African Bank yesterday swung into a full-year loss of R27 million for the year to end September on higher credit impairments and reduced insurance income. Picture: Oupa Mokoena/African News Agency (ANA)
African Bank yesterday swung into a full-year loss of R27 million for the year to end September on higher credit impairments and reduced insurance income. Picture: Oupa Mokoena/African News Agency (ANA)

African Bank swings into full-year loss of R27m after R1.2bn profit

By Sandile Mchunu Time of article published Jan 27, 2021

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JOHANNESBURG - AFRICAN Bank yesterday swung into a full-year loss of R27 million for the year to end September from a R1.2 billion profit a year earlier on higher credit impairments and reduced insurance income.

The bank reported a better second-half performance by reporting earnings of R84m from April to September compared to a first-half loss of R111m as lower risk emerged and operating costs and net interest expenses reduced.

African Bank raised a specific credit impairment of R550m and an insurance provision of R303m at the outbreak of the pandemic in March.

The group said that the provisions raised in the first half were being partly released, with R111m for the Covid19 credit impairment and R216m for related insurance provision remaining.

However, Covid-19-related claims surged by 27 percent to R638m.

The bank said that it assisted customers and provided debt-relief measures with instalments to the value of R304m deferred to mitigate against the impact of the pandemic on its performance.

African Bank said it also provided credit life insurance cover with R134m already claimed by customers who experienced short-time or unpaid leave.

It said its total net revenue, including insurance income, declined 9 percent to R6.1bn while its CET1 capital ratio was 31.2 percent, well above internal and regulatory levels.

African Bank outgoing chief executive Basani Maluleke said the bank made good progress on their strategic direction in the last three years.

“Our transition from a single-product business, operating through a single channel, to a diversified financial services business, has enabled us to grow and attract new customers. Unfortunately, our financial numbers have not withstood the worsened economic climate and the overlay of the effects of the Covid-19 pandemic. We are, however, heartened by the second half of the full year, which reported signs of reduced risk, improved earnings and a steady increase of usage of MyWORLD,” Maluleke said.

The group’s return on equity (RoE) was -0.3 percent compared to 11.6 percent last year.

African Bank said the SA Reserve Bank (SARB) last year promised to appoint advisers to assist shareholders with an exit plan.

“The bank has started working with these advisers and the SARB anticipates that their exit will be completed within 18 to 24 months after the identification of a suitable buyer,” the group said.

Nesan Nair, a senior portfolio manager at Sasfin Securities, said the decline in earnings was not a surprise as most banks felt the impact of the Covid-19.

“Most of the banks have shown a big fall in earnings. However, the loss is slightly worse than expected but it was not surprising for African Bank to report a loss, in view of the very tough consumer environment,” Nair said.

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