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AFRICAN BANK INVESTMENTS LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
COMPANY REGISTRATION NUMBER 1946/021193/06
AUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2000
HIGHLIGHTS
PRE-TAX PROFITS EXCEED R1 BILLION FOR THE FIRST TIME
* NET INCOME +37%
* HEADLINE EARNINGS PER SHARE +26%
* NET ASSET VALUE PER SHARE +89%
* ADVANCES PORTFOLIO +27%
BUSINESS OVERVIEW
FINANCIAL 2000 REPRESENTS A MILESTONE OF FIVE YEARS OF UNABATED GROWTH FOR THE
GROUP. SIGNIFICANT GROWTH WAS ACHIEVED ACROSS ALL SECTORS OF THE BUSINESS
DESPITE THE MANY CHALLENGES THAT WERE FACED.
BUSINESS STRUCTURE
AFRICAN BANK INVESTMENTS LIMITED ("ABIL" OR "THE GROUP") IS A CREDIT BANKING
GROUP FOCUSED ON PROFITABLY TARGETING CREDIT GAPS IN UNDER-SERVED MARKETS. IT
PROVIDES:
* PERSONAL CREDIT THROUGH ITS BANKING SUBSIDIARY AFRICAN BANK,
* ASSURANCE PRODUCTS THROUGH ITS WHOLLY OWNED SUBSIDIARY STANDARD AND GENERAL
INSURANCE ("STANGEN"), AND ALSO
* INVESTS IN INNOVATIVE CREDIT MODELS THROUGH ITS WHOLLY OWNED INVESTMENT
BANKING SUBSIDIARY, THETA INVESTMENTS.
OPERATIONAL HIGHLIGHTS IN THE REPORTING YEAR
STRONG ORGANIC GROWTH IN BUSINESS VOLUMES AND EARNINGS WAS ACHIEVED WITHIN THE
CONTEXT OF RAPID TRANSFORMATION OF THE GROUP AND THE INDUSTRY.
THE GROUP CONCLUDED A NUMBER OF IMPORTANT OPERATIONAL AND STRATEGIC
INITIATIVES. THESE INCLUDED:
* THE MERGER OF ALTFIN, KING AND UNITY WAS COMPLETED. THIS RESULTED IN ONE
TECHNOLOGY PLATFORM (CONVERSION OF THE BOLAND PLATFORM COMPLETED IN EARLY
NOVEMBER), AND THE UNIFORM BRANDING OF ALL OPERATIONS UNDER THE AFRICAN BANK
BRAND. THIS BRAND WAS RE-LAUNCHED UNDER THE CREDIT BANKING VALUE PROPOSITION.
* SUCCESSFUL INCREASE IN CORPORATE PRIVATE SECTOR PAYROLL LENDING TO
APPROXIMATELY 40% OF THE ADVANCES BOOK.
* THE DISTRIBUTION CAPACITIES OF AFRICAN BANK WERE RESTRUCTURED TO STRENGTHEN
THE BANK'S OWN BRANDED SERVICE POINT NETWORK (BRANCHES) AS WELL AS ESTABLISH A
FULLY OWNED AND DIRECTLY CONTROLLED MOBILE SALES CAPACITY. MAJOR BROKERAGES
WERE MERGED WITH THE BANK'S OWN STRUCTURES TO CREATE A NEW UNIFIED
DISTRIBUTION SYSTEM.
* CLIENT SERVICE LEVELS WERE IMPROVED AND QUALITY ASSURANCE AND REGULATORY
COMPLIANCE ACCENTUATED.
* TOP SKILLS IN THE RETAIL AND CREDIT ENVIRONMENT WERE RECRUITED TO STRENGTHEN
THE MANAGEMENT TEAM.
* A PARTNERSHIP AGREEMENT WAS CONCLUDED WITH STANDARD BANK, ALLOWING AFRICAN
BANK TO BENEFIT FROM STANDARD BANK'S LEADERSHIP POSITION IN TRANSACTION
BANKING. CONVERSELY, STANDARD BANK BENEFITS FROM AFRICAN BANK'S CREDIT BANKING
MARKET SHARE AND RISK MANAGEMENT. THIS PARTNERSHIP SIGNIFICANTLY ENHANCED THE
GROUP'S RETAIL BUSINESS CAPABILITY.
