| Mon 2 Aug 2004, 9:23 | | ABIL - Operational for the third quarter ending 30 |
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ABIL - Operational for the third quarter ending 30 June 2004
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
(`ABIL`)
Operational for the third quarter ending 30 June 2004
1. INTRODUCTION
In order to communicate operating performance more regularly than the six-
monthly statutory reporting periods, ABIL publishes regular 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. 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 few
years.
2. MARKET CONDITIONS
Market conditions have remained steady over the past three months. Both the
retail and credit sectors appear buoyant with significant growth in business
volumes being reported throughout these industries. The positive environment
continued to translate into higher sales growth and satisfactory credit quality.
Sales for the first three quarters of 2004 were 30% higher than that of the
equivalent period in 2003. ABIL is satisfied that the current level of sales
will generate appropriate returns without unduly increasing risk, and
accordingly, it does not foresee a significant increase in sales levels beyond
normal seasonal trends in the near future. In line with seasonal trends, sales
of R1 070 million for the quarter to 30 June 2004, were higher than the R1 013
million of the previous quarter, but lower than the R1 183 million for the
December quarter, which is traditionally the highest sales period of the
financial year.
Total advances declined by an annualised 3% as the reduction in the pay down
books marginally exceeded the growth in new sales. The change in the composition
of the portfolio has started to slow, keeping margins steady over the quarter.
The default rates on the higher turnover matched expectation and accordingly
NPLs continued to improve over the past quarter. NPLs declined by R92 million to
R2 327 million in the past three months, in line with the R206 million reduction
for the six months to March 2004, reflecting a steady downward trend.
Provision coverage to NPLs remained conservative at 74,5% (September 2003:
74,7%), while bad debt write-offs were maintained at similar levels to 2003.
The group held non-statutory cash reserves of R971 million after the payment of
the interim dividend and prior to raising the R1 billion ABL3 bond in July 2004
in preparation for the R1 billion ABL1 bond maturing in February 2005. The group
expects to continue to build up cash over the remainder of the year.
African Bank was assigned a national scale credit rating from Moody`s Investors
Service for the first time in June 2004. The rating of A2.za/Prime-1.za for long
and short-term, respectively, was an upgrade to the bank`s previous long-term
rating.
ABIL is confident that it should be able to deliver its targeted returns on
assets (10%) and equity (30%) this financial year, thereby continuing to
generate real shareholder value.
3. SALES
Although monthly sales volumes for 2004 have mirrored historical seasonal
trends, sales have stepped up from around R280 million a month for the first
nine months of 2003 to R360 million a month for 2004, with the current quarter`s
sales 24,1% higher than the equivalent quarter for 2003. The lift in sales was
achieved through a combination of increased volumes and average loan sizes. In
African Bank volumes picked up by 28% while the average loans size remained
fairly flat at R6 100. In Specialised Lending volumes reduced slightly but
average loans size increased by 38% to R1 700.
SALES VALUE
2004 2003
% 9 mths 3 mths 3 mths 3 mths 9 mths
R million growth Total Jun 2004 Mar 2004 Dec 2003 Total
African Bank 32 2 043 666 644 733 1 553
RETAIL
Payroll (39) 211 64 66 81 345
Retail debit 47 1 579 514 494 571 1 075
order
Standard Bank 90 254 89 84 81 133
joint venture
Specialised 28 1 224 404 369 450 953
lending
Credit Indemnity 23 683 218 209 255 553
Miners Credit 33 448 148 131 169 336
Guarantee
Commercial 46 94 38 29 26 64
Vehicle Finance
Total 30 3 267 1 070 1 013 1 183 2 506
Monthly sales history Graph-Please refer to the press release for the graph
4. GROSS ADVANCES
The table below sets out the composition of gross advances as at 30 June 2004
and the quarterly movements since 30 September 2003.
