| Thu 3 Feb 2005, 9:03 | | Operational update for the first quarter Dec 04 |
|
African Bank Investments Limited - Operational update for the first quarter
ending 31 December 2004
African Bank Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1946/021193/06)
ISIN: ZAE000030060
(Share code: ABL).
Operational update for the first quarter ending 31 December 2004
1. INTRODUCTION
African Bank Investments Limited (`ABIL`) publishes regular operational updates,
which focus primarily on recent sales trends, the size and composition of the
advances book and asset quality. 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.
2. OVERVIEW
Economic conditions in our target markets have remained positive over the past
three months and this translated into continued steady sales growth while the
credit quality of the overall book has remained stable.
Sales for the first three months of 2005 were 15% higher than the equivalent
three months of 2004 and 19% higher than the preceding quarter, in line with
typical seasonal trends.
Total advances at R6 323 million, grew 3% in the three months from September
2004 to December 2004 and were at similar levels to the R6 398 million in
December 2003. Gross interest-bearing advances grew by 4% in the quarter to R5
315 million.
ABIL has indicated previously that it expects margins over the next year to
still increase moderately from 2004 levels as the composition of the book
continues to change, before they start to flatten and eventually decline as a
result of the price differentiation strategies implemented within the group.
Margins for the first quarter of financial 2005 were higher than those of the
last quarter of 2004, and also slightly higher than expected due to the stronger
than budgeted sales.
NPLs maintained their steady downward trend and reduced by R102 million to R2
144 million in the quarter. NPL coverage was maintained at 73,7%.
Operating costs have continued to reduce in line with expectations and the group
remains on track to deliver its 17% cost-to-advances target by 2006.
The group held non-statutory cash reserves of R1 770 million after the payment
of the final and special dividends but before redemption of R631 million of ABL1
bonds that mature in February 2005.
Given the current operational and economic trends, ABIL is confident that it
remains on track to deliver at least its targeted returns on assets (10%) and
equity (30%) for this financial year.
3. SALES
% Sales value Rm
change 2005 2004
2005 3 3 months 3 months 3 3
months months months
vs to to to to to
2004 Dec 04 Total Sep 04 Jun 04 Mar 04 Dec 04
African
Bank -
retail 26 719 2 155 577 514 494 571
debit order
African
bank -
payroll (17) 67 270 59 64 66 81
21 786 2 425 636 577 560 652
Credit (2) 251 910 228 218 209 255
Indemnity
Miners 12 189 595 148 148 131 169
Credit
Standard 15 93 349 95 89 84 81
Bank JV
Commercial
Vehicle
Finance 78 47 138 44 38 29 26
Total 15 1 366 4 418 1 151 1 070 1 013 1 183
Sales for the three months to 31 December 2004 at R1 366 million, were 15%
higher than the R1 183 million achieved in the corresponding three months of the
previous financial year. African Bank retail debit order products achieved a 26%
growth in the period as a result of strong demand and the early signs of the
benefit of various targeted sales strategies implemented over the last six
months, including changes to footprint and distribution channels, price and
product differentiation and streamlined IT systems for loan origination. The
division experienced slower sales in October 2004 while the implementation of a
new front-end was rolled out, but the backlog was cleared by the end of November
2004.
The payroll product channel continued to be rationalised, resulting in a 17%
decline in sales from the same period last year, although this has remained
fairly steady relative to the previous two quarters. We would expect payroll
sales to remain at these levels going forward.
Credit Indemnity`s sales were flat as a result of a change in it`s monthly cut-
off dates in the equivalent quarter of 2004, which added an additional R25
million of sales to that quarter. On an equivalent sales days basis, its sales
were 9% higher in 2005 than in 2004. The strategy to shift focus to longer-term
loans for low risk clients has resulted in the sales having a longer average
term and hence the book has continued to grow. The average loans size for
Credit Indemnity has increased from R1 498 in December 2003 to R1 745 in
December 2004 and 12 and 18-month products now represent 31% of its sales,
relative to the 23% in the first quarter of financial 2004.
Both Miners Credit and the Standard Bank JV performed in line with expectations,
while Commercial Vehicle Finance grew sales by 78% off a low base, assisted by
the clarification and extension of the taxi recapitalisation programme.
Loan sizes have been increasing consistently over the past five quarterly
periods (due primarily to longer loan terms), with the average loan size across
the group increasing from R2 987 in December 2003 to R3 756 in December 2004.
