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MICROFINANCE

AFRICAN BANK INVESTMENTS LIMITED

Impairment Provisions & NPL Coverage 6,000

120

5,000

100

4,000

80

3,000

60

2,000

40

1,000

20

-

Banking Business Unit The growth in advances was the main driver. The large surge in credit demand (combined credit sales for African Bank and EHL) helped to push sales to growth of over 51%, with the total for H1 2011 of ZAR 10.0bn almost at the same level of sales for the FY 2010 of ZAR 11.0bn. African Bank credit sales grew by 58% to ZAR 8.0bn, while total disbursements at EHL increased by 29% to ZAR 2.1bn. ROE was at 21.5% (H1 2010: 18%) and gross advances are ahead of target. Whilst the total income yield declined 1.6% from 37.5% in H1 2010 to 35.9% this was offset by average gross advances that increased 25% y-o-y to ZAR 32.3bn (USD 4.1bn). Overall, the solid growth in advances resulted in income from operations increasing by 20% to ZAR 5.8bn (USD 736.0m).

2002

2003

2004

2005

2006

2007

2008

2009

2010

Banking Unit Income Statement (ZARm)

Total impairment provisions ZARm-LHS Impairment provisions to gross advances %-RHS NPL coverage %-RHS

Interest Income on Advances

Source: Joab’s Technologies and Research. Capital Joab’s Technologies and Research.

Assurance Income

H1 2010

H1 2011

%∆

2,890

3,377

17%

882

1,171

33%

Non-Interest Income

1,071

1,263

18%

Income from operations

4,843

5,811

20%

Risk Adj. Income from operations

3,180

3,832

21%

Profit from operations

1,139

1,462

28%

Profit before taxation

1,154

1,462

27%

854

1,050

23%

Profit after taxation

Asset quality continued to improve. Combined NPLs as a percentage of advances declined from 34% in H1 2010 to 28% on the back of the faster growth in performing loans and a lower migration rate from performing loans to NPLs. NPL coverage was 62.7%, compared to 65.3% in the prior period. Furthermore, the bad debt charge as a percentage of the advances book improved to 10.4% (H1 2011: 11.2%). Overall, NPLs grew at a slower rate of 5% as the performing book grew by 38%. The combined effect of a significant growth in advances and an improvement in the quality thereof led to a 23% growth in headline earnings of ZAR1. 05bn for H1 2011 (H1 2010: ZAR 854). Looking at the balance sheet, total assets were propelled by the growth in advances (+35%). Moreover, long term funding (main source of funds) was up +35% y-o-y to ZAR 25.1bn.

Average Cost of Funds Vs Capital Adequacy 45

16

40

14

35

Short term deposits & cash

5,054

4,702

-7%

Statutory assets-bank & insurance

1,473

2,317

57%

128 178

202 223

58% 25%

12

Other assets Other assets-EHL

10

Net Advances

22,325

30,063

35%

Total Assets

29,182

41,892

44%

30 25 8

Liabilities and equity

20 6 15 4

10

2

5 0

0 2002

2003

2004

2005

2006

African Bank capital adequacy %-LHS

2007

2008

2009

Average cost of funds %-RHS

Source: Joab’s Technologies and Research. Capital Joab’s Technologies and Research.

2010

Short term funding

2,258

2,429

8%

Short term funding-EHL

187

176

-6%

Other liabilities

496

529

7%

18,575

88 25,128

35%

23,809

31,172

31%

6,003

10,720

79%

29,812

41,892

41%

Other liabilities-EHL Bonds and other long term funding Total Liabilities Total equity (capital & reserves) Total Liabilities & Equity

Joab’s Technologies and Research.

Page 81 of 104

Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

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