African Bank Holdings reports net loss of R135m
AFRICAN Bank Holdings (ABH) yesterday reported a net loss after tax of R135 million for the six months to the end of March, as the Covid-19 pandemic affected the bank’s clientele.
However, this interim loss was significantly better than the R358m loss recorded in the same period last year.
It said the upfront higher credit impairments of R1.9 billion raised a year ago were sufficient to account for the increased risk of default, while the insurance entity increased its profits.
The economy continued to be negatively impacted by the stringent national lockdown measures well into the first half of the 2021 financial year.
However, African Bank Group, which is a 100 percent subsidiary of ABH, reported a return to profitability in the six-month period.
The African Bank Group reported an interim profit of R152m for the six months to the end of March, compared with a reported loss of R158m for the same period last year.
It said this was mainly as a result of upfront provisioning raised a year ago being sufficient to account for the increased risk of default brought about by the Covid-19 pandemic. This was also bolstered by a 51 percent increase in profits in the insurance entity to R251m by the end of March, from R146m in the same period last year.
The bank said disbursements of personal loans continued to be subdued because of the ailing local economy and the continued conservative approach to granting credit.
Disbursements of R4.23bn dropped materially to R2.54bn in the second half of last year, but have recovered somewhat to R3.36bn in the first half of this year.
Group chief financial officer Gustav Raubenheimer said the actions taken over the past six months were driven by uncertainty surrounding the pandemic and the macro economic challenges.
“We have focused on managing the factors within our control to return to profitability in the short term, while proactively seeking out opportunities to allow us to grow and excel in the longer term,” he said.
The bank’s operating costs were negatively impacted, as they rose 12 percent after it paid R75m as a result of section 189 severance packages to 429 retrenched members of staff.
The 14 percent reduction in staff enabled the team to right-size core functions and strip out unnecessary costs, the bank said.
Operating costs were also knocked by the resumption of the long-term incentive provision, and the indirect tax charge increasing substantially because of a change in the VAT apportionment ratio.
Despite a challenging operating environment, the group’s balance sheet remained liquid, with available cash resources increasing 48 percent to R8bn, from R5.4bn a year ago.
Ashburton Investments’ chief investment officer, Patrice Rassou, said African Bank was on a positive trajectory, as it managed to reduce its debt burden by R2bn to just under R1bn.
“I think like the other banks they have been very conservative, and this year we are starting to see definite signs of improving, or better outcomes,” Rassou said. “It’s good news, although there is a bit of anxiety about the third wave.”