| Thu 7 Aug 2003, 9:38 | | Quarterly operational update |
|
African Bank Investments Limited -
African Bank Investments Limited
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
Share code: ABL
ISIN: ZAE000030060
African Bank Investments Limited Quarterly operational update for the third
quarter ending 30 June 2003
1. INTRODUCTION
In order to communicate operating performance more regularly than the six-
monthly statutory reporting periods, African Bank Investments Limited ("ABIL")
publishes quarterly operational updates. These updates focus primarily on the
size and composition of the advances book as well as the levels of non-
performing loans ("NPLs") and provisions, which together constitute the primary
drivers of profitability in the group. It is important to note that while the
update gives an indication of these factors as well as any other pertinent
issues, these do not necessarily reflect overall profitability levels of the
group.
ABIL distinguishes between "lending books", being advances books in which
lending is continuing and "pay down books", being books that are being unwound
and in which no new lending is taking place. This is done in order to facilitate
enhanced disclosure regarding asset quality and growth, given the significant
changes that have taken place in the ABIL advances portfolios over the last
three years.
2. MARKET CONDITIONS
Market conditions have continued to improve steadily over the past quarter.
Lower inflation, interest and tax rate cuts and increasing financial discipline
contributed to a general easing of the financial position of our clients. This
combined with enhanced credit underwriting caused the credit default rate on new
loans to remain significantly below that of the equivalent period in 2002. Lower
default rates have allowed the group to relax its credit criteria marginally,
which has translated into increased sales on the back of the strong demand for
credit.
NPLs continued to improve over the past quarter, down from R2 989,6 million in
September 2002 to
R2 713,8 million in June 2003, a fall of R275,8 million. Credit quality
indicators continue to support a further reduction in NPLs.
Provision coverage to NPLs has reduced slightly to 77,0% (Sept 2002: 79,5%) as a
result of higher write-offs of loans that were fully provided for, and better
recovery rates on remaining non-performing loans.
The total advances portfolio declined by 10,5% over the nine months. Excluding
the paydown books, advances growth in the lending books of African Bank Retail
and Specialised Lending was 3,7% for this period.
ABIL remains well positioned to deliver its targeted returns on assets and
equity, thereby generating real shareholder value.
3. CREDIT RATING
CA-Ratings announced on 30 July 2003 that they have upgraded their rating of
African Bank Limited, a wholly owned subsidiary of ABIL, to a A-(long-term) and
A1(short-term). The higher rating should have a positive effect on African
Bank"s funding cost over time.
4. GROSS ADVANCES
The table below sets out the composition of the gross advances book as at 30
June 2003 and the movements since 30 September 2002.
ABIL GROUP - ADVANCES ANALYSIS
% 30 June 30 September
R000"s growth 2003 2002
African Bank RETAIL (11,7) 5 485 204 6 212 131
Lending books 2,6 3 163 654 3 084 305
Payroll (16,7) 1 504 494 1 806 908
Retail/debit order 30,3 1 514 881 1 162 426
Standard Bank joint 25,5 144 279 114 971
venture
Pay-down books (25,8) 2 321 550 3 127 826
Payroll - Persal (29,1) 518 682 731 559
Saambou PLB (24,8) 1 802 868 2 396 267
Specialised lending (2,5) 930 275 954 509
Lending books 9,7 663 794 604 921
Credit Indemnity 13,4 279 774 246 711
Miners Credit Guarantee (0,8) 277 044 279 360
A1 taxi 51,6 101 266 66 797
AB Commerce - 4 184 -
Other (87,3) 1 526 12 053
Pay-down books (23,8) 266 481 349 588
Gilt Edged Management (26,6) 152 985 208 560
Services
African Contractor (19,5) 113 496 141 028
Finance
Total (10,5) 6 415 479 7 166 640
African Bank Retail advances fell by 11,7% in the nine months since September
2002, mainly as a result of the collection on the Persal and Saambou PLB books.
Excluding these, organic growth within the division"s lending portfolio was up
2,6% for the nine months. The trend towards more high yielding retail and less
payroll-based lending continued over the period. The advances book in the
Standard Bank joint venture have started to accelerate, with advances increasing
by 11,1% over the past quarter.
The Specialised Lending Division reduced its gross advance levels by 2,5% over
the period. The loan books of the two businesses that are being wound down
decreased by 23,8%, while the advances within the continuing businesses
increased by 9,7% or 13% annualised.
The following table sets out the movements in the African Bank Retail book over
the period. In addition, the table highlights the strong cash flow of the
division with over R3 billion being collected in the nine months.
