African Bank, at its 2023 half-year stage, is markedly different from a year ago as it pivots from an unsecured lending business to a fully-fledged consumer and business banking group.
The bank now services 4.2 million customers, up 193% from 1.4 million customers a year ago. It has a strong balance sheet and cash reserves, after reporting a small taxed loss in the six-month period.
Its consumer banking customers came under pressure from rising food prices, transport inflation and load shedding during the six months, and a consequent rise in the credit impairment charge saw it report an interim R44 million net taxed loss, compared with R372m profit at the same time last year.
The Consumer Banking division’s credit impairment charge increase resulted in a sharp rise in the credit loss ratio to 11.1% from 4.8%.
“The group anticipates returning to profitability when we report our full year results to 30 September 2023. The second half will continue with a laser focus on the Consumer Banking’s lending portfolio to ensure the performance of this book improves following enhancements in our credit lending criteria,” the banking group’s directors said in the results.
Good progress had been made in the “Excelerate25 strategy” that the bank adopted 18 months ago.
In the past six months, it acquired Grindrod Bank and the assets and liabilities of Ubank.
“The Grindrod Bank acquisition enables the bank to stride confidently into the business banking space. It’s an area that, we believe, holds huge potential, particularly in the under-served SMME market,” the bank said yesterday.
The retail Consumer Banking division was bolstered by the acquisition of Ubank’s assets and liabilities, and Ubank’s operations had turned from a loss-making operation to breaking even.
“These transformational acquisitions will now form the foundation from which the new enlarged group is poised to springboard its growth aspirations and further diversify its customer offerings and customer base,” the bank’s directors said.
The group had a much larger and stronger balance sheet consisting of an advances book of R32.4 billion (R19.6bn), a more diversified funding base of R33.9bn (R15.9bn), and strong liquidity and cash reserves of R8.6bn (R4.8bn).
In the six-month period, interest revenue earned grew to R3.91bn (R2.72bn). Operating income before credit impairments grew by 47% to R3.99bn.
Insurance profits from insurance captive arrangements increased 273% to R339m. The cost to income ratio of 58% was marginally higher from 55.7% in the first half of 2022. Non-interest income improved 109% to R668m.
Some 115 000 of its clients were invested in the bank’s savings products, up 52% from a year ago, and 1.2 million were using its MyWORLD transactional banking accounts, up 101% from a year ago.
In the Business Banking segment, the key focus is on loan book and transactional base growth.
BUSINESS REPORT