* AFRICAN BANK STRENGTHENED ITS INTERNAL RETAIL COLLECTIONS CAPABILITY,
INSTALLING THE LATEST COLLECTION AND CALL CENTER TECHNOLOGY. THE OPERATIONS
CENTER MANAGES BOTH INBOUND AS WELL AS OUTBOUND CALL CENTERS. THE CALL
CENTERS ENHANCE THE GROUP'S CUSTOMER MANAGEMENT CAPABILITY, AND ANTICIPATED THE
MOVE TOWARDS A MORE RETAIL LENDING ENVIRONMENT.
* THE BUYOUT OF OUTSTANDING MINORITY SHARES IN CREDIT INDEMNITY, THE GROUP'S
FLAGSHIP RELATIONSHIP-BASED LENDER AND SUBSTANTIAL INCREASES IN THE EQUITY
HOLDINGS IN OTHER COMPANIES IN THETA INVESTMENTS.
* THE GROUP'S ASSURANCE BUSINESS WAS SUBSTANTIALLY RESTRUCTURED WITH THE GROUP
BUYING THE OUTSTANDING SHARES FROM CAPITAL ALLIANCE AND ENTERING INTO A
SEPARATE JOINT-VENTURE PARTNERSHIP WITH CAPITAL ALLIANCE
* AN EXCLUSIVE JOINT-VENTURE RELATIONSHIP WITH EDCON, SOUTH AFRICA'S LEADING
RETAILER, WAS CONCLUDED. AFRICAN BANK BRANDED KIOSKS ARE BEING ROLLED OUT IN
SELECTED SALES HOUSE, JET AND EDGARS STORES. EDCON HAS OVER 700 STORES AND AN
ACTIVE CLIENT BASE OF 3.3 MILLION.
OPERATING ENVIRONMENT
THIS REPORTING YEAR WAS CHARACTERISED BY IMPORTANT CHANGES IN THE EXTERNAL
OPERATING ENVIRONMENT:
* COMPETITION INCREASED IN CERTAIN SECTORS OF THE PAYROLL-COLLATERALIZED MARKET
WITH OTHER PLAYERS ENTERING THE MARKET.
* THE ADMINISTRATIVE ACTION TAKEN BY GOVERNMENT TO DISCONTINUE DISCRETIONARY
DEDUCTIONS OFF ITS PAYROLL ("PERSAL") ACCELERATED THE DEVELOPMENT OF SCORED
RETAIL LENDING.
THIS DECISION OF GOVERNMENT WAS MOTIVATED BY CONCERNS RELATING TO POTENTIAL
OVERHEATING OF ACTIVITY IN THE PUBLIC SECTOR, A CONCERN THAT ABIL SHARED AND
ANTICIPATED BY SUBSTANTIALLY SCALING BACK LOAN VOLUMES IN THIS SECTOR IN
DECEMBER 1999. THE IMPLEMENTATION OF THE DECISION HAS HOWEVER PLACED PUBLIC
SECTOR EMPLOYEES AT A DISADVANTAGE TO THEIR PRIVATE SECTOR COUNTERPARTS, WITH
RESPECT TO BOTH ACCESS TO CREDIT AND POTENTIAL DEBT CONSOLIDATION.
* THE REGULATORY ENVIRONMENT CONTINUED TO FORMALIZE. OPERATIONAL PRIORITIES
CENTERED AROUND COMPLIANCE ISSUES SUCH AS DISCLOSURE AND CLARIFICATION OF
CERTAIN PRACTICAL ASPECTS OF THE EXEMPTION NOTICE.
* POLICY DEBATES HAVE BEEN INITIATED ON ISSUES RANGING FROM INTEREST RATES TO
THE PRICING OF CREDIT LIFE INSURANCE. THE GROUP IS PROACTIVELY ENGAGING WITH
THE RELEVANT REGULATORS IN THIS REGARD.
