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African Bank well on its way to recovery

Net profit after tax up 13% to R1.15bn, with retail deposits increasing 115% to R2.4bn in the year to September.

African Bank is making steady progress. The lender, which had to be revived after it went into curatorship in August 2014, is now building up its deposit base, improving the quality of its loan book and strengthening its digital offering. 

During its results presentation for the year to September 30, the group reported a third successive year of increased profits.

It achieved triple-digit growth in retail deposits, which increased 115% to R2.4 billion from last year’s R1.1 billion. This funding base now represents 12% of total funding liabilities. Basani Maluleke, African Bank CEO, says the group is optimistic that it will reach its 2021 funding base target of 25%.  

She says the group’s aim is to be a leader in savings and investment rates. “The core strategy that we have adopted is to be one of the highest paying [interest] rate [banks] in South Africa – so we have SA’s best rates.”

The group offers an interest rate of 13.33% on a five-year fixed deposit, calculated at the end of the period – thus 10.75% per annum.

WATCH: Maluleke discusses African Bank’s conservative approach, new product development, increasing retail growth deposits, and building trust.

Conservative lending

Maluleke says the group has nonetheless adopted a conservative lending approach to improving the quality of its loan book.

“We have to be conservative in our lending because we want to be seen as one of South Africa’s prudent lenders, especially considering the changes that we have seen in economic growth.

“The fact that the South African consumer is under increasing pressure means we have to be much more conservative in who we choose to lend to.”

She says that about 84% of the new customers the bank lent money to in this financial year are classified as lower-risk customers, a slight improvement on the previous year’s 83%.  

The gross advances book has grown by 9% to R30 billion, with the bank reporting that it maintained a significantly increased overall coverage level of 34% (2018: 30%) as a result of the increased provisions under International Financial Reporting Standards (IFRS) 9.

Restoring trust

The group lost the trust of many South Africans after it was placed under curatorship and delisted from the JSE. 

Rescue efforts saw various parties making investments into the bank, including the South African Reserve Bank (50%) and the Government Employees Pension Fund (25%), with the big six banks – FirstRand, Standard Bank, Absa, Nedbank, Investec and Capitec – owning the remaining 25% in various proportions.

Maluleke says these investors have been practising good oversight to ensure that the bank adheres to the principles of good governance and manages risk appropriately.

Net profit after tax was up 13% to R1.15 billion.

“In a low-growth environment to achieve 13% growth is an enormous achievement,” she says.

The collection of outstanding balances of R787 million was a contributing factor.

Customer-centric approach

She says the group has spent a lot of time trying to better understand its customers and deliver on their key needs this year.

“We have started to receive some great feedback,” she says, adding that some of the products speak to the fact that customers appreciate the new channels and enjoy some of the things the bank is doing in terms of customer empowerment.

Denker Capital portfolio manager Jan Meintjes says the bank is making good progress in diversifying its revenue sources, improving its distribution channels and enhancing its funding base.

“Compared to some of the listed competition, they have more to do on the diversification front, but it is great to see that they have put in place a number of the building blocks,” says Meintjes.

He says the group does, however, need a more balanced funding base and proof that the transactional banking offering and insurance products are sustainably competitive.

He says that for a successful listing on the JSE, these are essential elements.

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Rescue efforts saw various parties making investments into the bank, including the South African Reserve Bank (50%) and the Government Employees Pension Fund (25%), with the big six banks – FirstRand, Standard Bank, Absa, Nedbank, Investec and Capitec – owning the remaining 25% in various proportions….

When will the the big six banks exit this scheme of arrangements and the Government can have its 1st viable nationalized bank….
1). South African Reserve Bank (50%)
2). Government Employees Pension Fund (25%)
3). Economic Freedom Fighters – EFF (25%)

That should bring peace and quiet for some time.

The money this bank borrows from the South African public could be used elsewhere. Like Eskom power. This failed bank makes no useful contribution to our economy.

Why don’t African Bank pay back the money we lost a few years ago? Easy to make profit if there were no consequences for pathetic performance in the past…

oracle, your comment beat me to it with 2 min!

YES, PAY BACK THE MONEY!!!

Yip-What a farce. Another Africa joke paid for by taxpayers money.

African Bank -What a joke! No congratulations from me. ABIL ripped off its pref share holders -paid out 37c/R. So the new shareholders get to reap the rewards. Pay the original investors back their money first, then you can pillage to your heart’s content. Banks are a bunch of con artists.

How well do you think you understand business rescue?

THINK, we do not need to understand ‘business rescue’ the way YOU understand it, simply because we work hard and honest and rescue ourselves.

we do not take other peoples money, we are honest and hard working. (you see what i did here? … yes, i mentioned it twice)

you can explain YOUR type of business-rescue-while-taking-no-responsibility to …. …. well, i do not want to get moderated … …

There’s a reason why wall street banks were despised.. This is the same reason. Taxpayer money as a fallback.

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