Lender African Bank has reported improved profit growth of nearly 40% as the number of loans it made to its retail clients grew to exceed pre-pandemic levels, boosting interest income .
The bank delivered its full-year financial results to the end of September 2022, showing that profit after tax rose 38% to R736 million, from R534 million previously.
Disbursed retail loans to the tune of more than R14. billion, a staggering 87% more than the previous year, when it lent R7.5 billion to clients.
The bank managed to significantly increase its loan book after it relaxed lending criteria early last year. When the Covid-19 pandemic hit, he took a prudent approach and tightened lending criteria, following a spike in bad loans, he said.
African Bank CEO Kennedy Bungane said the results demonstrate the bank’s efforts to strengthen its presence in the retail banking market.
That, he said, is “underpinned by our driving philosophy of building a customer-focused South African bank, a true bank for the people, by the people and serving the people.”
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Boding well for the company’s interest income, its gross advance balance rose 26%. This, together with a reduction in the cost of financing, resulted in the net interest margin increasing by 19%, to R4.7 billion.
“Strong growth in retail disbursements, coupled with the inaugural issuance of a corporate loan to a strategic business partner, has successfully addressed the declining trend in gross advances of previous years,” the bank said.
The company saw its net customer advance balance rise 38% to R22.6bn, while retail savings and investment deposits rose 15% yoy to R10.8bn. His MyWorld transactional balances increased 54% to R1.4 billion.
Against this backdrop, the group’s credit impairment charge increased by 7% to R1.4 billion, from R1.3 billion in the prior year.
He also said collections deteriorated, in part due to the industry-wide rollout of DebiCheck in October 2021, increased credit loss fees. DebiCheck is a new system where debit orders are electronically confirmed by customers. It was introduced to protect against abuse of debit orders and for consumers to control how money is withdrawn from their accounts.
“This increase has been offset by additional insurance benefit payments received from the insurer, which along with the change in cancellation policy and healing of qualified debt counseling loans, have decreased the charge,” they said. the banks.
This resulted in the average advance credit loss ratio improving to 4.8%, compared to 4.9% a year earlier. African Bank said client balances remain provisioned conservatively at a coverage ratio of 31.7%.
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