* THE DEVELOPMENT OF THE NATIONAL LOANS REGISTER HAS PROGRESSED WELL, AND IS
BEING LAUNCHED AT THE END OF NOVEMBER 2000.
* MAJOR PLAYERS IN THE INDUSTRY HAVE ENTERED INTO FRUITFUL DIALOGUE IN ORDER TO
ENSURE THE ORDERLY DEVELOPMENT OF THE MARKET.
NET INCOME (IN R MILLION)
159 1998
527 1999
723 2000
EARNINGS SUMMARY
THE FOLLOWING DISCUSSION PROVIDES A SUMMARY OF FINANCIAL 2000 RESULTS COMPARED
TO FINANCIAL 1999 RESULTS. 1999 FIGURES IN BRACKETS.
THIS REPORTED PERFORMANCE HAS FULLY FACTORED IN INCREASED PROVISIONS ON THE
PERSAL PORTFOLIO FOLLOWING THE GOVERNMENT DECISION TO DISCONTINUE DISCRETIONARY
DEDUCTIONS FROM ITS PAYROLL.
NET INCOME AFTER TAX FOR THE YEAR ENDED 30 SEPTEMBER 2000 WAS R723 MILLION,
(R527 MILLION ) REPRESENTING AN INCREASE OF 37%.
THE UNDERLYING DRIVERS OF PERFORMANCE FOR THE COMPANY DURING 2000 WERE A STRONG
ORGANIC LOAN GROWTH, ROBUST PERFORMANCE IN STANGEN AND THE THETA INVESTMENTS
SUBSIDIARIES.
THE GROSS ADVANCES PORTFOLIO INCREASED BY R984 MILLION, OR 27% DURING THE
REPORTING YEAR. THE GROWTH WAS ACHIEVED THROUGH INCREASES IN THE COMPANY'S
LOAN ORIGINATIONS. ACCOUNTS GREW TO 1.6 MILLION AS A RESULT OF THE GROUP'S
VARIOUS MARKETING CAMPAIGNS.
AFRICAN BANK INCREASED ITS PRE-TAX PROFITS TO R551 MILLION (R472 MILLION).
THE ASSURANCE BUSINESS INCREASED PRE-TAX PROFITS BY 43% TO R369 MILLION (258
MILLION), ON GOOD ORGANIC GROWTH.
THETA INVESTMENTS INCREASED ITS PRE-TAX PROFITS TO R192 MILLION (R45 MILLION),
PRINCIPALLY DUE TO THE SUCCESSFUL UP-SCALING OF UNDERLYING INVESTMENTS, IN
PARTICULAR CREDIT INDEMNITY AND MINERS CREDIT GUARANTEE.
INCOME
NET INTEREST INCOME WAS R1.434 BILLION (R1.046 BILLION) REPRESENTING 37%
GROWTH. THIS INCREASE REFLECTS A 27% INCREASE IN AVERAGE LOANS.
NON-INTEREST INCOME (INCLUDING ASSURANCE INCOME) COMPRISED 29% (30%) ON NET
REVENUE BEFORE CHARGE FOR DOUBTFUL DEBT FOR 2000.
CREDIT LOSSES
THE NET CREDIT LOSS RATE FOR THE YEAR IS 4.6% (2.8%) , REPRESENTING AN
IMPROVEMENT FROM THE 4.8% IN MARCH 2000.
NET CREDIT LOSSES ARE EXPECTED TO REMAIN IN THE 5% REGION FOR
PAYROLL-COLLATERALLISED LENDING, AS CRITICAL MASS IN THIS TYPE OF LENDING HAS
BEEN ACHIEVED AND HENCE CREDIT LOSSES REFLECT THE BROADER UNIVERSE OF THE
TARGET MARKET.
NET CREDIT LOSSES IN THE RETAIL LENDING PORTFOLIO OVER THE LONG TERM ARE
EXPECTED BE IN THE REGION OF 8%.
