African Bank’s Net Advances Grow by 8%, Strong Capital Position and Liquidity Highlight Financial Stability

Some Milestones include:

Steady financial performance in a tough economic environment with a growing customer franchise and diversifying balance sheet set for further growth

The diversification of the African Bank Group balance sheet continues to progress well following the integration of acquisitions, and consists of:

Net advances of R34.4 billion (FY23: R31.8 billion), with solid growth of 8% in this financial year, with secured Business & Commercial making up 38% of our advances to customers and delivering the benefits contemplated from the acquisitions,

A stable funding base that has further diversified with business and retail deposits making up 92% (FY23: 87%) of total funding of R35.5 billion (FY23: R34.6 billion),

Significant liquidity with cash reserves, excluding statutory asset requirements, totalling R7.1 billion (FY23: R9.9 billion),

Strong capital adequacy position, with a total capital adequacy ratio of 31.4% (FY 23: 29.5%) bolstered by successful Tier 2 bond issuances, well exceeding our regulatory and internal minimums.

Although the tough operating environment in South Africa persists, there are early signs of green shoots and improvements. The Group reported a satisfactory net profit after tax for the twelve months ended 30 September 2024 of R523 million (FY 23: R521 million).

Reviewing the various elements of the Group’s operational performance:

Interest income declined by 4% to R7.0 billion (FY23: R7.3 billion), mainly because of the deliberate strategy of subdued growth in unsecured personal loans and the slower than expected conversion of the Business & Commercial approved loans. Further, the shift to the lower yielding credit card and overdraft products, together with the integration of the lower yielding secured lending in Business & Commercial resulted in the net interest margin declining to 9.7% (FY23: 10.9%),

Cost of funding continued to be well managed at 7.9% (FY23: 7.4%) notwithstanding that the average repo rate rising by 77 basis points over the financial year, and the addition of the more expensive Tier 2 funding,

Non-interest income (net of related card and transaction fee costs) grew by 14% to R1 537 million (FY23: R1 345 million) as usage of the transactional MyWORLD and credit card accounts by customers increased, and value-added services offered by the Group through the expanding Alliance partnership customer base were consumed,

Net insurance income increased by 14% to R821 million (FY23: R718 million), and include the IFRS17 related updates

Operating expenses were well contained and reduced by 1% compared to the prior year, with a cost to income ratio of 58.7% (FY23: 57.2%) as the group continues with its significant investment and integration phase, and

Credit impairment charges improved by 20% to R2 609 million (FY23: R3 262 million) resulting in a corresponding reduction in the credit loss ratio to 6.3% (FY23: 8.0%) due to the book diversification to secured lending, management’s actions of refining the credit granting criteria, leading to conservative disbursements, and improving the collections and rehabilitation processes.