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AFRICAN BANK LIMITED - African Bank Limited reviewed interim financial statements for the six months ended 31 March 2015

Release Date: 26/06/2015 08:20
Wrap Text
African Bank Limited reviewed interim financial statements for the six months ended 31 March 2015

AFRICAN BANK LIMITED
(Incorporated in the Republic of South Africa)
(Registered bank)
(Registration number 1975/002526/06)
Company code: BIABL
(“African Bank” or “the Bank”)

African Bank Limited reviewed interim financial statements for the six months ended 31 March
2015

Features:
- Loss of R2.8 billion (2014: R5.9 billion restated) – in line with trading update issued on 11 June
2015
- Credit impairment charge of R5.4 billion (2014: R8.5 billion restated)
Stakeholders are referred to the statement regarding the Curatorship of African Bank ("the
Curatorship") made by the then Governor of the South African Reserve Bank ("SARB"), Ms. Gill
Marcus, on 10 August 2014 ("the SARB statement") and to the SENS announcements released by
African Bank Investments Limited ("ABIL") and African Bank on 26 September 2014,
10 December 2014, 3 March 2015 and 31 March 2015, and by African Bank on 28 and
29 May 2015 ("the Restructuring SENS Announcements") and the announcement on 11 June 2015
(“the June 2015 Curatorship update”).
The SARB statement confirmed that Mr. Tom Winterboer was appointed as Curator of African Bank
("the Curator") in terms of the Banks Act No. 94 of 1990 (as amended) on 10 August 2014. At the
same time the SARB statement set out a proposal for the restructuring of African Bank, which
entailed the creation of a new "Good Bank" ("the Good Bank Restructuring Proposal"). Further
detail about the Good Bank Restructuring Proposal has been communicated to stakeholders in the
Restructuring SENS Announcements.
Following the June 2015 Curatorship update, which included a trading update for the six months to
31 March 2015, the Curator today publishes the reviewed financial results for the six months ended
31 March 2015.

Financial results for the six months ended 31 March 2015
The loss for the six months decreased by 53% from the prior period to R2 787 million (2014: R5 892
million restated).
The loss for the six months to 31 March 2014 has now been restated to R5 892 million compared to
a previously reported loss of R2 716 million.
Detailed explanations regarding the restatements are made in the notes to the reviewed financial
statements     for    the    six    months    ended    31     March     2015,     available   at
http://africanbank.investoreports.com.
Earnings were negatively impacted by a declining advances book as a result of lower monthly
disbursements and the paydown of loans which decreased income from operations by 20% from the
prior period to R6 216 million (2014: R7 729 million restated).
The credit impairment charge decreased by 37% from the prior period to R5 422 million (2014:
R8 541 million restated). The comparative charge was heightened as a result of the adjustments
made to provisioning described in the reviewed interim financial statements for the six months
ended 31 March 2014, and the restatements as described in this set of interim reviewed financial
statements. The current year’s impairment charge was negatively impacted by the deterioration in
credit quality in the existing legacy advances book.
Extensive changes to the provisioning methodology described in the audited annual financial
statements for the year ended 30 September 2014 and the supplementary information released
with the statements, resulted in increased provisioning coverage as at that date. These provisioning
levels have been maintained as at 31 March 2015 and are shown together with the corresponding
provisioning levels as at 30 September 2014 below.


Advances Category                                     Impairment Coverage          Impairment Coverage
                                                            31 March 2015            30 September 2014

Neither past due nor specifically impaired                           1.7%                         1.7%
Past due and subject to collective impairment                       36.5%                        36.9%
Specifically impaired                                               80.0%                        79.8%
Total gross advances                                                38.4%                        35.3%

Operating costs increased by 4% to R1 380 million from the prior period (2014: R1 323 million),
primarily due to the increased costs of curatorship (including restructuring, legal and advisory costs),
offset to some extent by a lower cost base through natural attrition of staff and specific cost control
measures implemented by management.
Interest expense reduced by 5% to R2 282 million from the prior period (2014: R2 400 million), due
to slightly lower average liability balances compared to the comparative period.
Current and deferred taxation at R nil was down from the prior period (2014: R1 592 million charge
restated). Due to the losses in the six months to 31 March 2014 and the previous financial year
ended 30 September 2013, and the expectation that losses will persist for the near future, the Bank
deemed it improbable that sufficient taxable profit will be available against which the deferred tax
asset will be recoverable. The resultant reversal of the previously reported tax credit and
impairment of the tax assets, as at 31 March 2014, has resulted in the restatement of the taxation
charge. The Curator remains of the view that losses will persist for the foreseeable future and
accordingly has not raised a deferred tax credit in the income statement and deferred tax asset on
the balance sheet in respect of the six months ended 31 March 2015.
While these results are disappointing, they are in line with expectations and the Curator reminds
stakeholders that the restoration to profitability and subsequent achievement of acceptable investor
returns in “Good Bank” will take time, effort and commitment.
The information in this announcement has been extracted from the reviewed interim financial
statements for the six months ended 31 March 2015, however this announcement has not been
reviewed by the external auditors.

On behalf of the Curator of the Bank

Midrand
26 June 2015

Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)


Footnote : T Winterboer was appointed as Curator of African Bank Limited on 10 August 2014 by the
Minister of Finance of the Republic of South Africa and pursuant to the Banks Act No. 94 of 1990 (as
amended) to manage the affairs of African Bank Limited subject to the supervision of the Registrar
of Banks. Please note that Mr. Winterboer acts in the aforesaid capacity.

Date: 26/06/2015 08:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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