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African Bank Investments Ltd (ABIL‚ ABL) on Monday reported an 18% rise in headline earnings per share to 342.5 cents for the year ended September 2012.

The group said it had delivered a solid set of results underpinned by a continued positive response from customers to the group’s credit and retail products‚ a high repeat business demand for the brand and expanded footprint of African Bank through the EHL distribution network. EHL delivered improved profit margins on the back of operational cost containment and further efficiencies.

ABIL met its targeted 20.0% return on equity and tangible return on equity of 36.3% and grew economic profit by 53% to R755 million.

Headline earnings increased by 18% to R2.8 billion.. Gross advances increased by 33% to R53.0 billion on the back of the growth in new business volumes and extension of term. Non-performing loans coverage was at 60.0%‚ relative to 60.9% in the prior year. The group increased its final dividend to 110 cents per share‚ or a total dividend of 195 cents for the year.

The Banking unit which represents some 91% of the groups’ earnings‚ continued to deliver on an excellent track record‚ reporting a ROE of 22.9%.

The Bank continued to focus on its target market of customers earning R15‚000 per month and below while maintaining a stable asset quality. Higher employment costs were incurred due to staffing of the carve-outs and kiosks in certain of the retail stores as well as from increased collection costs due to higher volumes. A slightly elevated bad debt charge from refinements in the write-off policy was realised in the latter part of the year‚ it said.

EHL delivered a much improved 35% growth in headline earnings to R257 million.

“We have managed to steer our operations successfully through the economic volatility during the year and have built a robust‚ well capitalised and flexible business to position us as the market leader in a larger‚ more competitive unsecured credit market‚” said CEO Leon Kirkinis.

Looking ahead‚ the group said the embedded value in the advance book of R53.0 billion bodes well to sustain the business into the medium term future and the focus for 2013 has shifted to a sharper focus on returns rather than growth.

The current strong capital ratios and liquidity profile‚ supported by expected earnings and further capital and debt raisings will enable the group to comfortably meet its returns objectives‚ remain solvent and cater for expected regulatory changes. The group expects advances to grow at an average compound rate of around 15%‚ and is targeting a return on equity of 23% for the 2013 financial year.

Management remained vigilant and engaged in dialogue with regulators and credit providers concerning the sharp growth in unsecured lending within certain income brackets to manage the risk of oversupply of credit.

“We were pleased to note that the combination of increased regulatory scrutiny and heightened awareness by key players in the market has begun to curb excess supply of credit and that a slowdown of credit extension is evident in the most recent bureau information‚.” Kirkinis noted.

The group is comfortable that risk remains well controlled‚ from the perspective of the economic environment‚ recent legislative and regulatory developments‚ as well as credit quality.

“We remain cognisant of our customers’ requirements as well as financial distresses in this deteriorating macroeconomic environment. We will continue to adapt our affordability and debt rehabilitation measures and processes accordingly as we strive to create responsible access to credit for South Africans in our target market”‚ he concluded. - I-Net Bridge