The December quarter is traditionally the highest sales period of the financial
year, and based on the experience to date the group expects sales for the rest
of 2005 to follow established seasonal patterns, and is confident that it will
achieve its previously stated sales growth target for the year in the 10% to 20%
range.
Monthly sales history.
Please refer to press release for the graph.
4. GROSS ADVANCES
As a result of the seasonally high sales for the quarter, the lending books grew
by 8% in the last quarter, while the pay down books declined as expected by 12%,
resulting in a 3% increase in total advances. The growth in each of the segments
within the lending books is closely correlated with the sales trends as
described above. Current indications are that the guidance provided at the end
of 2004 for a 10% - 15% growth in the lending books for 2005 remains on track.
The table below sets out the composition of gross advances as at 31 December
2004 and the quarterly movement since 30 September 2004.
ADVANCES ANALYSIS
% As at As at
Rm change 31 Dec 30 Sep
04 04
Lending books 8 5 046 4 685
African Bank - retail debit 12 2 820 2 511
order
African Bank - payroll (7) 864 934
Credit Indemnity 4 419 403
Miners Credit 15 434 379
Standard Bank JV 8 296 273
Commercial Vehicle Finance 14 213 187
Pay down books (12) 1 277 1 444
Persal (7) 280 302
Saambou PLB (15) 796 931
Gilt Edged Management Services (6) 93 99
African Contractor Finance (1) 93 94
ABCommerce (14) 15 18
Total advances 3 6 323 6 129
Less: Non interest-bearing (2) 1 008 1 029
advances
Gross interest-bearing advances 4 5 315 5 100
The lending books as a proportion of total advances increased from 68% twelve
months ago to 80%, which has continued to have a positive impact on both margins
and asset quality.
5. ASSET QUALITY
NPLs declined a further R102 million in the quarter and as a percentage of total
advances decreased from 36,6% in September 2004 to 33,9% as at 31 December 2004.
Bad debts written off as a percentage of advances increased marginally relative
to 2004 as the writing off of loans from 2001/2 was accelerated. Overall
provision coverage remained steady at 73,7%.
ASSET QUALITY ANALYSIS
% As at As at
Rm change 31 Dec 04 30 Sep 04
Advances
Performing 8 4 179 3 883
Non-performing (5) 2 144 2 246
Total 3 6 323 6 129
Provision for impairment and
reserves
Portfolio provisions 14 35 31
Specific provisions (6) 1 421 1 514
Stangen & Miners credit life 11 125 112
reserves
Total provisions for (5) 1 580 1 657
impairment and reserves
Ratios % %
NPLs as a % of total advances 33,9 36,6
Total provision as a % of 73,7 73,8
NPLs (NPL coverage)
Total provisions and reserves 25,0 27,0
as % of total advances
Bad debt write-off as % of 14,2 13,5
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 default status, which
is defined as more than three cumulative missed instalments.
As reflected in the African Bank Retail chart below, the vintages have over the
past two years remained in a tight band of less than 3% variation. The vintages
for the last year have been at the upper end of the range as a result of a
deliberate strategy to cautiously increase the group`s risk appetite. This has
had the positive benefit of increased sales and better cost absorption. The
increases are within the tolerances set by the credit and underwriting
processes.
Vintage Graph - African Bank Retail
More than three missed instalments
Please refer to press release for the graph.
6. NATIONAL CREDIT BILL
The Department of Trade and Industry published the final draft of the National
Credit Bill in December 2004. It contains several conceptual changes from the
previous draft, that were made as a result of industry comment. The draft is now
expected to go to parliament later during 2005. Since the bill is enabling in
nature, it requires a set of regulations to be promulgated before it can be
fully implemented, and these still require further debate and clarification. It
is therefore not expected to have any impact for the current financial year.
On behalf of the board
This announcement is also available on the
African Bank Investments Limited website at http://www.africanbank.co.za
Registered office: 59 16th Road, Midrand, 1685.
Share transfer secretaries: Ultra Registrars (Pty) Limited, 11 Diagonal Street,
Johannesburg, 2001.
Board of directors: Executive directors: G Schachat (Deputy Chairman), L
Kirkinis (Chief Executive Officer), 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.
Midrand
3 February 2005
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited
Date: 03/02/2005 07:00:14 AM
Produced by the JSE SENS Department