ADVANCES ANALYSIS - African Bank Retail
Pay-down books
Lending Saambou
R000"s books Persal PLB Total
Gross 3 084 305 731 559 2 396 267 6 212 131
advances as
at 30
September
2002
New loans 1 534 469 - - 1 534 469
granted
Net receipts (1 150 753) (130 443) (395 832) (1 677
028)
Interest and 863 413 85 020 396 840 1 345 273
charges
accrued
Gross cash (2 014 166) (215 463) (792 672) (3 022
receipts 301)
Bad debts (311 839) (174 962) (197 567) (584 368)
written off
Balance as at 3 156 182 526 154 1 802 868 5 485 204
30 June 2003
Given the levels of NPLs and provisions, relatively high levels of write-offs
should be expected as the credit bubble unwinds and they will remain a feature
over the next few reporting periods. The sizeable write-offs also affect the
level of the advances book. Write-offs have reduced the book by R584,4 million
in the first nine months of this financial year, which is equivalent to 38,1% of
new loans granted.
5. NON-PERFORMING LOANS
African Bank Retail Saambou
(excl Saambou) PLB
R000"s Jun 03 Sep 02 Jun 03 Sep 02
Advances
Performing 2 348 698 2 435 268 702 602 1 014
808
Non-performing 1 333 638 1 380 596 1 100 1 381
266 459
Total 3 682 336 3 815 864 1 802 2 396
868 267
NPLs as a % of
total advances 36,2 36,2 61,0 57,7
Specialised
lending
Total
Jun 03 Sep 02 Jun 03 Sep 02
650 378 726 902 3 701 4 176
678 978
279 897 227 607 2 713 2 989
801 662
930 275 954 509 6 415 7 166
479 640
30,1 23,8 42,3 41,7
Non-performing loans fell by R66,3 million (2,4%) for the quarter, reducing NPLs
by R275,9 million or 9,2% for the nine months from 30 September 2002, from R2
989,6 million to R2 713,8 million. NPLs as a percentage of total advances
increased slightly from 41,7% to 42,3% as a result of the decline in the
advances book.
Non-performing loans within African Bank Retail division, excluding the Saambou
PLB declined by
R47,0 million over the three quarters while remaining constant as a percentage
of advances at 36,2%. NPLs in the Saambou PLB book fell by R281,2 million during
this period. As expected, the rapid pay down of the performing Saambou PLB have
caused NPLs as a percentage of advances to increase to 61,0% from 57,7% in
September 2002.
NPLs in Specialised Lending as a whole, increased by R52,3 million. NPLs in the
lending books reduced by R16,9 million or 14,8% over the period, while NPLs in
the pay-down books have increased by R69,1 million.
The total value of advances on which interest has been suspended as at 30 June
2003 was R1 200 million (Mar 2003: R1 192 million). The margins calculated using
the gross interest-bearing advances have improved over the period, as the mix in
the lending books continued to change towards high yielding products.
6. PROVISIONS
ABIL GROUP - ASSET QUALITY ANALYSIS
R000"s Jun 03 Mar 03 Dec 02 Sep 02
Advances
Performing 3 701 678 3 882 333 4 013 300 4 176 978
Non-performing 2 713 801 2 780 139 2 904 800 2 989662
Total 6 415 479 6 662 472 6 918 100 7 166 640
Provisions and
reserves
General 42 293 44 504 52 825 56 237
Specific 1 865 986 1 956 673 2 059 538 2 122 816
Stangen credit 101 421 101 041 98 392 87 388
life reserves
Total 2 009 700 2 102 218 2 210 755 2 266 441
provisions
Other 80 342 87 923 92 740 109 464
insurance
coverage
Total 2 090 042 2 190 141 2 303 495 2 375 905
provisions and
reserves
Ratios (%)
NPLs as a % of 42,3 41,7 42,0 41,7
total advances
Total 77,0 78,8 79,3 79,5
provisions as
% of NPLs (NPL
cover)
Specific 29,1 29,4 29,8 29,6
provisions as
% of total
advances
General 0,7 0,7 0,7 0,8
provisions as
% of total
advances
Credit life 2,8 2,8 2,8 2,7
reserves as %
of total
advances
General 0,8
provisions as
a % of total
advances
Total 32,6 32,9 33,3 33,1
provisions and
reserves as a
% of total
advances
Bad debt write- 13,0 11,4 9,7 12,2
offs as % of
average gross
advances
Provisions to gross advances remained steady at 32,6% with coverage being
maintained at constant levels. Write-offs were an annualised 13%, slightly
higher with the 12,2% achieved in the 2002 financial year.