GROUP PROVISIONS COVER THE HISTORIC NET CREDIT LOSSES BY MORE THAN THREE TIMES
OPERATING EFFICIENCY
NON-INTEREST EXPENSE INCREASED R232 MILLION DURING 2000 TO R634 MILLION DUE TO
THE COSTS ASSOCIATED WITH SERVICING A GREATER NUMBER OF CUSTOMERS, INCREASED
MARKETING ACTIVITY, MERGER AND INTEGRATION ACTIVITY IN AFRICAN BANK AND THE
INCLUSION OF OPERATING COSTS OF SOME THETA INVESTMENTS SUBSIDIARIES (AMOUNTING
TO R150 MILLION) FOR THE FIRST TIME.
THE GROUP'S COST-TO-INCOME RATIO WAS 31.3% (26.6%). THE INCREASE WAS ALSO
DRIVEN BY SLOWER GROWTH IN INCOME IN THE SECOND HALF OF THE REPORTING PERIOD.
THIS OPERATING EFFICIENCY RATIO IS NOT EXPECTED TO INCREASE IN THE LIGHT OF
THE CHANGE IN PRODUCT MIX AS RETAIL LENDING GAINS CRITICAL MASS. FOCUSED
ATTENTION IS BEING APPLIED TO COST CONTROL FOLLOWING A SUCCESSFUL MERGER OF
OPERATIONS AND THE FLEXIBLE STRUCTURE OF KEY DISTRIBUTION AND RELATED COSTS.
THE GROUP TARGETS A 30% COST-TO-INCOME RATIO.
RETURN ON ASSETS AND EQUITY
THE COMPANY'S RETURN ON AVERAGE ASSETS INCREASED FROM 14.5% IN 1999 TO 14.9% IN
2000. THE COMPANY'S MARKET FOCUS IS TO SEEK OUT PROFITABLE CLIENT
RELATIONSHIPS IN SELECTED RETAIL CONSUMER SEGMENTS AND APPLY ITS RISK-ADJUSTED,
RETURN-DRIVEN APPROACH TO CUSTOMER SEGMENTATION AND RISK UNDERWRITING. THE
COMPANY BELIEVES THIS STRATEGY IS RESPONSIBLE FOR ITS CONTINUED OVERALL
SUPERIOR FINANCIAL PERFORMANCE.
THE COMPANY CONTINUED TO STRENGTHEN ITS BALANCE SHEET IN 2000 WITH IMPROVED
PROFITABILITY, COMBINED WITH A HIGH LEVEL OF CAPITAL RETENTION. RETURN ON
AVERAGE EQUITY DECLINED FROM 54.6% IN 1999 TO 41.0% IN 2000, PRIMARILY DUE TO
AN INCREASED LEVEL OF EQUITY IN ANTICIPATION OF A SUBSTANTIAL GROWTH IN
ASSETS.
IN THE COMING YEAR RETURNS ARE EXPECTED TO IMPROVE FOR INTER ALIA THE FOLLOWING
REASONS:
* THE HIGHER THAN NORMAL LEVEL OF CASH HELD AND CURRENTLY INVESTED IN THE MONEY
MARKET (AND CONSEQUENTLY LOW YIELDING) SHOULD BE INVESTED AT HIGHER YIELDS IN
THE LOAN BOOK BEING CREATED AS THE GROUP'S RETAIL LENDING CAPACITY INCREASES,
AND THE INVESTMENT IN THE CORPORATE SECTOR PAYROLL MARKET BEARS FRUIT;
* THE GROUP IS EXPECTED TO INCREASE, WITHIN PRUDENT LIMITS, THE GEARING OF THE
BALANCE SHEET.
LOAN PORTFOLIO
THE FOLLOWING TABLE SUMMARIZES THE GROUP LOAN PORTFOLIO:
YEAR ENDED SEPTEMBER 30
(R MILLION) 2000 1999
YEAR END BALANCES 4,654 3,671
AVERAGE BALANCES 4,540 3,062
LOAN PORTFOLIO BALANCES GREW BY 27% IN THE REPORTING PERIOD DESPITE NEGATIVE
PORTFOLIO GROWTH IN THE SECOND HALF OF THE REPORTING PERIOD. THE SLOWDOWN WAS
PRIMARILY DUE TO:
* A NORMAL SEASONAL DOWNTURN IN THE MONTHS OF FEBRUARY TO JUNE, AND
* THE LOSS OF GOVERNMENT PAYROLL (PERSAL) DEDUCTION FACILITIES FROM THE END OF
JUNE 2000.
