The bank made a R1.7billion net loss a year ago.
The group attributed the change in profit after tax to the full goodwill impairment of R1.95bn in 2016, which did not recur in the current period.
The bank also increased its reported net interest income after impairment to R1.36bn, up from R548m, primarily as a result of a lower credit impairment charge due to conservative underwriting practices and lower net interest expense.
It said net interest income after impairment excluded the profit on bond buybacks.
Chief executive Brian Riley said: “Although we come off a relatively low base, the significant increase in profitability is a result which should satisfy all stakeholders, particularly as it includes planned investment and voluntary severance costs.
“In particular, the core loans business has been fixed, with the branch network producing a much improved return on equity of 20percent,” Riley said.
It was announced earlier this year that Riley would exit African Bank by March, with Basani Maluleke taking over as the chief executive.
Net customer advances had reduced as a result of a more conservative risk appetite reducing new business disbursements by 9percent. Net customer advances were R18.74bn, down from last year’s R20.11bn.
The bank achieved a core equity tier 1 capital adequacy ratio of 29.9percent, compared to 31.5percent last year.
Riley said strong liquidity had been maintained, while the bank had further optimised its balance sheet through additional buy-backs of liabilities, further cutting its net interest cost.
The bank has available cash balances, including surplus liquidity invested in the South African sovereign assets, of R10.15bn.
African Bank is a 100percent subsidiary of African Bank Holdings (ABH). ABH is an unlisted registered bank controlling company under the Banks Act, Act 94 of 1990.
The shares in ABH are privately held by the South African Reserve Bank, the Government Employees Pension Fund, Barclays Africa Group, Nedbank, FirstRand Bank, Investec Bank, Standard Bank and Capitec Bank.
African Bank was launched again in April last year following its collapse in 2014 after failing to raise about R8.5bn. Nhlanhla Nene, the former minister of finance, put it under curatorship. It was launched again last year with a new board led by Riley.
In a short space of time it has made good progress, prompting S&P Global Ratings to revise its outlook. The rating agency revised the outlook for African Bank from "negative" to "stable" and affirmed the B+/B global scale rating in April.
The national scale rating was raised to zaBB from zaBB-. S&P said the bank’s capitalisation has improved, combined with better earnings than expected.
“The stable outlook balances the bank’s very strong capital levels and limited medium-term refinancing risks against the weak economic environment that could negatively impact its earnings and business stability, and the longer-term risk that the bank’s funding is susceptible to investor confidence,” S&P said in April.
- BUSINESS REPORT