African Bank store in Cape Town. CEO Kennedy Bungane said: “Audacity has always been an African Bank trait. It takes audacity to defy the odds, which is what we have achieved with the evolution of African Bank from a mono-line credit lender to a fully-fledged retail and business bank.” Photo: Armand Hough/ Independent Newspapers
The fledgling African Bank Group massively grew the numbers of its retail and business banking clients in the year to September 30, and remained in robust shape despite taxed profit falling to R505 million from R736m due to higher credit risk impairments.
The Business Banking division contributed R682m in revenue in just 11 months. Group net revenue before impairments grew by 39% to R8 billion.
The results were negatively impacted by the Consumer Banking division customers who came under severe economic pressure due to rising food prices, transport inflation, and the load shedding crisis
The division’s credit loss ratio increased to 8%, from 4.9% in 2022. However, the full-year ratio was well down from 11.1% in the first half to March 2023, after more select credit policy and improved collections started previous October, started taking effect.
Business Banking group executive, Zweli Manyathi, said the number of staff in the business banking unit had grown from zero to 50, and it now comprised the frontline team, a small boutique investment bank, a commercial property finance team and would soon add a capital equipment asset finance operation.
The customer base expanded 158% to 4.1 million and the Consumer Banking division was taking on about 60 000 new customers per month. Over 1 million customers used the MyWORLD transactional account, Manyathi said in a telephone interview.
The Business Banking division was already serving 19 000 business customers across investments and secured loans.
The bank’s results mark the first time that it was released as a fully-fledged retail and business bank.
CEO Kennedy Bungane said the consumer division services 1.9 million customers who have credit products, transactional bank accounts, savings products and funeral and credit life insurance products. A further 2.1 million customers access products through alliance partner networks with Shoprite Checkers, Lesaka and MTN’s Momo.
Manyathi said they were not likely to make any more major acquisitions in the new year, but the acquisitions of Sasfin’s commercial property finance advances book and its capital equipments business, would be integrated into African Bank through the year.
A highlight of the results was the 41% growth in the net advances book, which reached R32 billion. This was underpinned by the secured business banking loans, which now make up over a third of the total loans to customers.
Bungane said: “Audacity has always been an African Bank trait. It takes audacity to defy the odds, which is what we have achieved with the evolution of African Bank from a mono-line credit lender to a fully-fledged retail and business bank.”
The bank had diversified its funding base. Retail and business deposits had become a major part of funding, now accounting for 87% of the R35bn.
Chief financial officer Anbann Chetti said the liquidity and capital position was strong, with cash reserves of R10bn. This had enabled the bank to undertake two significant acquisitions n the past year while maintaining a capital adequacy of 30%.
Interest income from the advances book grew by 28% to more than R7bn, with a net interest margin of 11%. Despite an increase in the repo rate, the bank managed to reduce its cost of funding to 7.3%.
Non-interest income surged 144% to R1.6bn, driven by an increased customer base. Insurance profits also rose significantly by 92% to R670m.
“We will work hard at growing our business banking footprint, achieving scalability by cultivating strong relationships with our customers and expanding our reach into new markets,” said Bungane.
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