THE LATTER EFFECT IS BEING COUNTERED BY THE INTRODUCTION OF RETAIL LOANS. THE
ROLL-OUT OF RETAIL LENDING CAPACITY IS EXPECTED TO REACH CRITICAL MASS AROUND
THE END OF FINANCIAL 2001. OVER THE COMING YEAR THE SIZE OF LOAN PORTFOLIO IS
NOT EXPECTED TO BE SIGNIFICANTLY DIFFERENT FROM THE CURRENT LEVEL, FOR THE
FOLLOWING REASONS:
* THE REPAYMENT OF THE PERSAL BOOK, GIVEN ITS TERM (UNDER 24 MONTHS),
COMPENSATED FOR BY:
* GROWTH FROM THE CORPORATE LENDING MARKET, AND
* GROWTH OF THE RETAIL LENDING PORTFOLIO, WITH SHORTER TERM AND LOWER LOAN
AMOUNT VALUES BUT HIGHER OVERALL YIELDS
THE HIGHER YIELDING, AND POTENTIALLY HIGHER RISK RETAIL PORTFOLIO IS EXPECTED
TO COMPRISE APPROXIMATELY 25% TO 40% OF THE LOAN BOOK IN THE MEDIUM TERM.
RETAIL LOANS HAVE SHOWN SIGNIFICANT GROWTH, WITH DAILY VOLUMES APPROACHING
APPROXIMATELY 800 LOANS.
PORTFOLIO UNDERWRITING MARGIN
THE COMPANY FOCUSES ON MANAGING THE RISK-ADJUSTED MARGIN, BEING THE OVERALL
YIELD ON THE ADVANCES PORTFOLIO, LESS THE NET CREDIT LOSSES, AS THE MAIN RATIO
REFLECTING UNDERWRITING EFFICIENCY. THE PORTFOLIO YIELD INCLUDES INTEREST
SPREAD, ADMINISTRATION FEES AND ASSURANCE INCOME.
THIS PORTFOLIO RISK-ADJUSTED MARGIN DECLINED FROM 40.9% IN 1999 TO 38.4% IN
2000. THIS DECLINE REFLECTS LOWER INTEREST RATES CHARGED ON 20% OF THE TOTAL
BOOK (FORMERLY THE BOLAND BOOK) THAT HAS A PRIME RATE-LINKED VARIABLE INTEREST
RATE, THE EFFECT OF NOT ACCRUING INTEREST ON ARREAR ACCOUNTS AND AN INCREASE
IN NET CREDIT LOSSES.
THE OVERALL PORTFOLIO YIELD IS EXPECTED TO REMAIN HIGH, AVERAGING LOWER YIELDS
IN CERTAIN LOWER RISK BUT MORE COMPETITIVE SUB-SEGMENTS OF THE PAYROLL MARKET
AND HIGHER YIELDS IN THE NEWER MARKETS.
PROVISIONS FOR CREDIT LOSSES
PROVISIONING POLICY
THE GROUP HAS A POLICY OF CREATING A GENERAL RESERVE FOR UNFORESEEN EVENTS
THAT COULD LEAD TO UNDERWRITING LOSSES. THIS GENERAL PROVISION IS CREATED AT 8%
OF LOAN AMOUNT ON RETAIL LOANS UPON LOAN ORIGINATION AND 5% OF LOAN AMOUNT FOR
PAYROLL-COLLATERALISED LOANS.
SPECIFIC PROVISIONS ARE RAISED ON ANY DEBT THAT IS IDENTIFIED AS DOUBTFUL.
IN ADDITION TO PROVISION FOR CREDIT LOSSES, THE LIFE FUND IN THE ASSURANCE
BUSINESS ALSO SUPPORTS THE ASSETS QUALITY.
