JOHANNESBURG – African Bank Investments (JSE:ABL) Limited (Abil) is working on expanding its credit card offering and will now broaden it to the furniture business Ellerine Holdings (JSE:ELH) Limited (EHL), as part of its bid to grow lending and improving value proposition to its customers.
“We are really expanding our credit card offering than we have in the past ... It’s part of our new value proposition to our customers,” CEO Leon Kirkinis said in an interview following the release of the company’s interim results.
Abil, which launched its credit card offering in 2007, has established a direct sales channel to sell cards. It has three types of credit cards (blue, silver and gold) with gold offering a credit limit of up to R36 000.The plan is to expand the credit card target market within its existing loan client base, while keeping a moderate increased exposure to new clients.
For the six-months ended March 31 2011, Abil’s credit card portfolio grew by 68% to R3.9bn with the total number of new cards issued in this period rising by 48% to 122 000. In the period under review Abil had a total of 591 000 cards in issue. Credit card sales grew by 99% in the six months period to R1.2bn
Kirkinis said overall Abil’s growth came from a lower-risk customers, but pointed out that there was a need to also go for the high risk customers. But he said there were some business models that needed to be worked on before playing hard in that segment. Abil has in excess of 4m customers, according to its website and Kirkinis says the company was now approaching 50 000 customers a month.
The company, which is receiving about 250 000 loan applications per month, has said it will also roll out a variety of products in the second-half of the year.
The company’s headline earnings per share rose by 20% to 136.3c in the six months period to end March 2011. Headline earnings also rose 20% to just over R1bn. The banking unit posted a 24% increase to R1bn in headline earnings, while retail’s headline earnings increased by 30% to 144m. The dividend was flat at 85c a share. The company also had to pay R82m for other group adjustments including tax.
For the banking division, gross advances rose by 27% to R34.4bn compared to the previous period. The bad debt charge fell by 10.4% compared to 11.2% previously. Non-performing loans were down to 28% from 34, while performing loans rose 38%.
For the retail business sales were up 7% to R2.5bn. Credit merchandise sales rose by 16%, while cash sales fell 5%. Going forward Abil wants to convert EHL customers to African Bank clients and build EHL into a cash retailer.