incentives, which would cost the company as much as R220m after the share price slumped, it said.
The lender plans to boost capital with a rights issue of as much as R4 billion.
The bank faces a regulatory fine of as much as R300m for what the National Credit Regulator terms reckless lending.
The charge forced Abil to abandon plans to raise $300m (about R3bn at current exchange rates) in foreign markets earlier this year. It may try to sell three rand bonds this week, according to documents the lender lodged with JSE.
“The South African economy and operating environment within which both the retail and credit businesses operate continues to prove challenging, with little respite expected in the next year,” the company said.
Earnings might start to recover in the second half of the next financial year, it said. - Bloomberg