PERSAL PORTFOLIO
THE ANNOUNCEMENT MADE BY THE GOVERNMENT TO DISCONTINUE DISCRETIONARY DEDUCTIONS
FOR INTER ALIA LOANS FROM JUNE 2001 ON ITS PAYROLL HAS LED TO A REVIEW OF THE
LEVEL OF PROVISIONS REQUIRED ON THE PERSAL PORTFOLIO.
THE OUTSTANDING BALANCE ON THIS PORTFOLIO AT 30 SEPTEMBER 2000 IS R2.2 BILLION.
AT 30 JUNE 2001 THE PORTFOLIO, ASSUMING NO CHANGES TO THE PORTFOLIO, WOULD
HAVE RUN DOWN TO R1.0 BILLION. ARRANGEMENTS HAVE BEEN PUT IN PLACE WITH MAJOR
RETAIL BANKS THAT COVER THE COLLECTION OF 49% OF THIS BOOK.
THE REMAINING 51% WILL BE HANDLED USING DIFFERENT APPROACHES, INCLUDING:
* TARGETED PRODUCT OFFERING ON E-PLAN PLATFORM , ON A CREDIT PRE-SCORED BASIS
(PRE-SCORING OF PORTFOLIO COMPLETED DURING OCTOBER 2000).
* NORMAL RE-ADVANCES THROUGH REVOLVING CREDIT FACILITIES, AT THE CLIENT'S
REQUEST
* NORMAL BANK DEBIT ORDERS (ALREADY SIGNED WHEN ORIGINAL LOAN APPLICATION WAS
MADE)
* TARGETED DEBT COLLECTION USING THE INTERNAL RETAIL COLLECTION CAPACITY
* LEGAL RECOURSE IN THE INDIVIDUAL CASES OF NON-PAYMENT.
THE SPECIFIC PROVISION ON THE PERSAL PORTFOLIO AT 30 SEPTEMBER 2000 WAS R172
MILLION, INCLUDING A PROVISION OF APPROXIMATELY R60 MILLION RESULTING FROM
INCREASED STOP ORDER CANCELLATIONS THAT IMMEDIATELY FOLLOWED THE GOVERNMENT IN
JUNE 2000. THE TOTAL GENERAL PROVISIONS HELD (INCLUSIVE OF THE ASSURANCE
RESERVE) ARE R273 MILLION. THESE AVAILABLE PROVISIONS EQUATE TO 20% OF THE
PERSAL PORTFOLIO AT 30 SEPTEMBER 2000 AND 44% OF THE PROJECTED OUTSTANDING
PERSAL PORTFOLIO AT 30 JUNE 2001. MANAGEMENT ARE SATISFIED THAT THIS LEVEL OF
PROVISIONS CONSERVATIVELY COVERS THE INCREASED RISK ON THE PERSAL PORTFOLIO.
OVERALL LEVEL OF PROVISIONS
THE PROVISION FOR CREDIT LOSSES WAS R675 MILLION (R315 MILLION), OR 14.5%
(8.5%) OF LOANS.
GROSS ADVANCES AND PROVISIONS (IN R MILLION)
PROVISIONS GROSS ADVANCES
SEPT-99 315 3,671
MAR-00 721 4,785
SEP-00 675 4655
THE INCREASE IN THE ALLOWANCE FOR CREDIT LOSSES AS A PERCENTAGE OF REPORTED
LOANS REFLECTS:
* RESIGNATIONS AND GENERAL JOB LOSSES IN THE FORMAL ECONOMY;
* INCREASED CREDIT RISK IN CERTAIN PUBLIC SECTOR PORTFOLIOS (APPROXIMATELY 5%
OF THE 498,000 PUBLIC SECTOR EMPLOYEES WHO HAD CREDIT AND INSURANCE DEDUCTIONS
TOOK HOME LESS THAN 25% OF GROSS SALARY AS AT JUNE 2000);
* INCREASED INCIDENCE OF FRAUD;
* ADDITIONAL UNDERWRITING RISK ASSUMED WHEN THE WARRANTY ON THE PURCHASED
BOLAND BOOK WAS LIFTED IN EXCHANGE FOR A CASH SETTLEMENT OF R259 MILLION BY BOE
BANK LIMITED.