7. CREDIT QUALITY INDICATORS
Vintage curves track each month"s new loans and plot the cumulative proportion
of that portfolio that migrates to non-performing status. The latest vintage
curves are set out below.
NPC 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2
%
Jan 0. 5. 7. 10. 11 13 14 14 16 16 17 17 18 18 18 17 17 17 17 17 1
"01 7% 4% 4% 1% .4 .3 .0 .5 .5 .7 .3 .7 .2 .0 .3 .8 .8 .5 .3 .0 .
% % % % % % % % % % % % % % % % %
Feb 0. 3. 5. 7.6 9. 11 10 14 13 15 14 16 14 16 14 16 14 16 14 16 1
"01 1% 3% 9% % 2% .0 .8 .1 .6 .5 .3 .4 .9 .9 .9 .8 .5 .6 .3 .3 .
% % % % % % % % % % % % % % % %
Mar 0. 5. 7. 9.5 10 11 13 14 15 15 15 15 16 16 16 15 15 15 15 15 1
"01 4% 4% 2% % .6 .1 .7 .1 .1 .4 .6 .9 .2 .1 .1 .9 .7 .6 .5 .0 .
% % % % % % % % % % % % % % % % %
Apr 0. 4. 7. 9.8 10 13 13 14 14 15 14 16 15 16 15 16 14 16 14 16 1
"01 3% 8% 9% % .5 .3 .3 .8 .3 .8 .7 .6 .1 .7 .1 .6 .6 .4 .4 .1 .
% % % % % % % % % % % % % % % % %
May 0. 4. 6. 7.0 10 10 12 12 13 14 14 15 15 15 15 15 15 14 14 13 1
"01 5% 6% 5% % .2 .9 .5 .5 .9 .3 .7 .0 .3 .3 .2 .1 .0 .9 .7 .8 .
% % % % % % % % % % % % % % % % %
Jun 0. 4. 4. 9.1 9. 12 11 13 12 15 13 15 13 15 13 15 13 15 13 15 1
"01 3% 0% 7% % 8% .3 .4 .8 .8 .1 .4 .6 .8 .8 .5 .9 .4 .7 .0 .4 .
% % % % % % % % % % % % % % % %
Jul 0. 3. 9. 10. 12 12 14 14 14 14 14 15 15 15 15 15 15 15 15 14
"01 3% 2% 3% 5% .4 .6 .1 .3 .5 .7 .9 .2 .5 .4 .4 .2 .1 .1 .1 .1
% % % % % % % % % % % % % % % %
Aug 0. 5. 7. 9.7 10 11 11 13 13 14 13 15 14 16 14 16 14 16 14
"01 4% 1% 2% % .1 .8 .5 .5 .0 .6 .8 .4 .3 .1 .8 .2 .8 .5 .9
% % % % % % % % % % % % % % %
Sep 0. 4. 7. 9.0 11 11 12 13 14 14 15 15 16 16 16 16 16 16
t"0 3% 9% 5% % .2 .5 .9 .2 .4 .7 .3 .6 .0 .2 .3 .4 .5 .2
1 % % % % % % % % % % % % % %
Oct 0. 3. 5. 8.0 9. 11 11 13 13 14 14 15 14 16 15 16 15
"01 5% 9% 8% % 4% .3 .7 .1 .4 .5 .0 .7 .8 .0 .1 .2 .0
% % % % % % % % % % % %
Nov 0. 2. 5. 8.0 9. 11 12 13 13 14 14 15 15 15 15 15
"01 3% 9% 5% % 8% .5 .2 .5 .9 .4 .9 .5 .5 .7 .7 .8
% % % % % % % % % % %
Dec 0. 3. 7. 9.9 11 12 13 14 14 15 14 16 14 16 14
"01 3% 8% 1% % .4 .8 .5 .6 .2 .7 .8 .0 .8 .0 .6
% % % % % % % % % % %
Jan 0. 3. 5. 7.6 9. 10 11 11 12 12 13 13 13 13
"02 3% 0% 6% % 2% .6 .4 .6 .6 .9 .1 .2 .3 .3
% % % % % % % % %
Feb 0. 2. 5. 7.1 8. 10 10 12 12 13 12 13 12
"02 1% 5% 0% % 6% .4 .5 .3 .1 .3 .7 .8 .7
% % % % % % % %
Mar 0. 2. 4. 6.2 7. 8. 9. 10 11 11 12 12
"02 1% 2% 2% % 6% 6% 8% .8 .1 .9 .0 .5
% % % % %
Apr 0. 2. 4. 6.3 7. 9. 9. 10 10 12 11
"02 1% 0% 2% % 1% 2% 5% .9 .9 .1 .6
% % % %
May 0. 2. 3. 5.1 6. 8. 8. 9. 10 10
"02 2% 1% 7% % 9% 1% 9% 8% .2 .9
% %
Jun 0. 1. 2. 4.6 5. 7. 7. 9. 9.
