African Bank Investments Limited - Government Prop
ABL ABLP
ABL
African Bank Investments Limited - Government Proposals Relating To Limitations
To Fees And Interest Under The New National Credit Bill
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" or "the company")
GOVERNMENT PROPOSALS RELATING TO LIMITATIONS TO FEES AND INTEREST UNDER THE NEW
NATIONAL CREDIT BILL
ABIL has kept investors informed regarding progress with the new National Credit
Bill ("The Bill") over the last few reporting periods. The Bill was approved by
Parliament and is expected to become law in 2006. The Bill requires the
publication of regulations to give it effect.
Pursuant to the promulgation of the Act, the dti has recently released the
proposed regulations related to the Act for public comment. The proposals remain
consistent with ABIL"s expectations.
Included in the current proposals are limitations on interest, fees and charges
for different categories of credit agreements. We support the structure of this
set of proposals which, for the majority of credit agreements, creates a
continuous yield curve without unnatural steps that may create market
distortions. ABIL"s current business will fall mainly into the category
"unsecured credit transactions", which sets a current interest rate limit of
35.4%, an initiation fee of between R150 and R500 depending on the size of loan,
and a service fee of R50 per month. ABIL"s prevailing prices are below these
levels for the majority of its business.
We estimate that, by number of customers, approximately 17% of our customers
(being higher-risk categories) will be adversely affected by these price
ceilings, of which we would be unable to service 6%, and will have to
restructure the loans for some 11% to lower value, shorter-term products. On the
other hand, for our lower-risk customers, representing approximately 15-20% of
our clients, the proposed regulations will create both the opportunity to grant
loans beyond the present R10 000 loan size limit, and allow a broader range of
product offering.
ABIL has been adapting its business over the last two years in anticipation of
the introduction of The Bill, including assumptions regarding the effect of the
proposed interest rate caps and accordingly, our stated financial targets remain
unchanged.
Midrand
22 February 2006
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 22/02/2006 09:49:18 AM Produced by the JSE SENS Department
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