* To replace Ellerines head
* Disbursements down 25 pct
JOHANNESBURG Feb 5 South African unsecured
lender African Bank warned of a sharp fall in
first-half profits on Wednesday, hit by rising bad loans as
debt-laden consumers struggle to meet their payments.
The lender commonly known as Abil has been scaling back new
loans after it reported a nearly 90 percent drop in profit last
year as its core market of low-income borrowers grappled with
inflation and a weak economy.
In November it issued 5.5 billion rand ($494 million) in new
shares to shore up a battered balance sheet.
"The consolidated impact of the fuel price hikes, interest
rate increases and food inflation against the backdrop of a
weakened rand has and will continue to present challenges," Abil
said in a filing, adding it would see a "significant reduction"
in first-half profits.
New loans declined by 25 percent to 5.56 billion rand in the
three months to end-December after it adopted more stringent
Abil said both non-performing loans and bad-debt provisions
were higher than a year earlier. It has changed its policy on
bad debts, increasing provisions and writing off bad loans
"It seems things are tough out there," said Johann Scholtz,
head of research at Afrifocus Securities. "Earnings are going to
be weak once again as a result of quite a sharp reduction in new
business production and (non-performing loan) formations still
The bank also owns a retail furniture unit, where sales were
21 percent lower at 1.18 billion rand. Abil said it would
announce a new chief executive at the Ellerines unit in a few
weeks' time. It had earlier announced plans to dispose of the
Abil shares are down 1.9 percent at 0802GMT. In 2013, the
stock plunged 50 percent.
($1 = 11.1242 South African rand)
(Reporting by Helen Nyambura-Mwaura; Editing by David Dolan)