"02 1% 2% 3% % 6% 2% 6% 0% 0%
Jul 0. 1. 2. 4.5 5. 7. 8. 8.
"02 1% 1% 9% % 9% 0% 0% 9%
Aug 0. 1. 2. 4.1 5. 7. 7.
"02 1% 2% 6% % 4% 0% 5%
Sep 0. 0. 2. 3.6 4. 6.
t"0 1% 9% 1% % 8% 3%
2
Oct 0. 1. 2. 4.5 5.
"02 1% 3% 8% % 7%
Nov 0. 1. 3. 4.8
"02 1% 3% 0% %
Dec 0. 1. 3.
"02 1% 6% 2%
Jan 0. 0.
"03 1% 9%
Feb 0.
"03 0%
Since the previous year-end, the vintage curves have continued to show improving
trends and are projecting peaks between 12% and 14%. This improvement was a
result of both holding back credit supply and an improving market environment as
customers manage more acceptable levels of credit.
The most recent vintage trends support a slow and careful relaxation of credit
supply, which has started to translate into steady growth in advances. The
relaxation of the credit criteria has caused an expected slight increase in
risk. This process will continue to be carefully managed.
Monthly administration orders stabilised at 1 483, down from approximately 2 300
in September 2002. Persal cancellations continue to decline from a peak of 7 502
in September 2001 to 127 in June 2003 and the collection of this book is
performing well.
8. SPECIALISED LENDING
The divisionalisation of the Theta Investments" businesses is progressing well.
The divisionalisation of Credit Indemnity and A1 Taxi have been finalised, while
the minority stakes in Miners Credit Guarantee have been bought out. Non-core
assets have largely been disposed of and this process should be finalised by
year-end. Two businesses, GEMS and ACFC are being wound down. It is expected
that the integration will unlock cost efficiencies and surplus capital.
9. COLLECTIONS
The average collection rate on the Saambou PLB remains above 70%, with the
latest monthly collection rate at 59,5%, still running ahead of original
projections. ABIL utilised the better than expected cash flow to make an early
repayment of the final instalment on the acquisition, which was due in October
2003.
The new Collections division is progressing well, while the rehabilitation of
overlapping clients is also gaining momentum.
10. Costs
ABIL has in the past commented that whilst it operates at a comparably
attractive cost-to-income ratio, it also manages costs on a cost-to-assets
basis. This latter ratio has climbed from 17,9% in September 2002 to 19,0% by
March 2003, as overall advances levels have declined. ABIL has initiated certain
strategies including the integration of the Collections business and the
divisionalisation of the Specialised Lending operations, that will result in
this ratio beginning to decline.
11. FINANCIAL SERVICES CHARTER
The development of the financial services charter is progressing well. Abil is
confident that the delivery of the charter will be beneficial to the industry
and the country as a whole and is well poised to meet the challenges arising
from the charter.
On behalf of the board
7 August 2003
African Bank Investments Limited (Incorporated in the Republic of South Africa)
(Registered bank controlling company) (Registration number 1946/021193/06)
Share code: ABL ISIN: ZAE000030060
Registered office: 59 16th Road, Midrand, 1685
Share transfer secretaries: Computershare Limited, 70 Marshall Street,
Johannesburg, 2001, PO Box 1053, Johannesburg, 2000
Board of directors: Executive directors: L Kirkinis (Chief Executive Officer), G
Schachat (Deputy Chairman), JA de Ridder, AG Herselman, TM Sokutu, DF Woollam
Non-executive directors: AS Mabogoane (Chairman), DB Gibbon, BD Goba, JJ Kekane,
SA Levitt, R Naidoo, BJT Shongwe, BPF Steele, GZ Steffens (German), DFG Tembe
(Mozambican), A Tugendhaft
Group Secretary: S Martin
This announcement is available on the African Bank Investments Limited website
at: http://www.africanbank.co.za
Date: 07/08/2003 07:05:53 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
