JOHANNESBURG May 19 African Bank Investments
swung to an expected six-month headline loss of 240.7
cents per share after the South African lender booked more bad
The bank commonly known as Abil had already flagged that
non-performing loans were 600 million rand higher than had been
expected, compelling the lender to set aside 2.5 billion more
for future loans.
Abil had aggressively pushed unsecured loans to the mass
market but stubborn inflation, high levels of indebtedness and
labour strife in the platinum mines have crippled the ability of
many borrowers to meet their obligations.
"The success of an unsecured lending business is based on
the future ability of customers to timeously meet their
contractual repayment on loans granted and their
credit card debt," Abil said in a stock exchange filing.
"Notwithstanding stricter underwriting standards and
periodic pullbacks in risk, tough economic cycles negatively
impact this ability."
Interest income was up 7 percent to 6 billion rand ($580
million) and non-interest income, or revenue from fees and
commissions, declined by 10 percent to 1.47 billion rand.
The credit impairment charge more than doubled to 8 billion
rand from 3.89 billion rand a year ago.
South African banks face an increase in bad loans due to
rising interest rates and the prevalence of unsecured lending,
according to ratings agency Moody's.
Abil shares have extended losses this year, dropping 30
percent after a 50 percent plunge in 2013.
South Africa's five biggest banks have reported a decline in
impaired loans, which fell to 84 billion rand in December 2013,
or 3.1 percent of total loans, according to the central bank.
But impaired credit is a bigger problem at smaller banks,
ballooning to a peak of 24 billion rand, or 17.4 percent of
their total loans, in July 2013.
Unsecured lending accounts for almost 12 percent of total
gross credit exposure in the banking sector, according to
central bank data.
($1 = 10.3510 South African Rand)
(Reporting by Helen Nyambura-Mwaura; Editing by Ed Cropley)