ABIL produces solid earnings growth and will continue to build on a robust foundation for a sustainable future

Group financial highlights 
  • Improved return on equity to 20.0% from 18.4%
  • Stable tangible return on equity to 36.3% from 36.1%
  • Increased economic profit by 53% to R755 million (2011: R494 million)
  • Growth of 18% in headline earnings to R2.8 billion
  • 33% growth in advances to R53.0 billion, exceeding target 
  • Total funding increased 34% to R45.7 billion, in line with asset growth
  • Final ordinary dividend of 110 cents (2011: 100 cents) / Ordinary dividend of 195 cents

African Bank Investments Limited (“ABIL”) delivered a solid set of results underpinned by a continued positive response from customers to the group’s credit and retail products, a high repeat business demand for the brand and expanded footprint of African Bank through the EHL distribution network.  EHL delivered improved profit margins on the back of operational cost containment and further efficiencies.

ABIL met its targeted 20.0% return on equity and tangible return on equity of 36.3% and grew economic profit by 53% to R755 million.  Headline earnings increased by 18% to R2.8 billion as did headline earnings per share to 342,5 cents. Gross advances increased by 33% to R53.0 billion on the back of the growth in new business volumes and extension of term. Non-performing loans coverage was at 60.0%, relative to 60.9% in the prior year. The group increased its final dividend to 110 cps or a total dividend of 195 cents for the year.

The Banking unit which represents some 91% of the groups’ earnings, continued to deliver on an excellent track record, reporting a ROE of 22.9%. The Bank continued to focus on its target market of customers earning R15 000 per month and below while maintaining a stable asset quality. Higher employment costs were incurred due to staffing of the carve-outs and kiosks in certain of the retail stores as well as from increased collection costs due to higher volumes.  A slightly elevated bad debt charge from refinements in the write-off policy was realised in the latter part of the year.

EHL delivered a much improved 35% growth in headline earnings to R257 million. With a return on sales of 5.4%, return on equity of 9.4% the retail unit continued to experience good and improved operating leverage despite a 4.7% like to like growth in merchandise sales. Increased benefits of stronger margin and cost reductions were realised due to improved buying processes, integration of management structures and centralisation of distribution logistics networks and the development of smaller store formats.  The logistics network roll-out has been one of the key strategic projects in the Retail unit for the last 3 years. The Boksburg distribution centre went into full scale operation, a further three regional distribution centres were opened in Gauteng, Eastern Cape and Western Cape, while the Durban unit was completed and went live on 1 November for stock intake. 

The group and Bank’s wholesale funding structure is robust to withstand volatility through cycles and has improved its diversification across the domestic and international markets.  The group experienced significant balance sheet growth during the year with debt issuance in the international markets and with new South African investors, both through the treasury desk and under the local and international note programs. The Group meets regulatory capital requirements and is well positioned for Basel III capital adequacy requirements, while it proactively balances growth, solvency and shareholder returns.

CEO, Leon Kirkinis commented on the results, “We have managed to steer our operations successfully through the economic volatility during the year and have built a robust, well capitalised and flexible business to position us as the market leader in a larger, more competitive unsecured credit market”.

The embedded value in the advance book of R53.0 billion bodes well to sustain the business into the medium term future and the focus for 2013 has shifted to a sharper focus on returns rather than growth. The current strong capital ratios and liquidity profile, supported by expected earnings and further capital and debt raisings will enable the group to comfortably meet its returns objectives, remain solvent and cater for expected regulatory changes. The group expects advances to grow at an average compound rate of around 15%, and is targeting a return on equity of 21%  for the 2013 financial year.

Management remained vigilant and engaged in dialogue with regulators and credit providers concerning the sharp growth in unsecured lending within certain income brackets to manage the risk of oversupply of credit.  

Kirkinis noted, “We were pleased to note that the combination of increased regulatory scrutiny and heightened awareness by key players in the market has begun to curb excess supply of credit and that a slowdown of credit extension is evident in the most recent bureau information.”

The group is comfortable that risk remains well controlled, from the perspective of the economic environment, recent legislative and regulatory developments, as well as credit quality.

Kirkinis concluded, “We remain cognisant of our customers’ requirements as well as financial distresses in this deteriorating macroeconomic environment. We will continue to adapt our affordability and debt rehabilitation measures and processes accordingly as we strive to create responsible access to credit for South Africans in our target market”.


Leon Kirkinis; CEO 011 256 9239
Nithia Nalliah; CFO 011 256 9255

Vestor Media and Investor Relations
Louise Brugman, 083 504 1186


About African Bank
African Bank’s purpose is to impact people’s lives positively through the provision and access to credit led, risk-based financial services. We help our customers to affordably meet their needs, achieve their dreams and manage the unanticipated financial events that occur through life.

With 19 years of experience in unsecured loan origination, African Bank’s deep industry specific knowledge and application of robust risk metrics has enabled the Group to position itself as the largest provider of personal loans. 

African Bank funds itself primarily in the South African and foreign wholesale capital markets and, more recently, has initiated a retail fixed deposit offering, providing the bank with required diversification. The Bank provides significant comfort to its debt investors through its positive asset liability mismatch profile, where cash is received from loans advanced to customers on average before it is due to be repaid to the providers of funding, thereby generating surplus liquidity.