Turnaround moves pay dividends

A branch of African Bank in 2014, before it was placed under curatorship. File photo  Picture: WALDO SWIEGERS
A branch of African Bank in 2014, before it was placed under curatorship. File photo
Picture: WALDO SWIEGERS

Once-troubled African Bank achieves R335m in profit

African Bank posted R335-million in operating profit for its 2016 financial year, pleasantly surprising shareholders and other affected parties who would have been expecting millions of rands in losses forecast by the curator of its predecessor bank, which failed in 2014.African Bank, which was relaunched in April, released its maiden results this week.

“It was much better than planned, which is great,” chief executive Brian Riley said. “We got involved with the buy back plan, we saved on interest . . . the cost of financing reduced.”

Tom Winter boer, who was appointed curator of the former African Bank after it hit a liquidity crisis in 2014, had said in an earlier memorandum to investors who wished to swap their debt in the old African Bank for bonds in the new bank, that the new organization was expected to make an operating loss of R280-million in its first year.

The bank has bought back bonds –mainly listed on foreign markets –worth R11.7-billion as part of its liability management plan, savingR2.3-billion in interest through to 2022.

Its interest savings for the year were R251-million.But its largest saving came from lower-than-forecast credit impairments, as its stricter lending policy kicked in. It also tightened lending to underperforming borrowers.

African Bank has covered 63.7% of its R27.6-billion gross loan book against impairments, with non-performing loans – accounts in arrears for more than four months – standing at 31.5% of the book.

It incurred R362-million in credit impairment charges for the year.

The bank reported a pre-tax loss ofR1.6-billion for the period, R312-millionbetter than forecast.

It has amassed R12.9-billion in cash, which finance chief Gustav Raubenheimer says it may spend on buying back debt.

“We sit with cash – now we would be interested in buying back early maturity debt if the price is good for us[and] if there is no other use for the cash,” Raubenheimer said.

African Bank has just more thanR10-billion in debt due to mature in the next 18 to 30 months.

Raubenheimer said most of it was held locally.

“This could unlock further profit in liability management,” he said.

The bank also planned to invest in scaling up its direct credit business by early next year, with the launch of a transactional banking offering following late in that year.

It has already clinched a number of partnerships – a key enabler for its five-year performance plan.

African Bank branches offer extra value loans to customers in partnership with retail groups Edcon and Hi-Fi Corporation.

“Let’s say in the most extreme case, you take a R20 000 loan. Then R10 000would be cash, R5 000 would be loaded on an Edcon card, and R5 000 on a Hi-Fi Corporation card,” Riley said.

African Bank also planned to launch a broader range of insurance products, expanding from its current credit life offering.
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