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| Advances and impairment provisions analysis |
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Gross
advances |
Non-performing loans (NPLs) |
Total
impairment
provisions |
NPL
coverage |
Bad debts
written off
(note 1) |
| R million |
R million |
%
of gross
advances |
%
of gross
advances |
% |
R million |
| 30 September 2007 |
|
|
|
|
|
|
| Retail |
8 248 |
1 988 |
24,1 |
15,7 |
65,0 |
665 |
| Mining |
925 |
294 |
31,8 |
21,8 |
68,7 |
27 |
| Credit card |
466 |
62 |
13,3 |
10,9 |
82,3 |
0 |
| Payroll |
462 |
171 |
37,0 |
19,9 |
53,8 |
(32) |
| Standard Bank JV |
256 |
76 |
29,7 |
18,8 |
63,2 |
51 |
| Lending portfolio |
10 357 |
2 591 |
25,0 |
16,3 |
65,0 |
711 |
| Pay down portfolio |
533 |
413 |
77,5 |
38,8 |
50,1 |
(162) |
| Total |
10 890 |
3 004 |
27,6 |
17,4 |
63,0 |
549 |
| 30 September 2006 |
|
|
|
|
|
|
| Retail |
5 474 |
1 394 |
25,5 |
18,0 |
70,9 |
411 |
| Mining |
748 |
191 |
25,5 |
17,9 |
70,2 |
80 |
| Credit card |
73 |
3 |
4,1 |
2,7 |
66,7 |
0 |
| Payroll |
494 |
179 |
36,2 |
18,0 |
49,7 |
(14) |
| Standard Bank JV |
383 |
59 |
15,4 |
11,5 |
74,6 |
47 |
| Lending portfolio |
7 172 |
1 826 |
25,5 |
17,5 |
68,8 |
524 |
| Pay down portfolio |
555 |
387 |
69,7 |
32,1 |
46,0 |
(69) |
| Total |
7 727 |
2 213 |
28,6 |
18,6 |
64,8 |
455 |
|
Note 1
Bad debts written off are stated net of bad debts rehabilitated. |
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| Non-performing loans and impairment provisions |
NPLs increased by R791 million, or 36%, to R3 004 million
(2006: R2 213 million), against a 41% growth in gross
advances.
Total NPLs (including paydown books) as a percentage of
advances at 27,6%, has reduced from 28,6% at
30 September 2006, although this is largely due to the
recent strong growth in the advances base on which NPLs
have not yet fully emerged.
ABIL believes that NPLs will rise moderately over the next few
years in line with the group's growth and risk appetite, but will
remain within the targeted range of 25% to 30% of advances
over the longer term. The chart below shows the NPL to
gross advances trend for the portfolios excluding the paydown
books (Saambou and Persal) over the last five years. |
| |
| NPL trends – lending books |
 |
| |
The graph below reflects the monthly and cumulative
projected cashflows as well as the actual cashflows received
over the last 12 months based on the NPL portfolio and
IAS 39 model as at 31 August 2006. This shows that the
group collected approximately R62 million more cash than
the expected R367 million over the
12 months.
As a result of the actual cashflow experience on NPL
portfolios exceeding those projected under the IAS 39
provisioning models, NPL coverage has decreased from
64,8% in September 2006 to 63,0%. |
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| Cash received from NPLs: model vs actual
IAS 39 – NPLs as at August 2006 |
 |
| |
The group is comfortable that the IAS 39 provisioning
models introduced in 2003 have proven to be robust in
predicting cashflows and thus ensuring that appropriate
provisions are maintained.
Bad debt write-offs as a percentage of average advances at
5,9% (2006: 6,4%) remains below the average income
statement charge of between 8,5% and 9,5%. This is partly
due to the fact that the loan portfolios have grown strongly
over the last two years and thus whilst the denominator has
grown, there is an approximate 24-month lag for the
respective bad debt write-offs to flow through.
In addition, with the introduction of IAS 39 in 2006, and given
the fact the group had too aggressively written off loans in
prior periods, ABIL amended its credit accounting rules in that year to ensure that loans with recovery potential are not
written off too early and the group also rehabilitates (reinstates
back onto the balance sheet, with appropriate provisions)
loans that have previously been written off and are
subsequently receiving cash receipts above defined criteria.
During the current year, the group rehabilitated onto the
balance sheet, R405 million of loans that were previously
written off (2006: R279 million), with associated provisions
of approximately 60%. This had the effect of reducing the
bad debt write-offs to 5,9% (2006: 6,4%) from a gross
write-off rate of 10,3% (2006: 10,3%). Given the above,
cash recoveries on the remaining written off loans were
lower at R193 million
(2006: R219 million). |
| |
| Vintages |
The group tracks vintages as a better and more immediate
measure of portfolio risk than non-performing loans. Vintage
curves track each month's new loans as a discrete portfolio
and plot the cumulative proportion of each portfolio that
migrates into various levels of default status, as measured
by the contractual number of missed instalments. ABIL
defines an NPL as a loan with more than three instalments
in arrears.
In order to reflect more clearly the recent vintages, older
vintages have been coloured grey in the graph. The more
recent vintages have risen as the effect of the changes
introduced by the NCA to debit order collections processes
became more apparent. This effect has been in line with the
group's expectations and pricing model assumptions. The
group will continue to calibrate its underwriting criteria
based on the experience of the vintage curves as they
unfold. |
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| Vintage graph – African Bank (more than 3 missed instalments) |
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