African Bank takes R853m Covid-19 hit to its profits
ABH said an R853m pandemic charge negatively impacted its profit after tax by R614m and, as a result, on a post-Covid-19-adjustment basis, the group reported a net loss of R111m compared to a R533m profit last year.
Chief executive Basani Maluleke said management continued to maintain a strong liquidity profile with high group equity capital levels of R10.5bn and a total capital adequacy ratio of 40.1percent.
“Our strong balance sheet and liquidity profile continues to provide our stakeholders with a solid investment proposition,” Maluleke said.
The group’s return on equity was a negative 2.1percent compared to a positive 10.9percent last year.
On a pre-Covid-19 adjusted basis, ABH would have reported a 6percent decline in profits to R503m.
Despite the Covid-19 impact, the group’s balance sheet remained robust, with cash resources of R5.4billion.
Looking ahead, Maluleke said the biggest unknown factor in assessing their outlook would be the impact of Covid-19.
“The group will remain adaptable and resilient to effectively manage the factors in our control. We will continue to ensure a safe environment for our people and our customers, engage in robust short-term and longer term scenario-planning exercises, manage liquidity, review and update conservative credit-granting criteria, drive prudent liability management and carefully manage costs and discretionary spending,” she said.
ABH owns 100 percent of African Bank Limited, and is unlisted and its shares are privately held by the South African Reserve Bank, the Government Employees Pension Fund, Absa Trading and Investment Solutions, Capitec Bank, FirstRand, Investec Bank, Nedbank and The Standard Bank of South Africa.
The group’s total income increased by 5percent to R3.50bn and it continued to focus on the disbursement of loans to low risk customers and above 85percent of disbursements were made to this low risk category.
Its gross loan advances increased by 3percent to R30.09bn.
ABH said given the tough operating environment, customer credit balances were conservatively provided for with a coverage ratio of 36.4percent on a post-Covid-19 adjustment basis, and 34.7percent on pre-Covid-19.
“The Covid-19 pandemic is expected to increase defaults on loans as well as negatively impact collections, hence further additional conservative credit granting measures were implemented in April,” the group said.