Johannesburg - South Africa's African Bank Investments posted an expected 88-percent plunge in full-year earnings on Monday after a sharp increase in bad loans.
The bank commonly known as Abil said headline earnings per share totalled 45.1 cents in the year to end September, down from 378.2 cents a year earlier.
Headline EPS, which excludes some one-time and financial items, is the main measure of profit in South Africa.
Although interest income rose 21 percent to R11.96 billion, Abil said it took a hit from bad debt charges, which rose 89 percent to R9.15 billion.
To prop up its diminishing balance sheet, Abil is raising nearly R5.5 billion in a rights issue and disposing off its furniture retail unit Ellerines.
The bank, South Africa's biggest unsecured lender, purchased the seller of sofas and beds in 2007 hoping to plump up its loan portfolio through selling furniture on hire purchase.
South African banks are pulling back on lucrative yet risky unsecured loans, which they leaned on for the past few years to boost dwindling income in a tough economic environment.
Abil shares have lost more than 40 percent of their value this year as the lender issued successive profit warnings. Johannesburg's All-share index is up 16 percent.
Capitec Bank, Abil's main competitor in extending the loans without the backing of collateral, has added nearly 10 percent this year.
Unlike Capitec, Abil does not take deposits and relies solely on bonds for capital. Its has also been more liberal with bad loans, choosing to hold on longer to them on its balance sheet. - Reuters