Reuters, Bloomberg and Staff Reporter
THE LENDING unit of African Bank Investments, which failed in August, said losses for the six months to March narrowed from a year earlier as efforts to re-establish a viable company continue.
The bank recorded a loss of R2.79 billion, as it granted fewer loans to low income earners, compared with a restated loss of R5.9bn in the previous period, the Johannesburg-based lender said on Friday.
The bank’s revenue fell by nearly 20 percent to R6.2bn as the administrators appointed by the Reserve Bank tightened lending criteria. The credit impairment charge improved to R5.4bn from R8.5bn.
While impairments improved, they remain high, “principally due to the deterioration in the advances book that existed” before the bank collapsed, the lender said.
“Losses will persist for the foreseeable future,” Tom Winterboer, the bank’s administrator, said.
Operating costs increased by 4 percent to R1.4bn from the prior period’s R1.3bn, primarily due to the increased costs of curatorship, including restructuring, legal and advisory costs, offset to some extent by the lower cost base through natural attrition of staff and specific cost control measures implemented by management, African Bank said.
Interest expense declined by 5 percent to R2.3bn from the prior period’s R2.4bn due to slightly lower average liability balances compared to the comparative period.
Current and deferred taxation was zero down from R1.6bn in the prior six-month period.
“The curator remains of the view that losses will persist for the foreseeable future and accordingly has not raised a deferred tax credit in the income statement and deferred tax asset on the balance sheet in respect of the six months ended March 31, 2015,” African Bank said. The bank collapsed last year amid record losses and a lack of funding.
The South African Reserve Bank stepped in to affect a rescue, appointing Winterboer to corral the lender’s remaining viable assets into a so-called good bank.
That business is awaiting a fresh banking licence and may be operational by the fourth quarter of this year.
Cash and cash equivalents at the end of the first half rose to R8.4bn from R6.6bn in the previous period, the company said. The results are line with expectations, Winterboer said.
“The restoration to profitability and subsequent achievement of acceptable investor returns in the ‘good bank’ will take time, effort and commitment,” he said.