| Mon 6 Feb 2006, 7:00 | | ABIL- Trading Update For The First Quarter Ending |
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ABL ABLP
ABL
ABIL- Trading Update For The First Quarter Ending 31 December 2005
AFRICAN BANK INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
(Ordinary share code: ABL) & (ISIN: ZAE000030060)
(Preference share code: ABLP) & (ISIN: ZAE000065215)
("ABIL")
Trading update for the first quarter ending 31 December 2005
Continued consumer confidence, a favourable economic climate, ongoing positive
results from sales growth strategies and the early benefits from the new price
differentiation models have had a positive impact in the first quarter of 2006
in terms of sales, book growth and asset quality.
SALES
As previously communicated, the group has since late 2004 been implementing a
multi-pronged strategy for growing its customer base and lending books, while
remaining focused within the market of personal unsecured credit. This strategy
included
- an expansion of the target market, improved penetration of existing markets
and a broader product offering; and
- the implementation of a new risk-based pricing suite for African Bank products
to eliminate client cross-subsidisation and enable the group to drive down the
cost of credit to lower risk clients, so as to test the price / volume
elasticity of unsecured loans in these segments.
The positive market conditions and early benefits of this strategy have
contributed to a higher than expected 28% increase in sales of new loans during
the first quarter, being traditionally the best sales quarter of the year, to
R1.75 billion compared to the R1.37 billion for the comparable period in 2005.
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% change Sales value (R million)
2006 vs 2006 2005
2005
(3 mnths)
3 3 3 3 3
mnths mnths mnths mnths mnths
to to to to to
Dec 05 Sep 05 Jun 05 Mar 05 Dec 04
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African Bank - 35% 1 312 1 088 1 086 826 969
retail products*
African Bank - (30%) 47 59 57 57 67
payroll products
Miners Credit 22% 231 149 147 153 189
Standard Bank JV 28% 118 97 100 75 93
Commercial (18%) 39 45 41 42 47
Vehicle Finance
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Total 28% 1 747 1 439 1 432 1 153 1 366
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*The Credit Indemnity loan book has been incorporated into African Bank retail
products.
The opening of new branches, integration of the African Bank and Credit
Indemnity product suites and target market extension to include cheque account
holders implemented during 2005, have continued to impact positively on new
customer acquisition.
The introduction of the new risk-differentiated pricing models at the end of
2005 has substantially improved affordability and lengthened the term for lower
risk customers. As a result, average loan sizes have increased steadily, the
average term extended from 18 to 21 months for debit order loans since the
introduction of the new models, and the sales profile has begun to change
towards the lower risk end of the spectrum.
Sales for Miners Credit were positively impacted by the additional outlets
acquired as part of the remaining portion of the Teba JV at the end of 2005.
The Standard Bank JV delivered a 28% growth in sales over the comparative period
on the back of the implementation of specific marketing strategies and a gradual
increase in the average loan size.
Graph available on the African Bank Investments Limited website at
http://www.africanbank.co.za.
GROSS ADVANCES
Gross advances grew by 7% over the past three months from R6.4 billion as at 30
September 2005 to R6.9 billion as at 31 December 2005. The table below sets out
the composition of gross advances as at 31 December 2005 and the movements since
30 September 2005.
Advances Analysis
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R million % As at 31 As at 30
growth Dec 05 Sep 05
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Lending books 9% 6 238 5 738
African Bank - retail products* 12% 4 411 3 926
African Bank - payroll products (8%) 563 614
Miners Credit 5% 684 651
Standard Bank JV 11% 387 348
Commercial Vehicle Finance 2% 260 254
Provision for deferred admin fees 22% (67) (55)
Pay down books (7%) 615 661
Persal (4%) 189 197
Saambou PLB (8%) 414 450
Gift Edged Management Services (14%) 12 14
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Gross advances 7% 6 853 6 399
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The lending books grew by R500 million in the three months to 31 December 2005,
on the back of the strong sales. The pay down books now constitute 9% of the
gross advances, relative to the 20% in December 2004 and will continue to fall
as a result of strong collections and write-offs on these books.
Investors should note that the implementation of the sale of the Commercial
Vehicle Finance business, announced in 2005, has not yet occurred as the
transaction is still awaiting final regulatory approval. If implemented, it will
reduce the lending books by at least R260 million and hence, the group maintains
its growth target for these books of 10% to15% for the full year, despite the
growth in this quarter.
ASSET QUALITY
Non-performing loans (NPLs) at R1.6 billion, maintained their steady downward
trend and reduced by R65 million in the quarter to 31 December 2005. Overall
provision coverage was maintained at 68%.
Asset quality analysis
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R million % Actual Actual
change 31 Dec 05
30 Sep 05
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Advances
Performing 11% 5 276 4 757
Non-performing (4%) 1 577 1 642
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Total 7% 6 853 6 399
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Impairment provisions and reserves
Portfolio impairment provisions 8% 43 40
Specific impairment provisions (2%) 923 939
Stangen credit life reserves (22%) 108 138
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Total impairment provisions and (4%) 1 074 1 117
reserves
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Ratios
NPLs as a % of total advances 23.0% 25.7%
Total impairment provisions as a % 68.1% 68.0%
of NPLs (NPL coverage)
Total impairment provisions and 15.7% 17.5%
reserves as a % of total advances
Bad debt write-offs as a % of 12.1% 19.8%
average gross advances
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Credit quality is best reflected through vintage charts. As indicated in the
African Bank Retail vintage chart below, risk has remained within the group"s
targeted range.
Chart available on the African Bank Investments Limited website at
http://www.africanbank.co.za.
OTHER
The interest rates charged on the majority of new loans have been reduced over
the last six months. It will however, take time before these new loans comprise
a sufficient proportion of the book to impact on the average yield of the
advances portfolio, which is still benefiting from the positive lift in margins
due to the continued reduction in the pay down books. The group therefore
expects yields to fall gradually as the price reduction and differentiation
strategies begin to feed through over the next two years.
Tight cost management continued to keep operating costs in line with
expectations.
The National Credit Bill was approved by parliament in December 2005 for
expected promulgation early this year. Consultation on the proposed set of
regulations that are required to implement the Bill continues and should be
finalised during the next few months. The proposals remain consistent with
ABIL"s expectations and the group has no reason to change its stance on the
matter to date. The group is confident that its preparations for the
implementation of the Bill are on track. It is not expected to have any impact
for the current financial year.
On behalf of the board
6 February 2006
This announcement is 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) Ltd, 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
Date: 06/02/2006 07:00:08 AM Produced by the JSE SENS Department