ADVANCES ANALYSIS
YTD As at
annualised 30 Jun
R000 % growth 2004
Lending books 14 4 566 174
African Bank Retail 10 3 623 337
Payroll - corporates (39) 1 026 179
and other
Retail debit order 44 2 343 069
Standard Bank joint 72 254 089
venture
Specialised Lending 33 942 837
Credit Indemnity 33 394 108
Miners Credit 20 366 672
Guarantee
Commercial Vehicle 55 161 648
Finance
ABCommerce 410 20 409
Pay down books (34) 1 623 921
African Bank Retail (35) 1 418 155
Persal (40) 320 763
Saambou PLB (34) 1 097 392
Specialised Lending (22) 205 766
Gilt Edged (27) 107 396
Management Services
African Contractor (17) 96 800
Finance
Quatro & Safrich 2 1 570
Total advances (3) 6 190 095
Less: Non-interest- (31) (1 081 779)
bearing advances
Gross interest- 6 5 108 316
bearing advances
ADVANCES ANALYSIS
As at As at As at
31 Mar 31 Dec 30 Sept
R000 2004 2003 2003
Lending books 4 493 827 4 381 759 4 136 191
African Bank Retail 3 594 552 3 533 759 3 381 307
Payroll - corporates 1 152 490 1 331 975 1 454 763
and other
Retail debit order 2 212 968 2 006 483 1 761 261
Standard Bank joint 229 094 195 301 165 283
venture
Specialised Lending 899 275 848 000 754 884
Credit Indemnity 375 856 349 019 315 641
Miners Credit 356 457 352 302 319 836
Guarantee
Commercial Vehicle 140 577 128 004 114 399
Finance
ABCommerce 26 385 18 675 5 008
Pay down books 1 777 879 2 016 045 2 177 906
African Bank Retail 1 558 810 1 784 014 1 930 597
Persal 355 206 415 899 457 543
Saambou PLB 1 203 604 1 368 115 1 473 054
Specialised Lending 219 069 232 031 247 309
Gilt Edged 116 315 123 965 135 220
Management Services
African Contractor 101 182 106 437 110 546
Finance
Quatro & Safrich 1 572 1 629 1 543
Total advances 6 271 706 6 397 804 6 314 097
Less: Non-interest- (1 135 361) (1 234 038) (1 415 300)
bearing advances
Gross interest- 5 136 345 5 163 766 4 898 797
bearing advances
Payroll loans fell (-39%) as the shift into higher margin, lower value retail
loans continued (+44%). The lending books increased as a proportion of total
advances to 74% from 72% in the last quarter.
African Bank Retail`s advances on the lending books grew an annualised 10% for
the nine months, while the Specialised Lending division increased its advances
on its lending books by 33% over the same period. The pay down books declined
rapidly through a combination of recoveries and write-offs that have reduced
this portfolio by R554 million in nine months.
Gross interest-bearing advances have grown by 6% on a year-to-date basis, but
have remained flat over the last three quarters.
The total value of advances on which interest has been suspended as at 30 June
2004 fell 31% to R1 082 million (September 2003: R1 415 million). The reduction
was as a result of write-offs, cash received on these loans during the period
and lower levels of new advances qualifying for interest suspension.
Gross advances portfolio mix Graphicor-Please refer to the press release for the
graph
5. ASSET QUALITY
NPLs reduced by R298 million or 11% over the past nine months. NPLs as a
percentage of total advances decreased from 41,6% to 37,6%. Bad debts written
off were at similar levels to the equivalent period for 2003. Provisions to
gross advances reduced from 31,1% to 28,0%, in line with the reduction in NPLs.
Asset Quality analysis
ABIL Consolidated
YTD % 30 Jun 31 Mar 30 Sept
R million change 2004 2004 2003
Advances
Performing 4,7 3 863 3 852 3 689
Non-performing (11,3) 2 327 2 419 2 625
Total (2,0) 6 190 6 272 6 314
Provisions and reserves
Portfolio provisions 9,8 33 34 30
Specific provisions (11,9) 1 580 1 630 1 793
Stangen and MCG credit 15,9 105 102 91
life reserves
Total provisions 1 718 1 765 1 914
Other insurance coverage (67,7) 15 35 47
Total provisions and (11,6) 1 733 1 800 1 961
reserves
Ratios (%)
NPLs as a % of total 37,6 38,6 41,6
advances
Total provisions as % of
NPLs
(NPL cover) 74,5 74,3 74,7
Total provisions and 28,0 28,7 31,1
reserves as % of total
advances
Bad debt write-offs as % 13,5 13,7 13,1
of average gross
advances
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 measured by contractual number of missed instalments. Given the
high growth in sales over the last twelve months, ABIL has continued to focus
for this reporting period on an earlier vintage, i.e. for sales written over the
last year which have missed more than two instalments, in order to depict the
recent credit trends in finer detail.
ABIL previously indicated that vintages had fallen below the group`s risk
appetite levels and that it was going to take on more risk by opening up sales.
As reflected in the African Bank Retail chart below, the vintages have increased
by approximately 1% - 2% over this financial year, on the back of a 32% increase
in sales. The group is satisfied that the increased sales and concomitant
increase in margins have not been at the expense of unanticipated higher default
risk and the vintages have remained in a narrow band.
Vintage graph - African Bank Retail-Please refer to the press release for the
graph
(More than 2 instalments missed)
Data as at June 2004
On behalf of the board 02 August 2004
This announcement is also available on the
African Bank Investments Limited website at:
http://www.africanbank.co.za
Registered office: Transfer secretaries:
59 16th Road, Ultra Registrars (Pty)Ltd
Midrand, 1685 11 Diagonal Street
Johannesburg, 2001
Board of directors:
Executive directors: L Kirkinis (Chief Executive Officer), G Schachat (Deputy
Chairman), JA de Ridder, A Fourie, AG Herselman, MLD Marole, 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
Sponsor to ABIL:
Deutsche Securities (SA) (Proprietary) Limited
Date: 02/08/2004 07:00:22 AM Produced by the JSE SENS Department