IF THE INCREASED PROVISION TO COVER THE PERSAL RISK IS FACTORED IN, THE LEVEL
OF PROVISIONS AT SEPTEMBER 2000 REFLECTS AN IMPROVEMENT OF R106 MILLION
RELATIVE TO THE LEVEL OF R721 MILLION REPORTED IN MARCH 2000. MANAGEMENT
EXPECT THESE IMPROVEMENTS TO CONTINUE, WITH THE EFFECT OF REDUCING PROVISION
LEVELS TO MORE NORMAL LEVELS IN THE REGION OF 12%.
UNDERWRITING RISK
ARREARS IN THE BOOK AT YEAR END REPRESENTED 8.5% (2.0%) OF THE CLOSING ADVANCES
BALANCE. THE ARREARS ARE WITHIN NORMAL LEVELS FOR THE BUSINESS, AND COMPARE
FAVOURABLY WITH THE 14.5% (8.5%) LEVEL OF PROVISIONS HELD.
PROSPECTS
THE STRATEGIC INITIATIVES UNDERTAKEN DURING THE YEAR PLACE ABIL IN A POSITION
TO CONTINUE TO BE THE LEADING PLAYER IN THIS DYNAMIC MARKET PLACE.
BUILDING ON SOUND FOUNDATIONS ESTABLISHED IN FINANCIAL 2000 THE GROUP AND ITS
FLAGSHIP CREDIT BANKING SUBSIDIARY AFRICAN BANK HAVE SET THE FOLLOWING
PRIORITIES IN THE YEAR AHEAD:
* CONSOLIDATING THE GROUP'S LEADING POSITION IN THE PAYROLL BASED LENDING
ENVIRONMENT AND CONTINUING TO GROW ITS MARKET SHARE.
* AGGRESSIVELY EXPANDING THE NON-PAYROLL BASED LENDING OPERATIONS LEVERAGING
OFF THE E-PLAN PLATFORM.
* EXPANDING RETAIL LENDING BEYOND THE E-PLAN BASE.
* EXPANDING AND ENHANCING THE GROUP'S VALUE PROPOSITION TO THE PAYROLL AND
NON-PAYROLL BASED MARKETS IN LINE WITH THE ESTABLISHED NEEDS, PREFERENCES AND
PRIORITIES OF THE GROUP'S CHOSEN TARGET MARKET.
* CONTINUED INVESTMENT IN INNOVATIVE MODELS THAT EXPAND "THE MARKET", THROUGH
THETA INVESTMENTS
* INCREASING THE LEVERAGE DERIVED FROM THE PARTNERSHIPS WITH STANDARD BANK,
EDCON AND CAPITAL ALLIANCE.
* EXPLORING CREDIT BANKING INITIATIVES BEYOND THE BORDERS OF SOUTH AFRICA.
* EXPLORING STRATEGIC ACQUISITIONS IN OUR CORE MARKET.
THE ATTRACTION AND RETENTION OF PASSIONATE PEOPLE INTO THE BUSINESS AND THE
FOSTERING OF A "CAN DO" CULTURE ARE THE CORE COMPETITIVE ADVANTAGES OF THE
GROUP. GIVEN THE SUBSTANTIAL INVESTMENT IN PEOPLE POTENTIAL THAT HAS OCCURRED
DURING THE YEAR, MANAGEMENT ARE CONFIDENT THAT AN EXCITING FOUNDATION FOR
FUTURE ORGANIC GROWTH HAS BEEN LAID.
ON BEHALF OF THE BOARD
LEON KIRKINIS, CHIEF EXECUTIVE OFFICER
ASHLEY MABOGOANE, CHAIRMAN 20 NOVEMBER 2000
TRANSFER SECRETARIES SECRETARY AND REGISTERED OFFICE
MERCANTILE REGISTRARS LIMITED GEORGE DAVIS
11 DIAGONAL STREET, JOHANNESBURG, 2001 59 16TH ROAD
PO BOX 1053, JOHANNESBURG, 2000 MIDRAND, 1685
FOR MORE INFORMATION VISIT OUR WEBSITE: WWW.AFRICANBANK.CO.ZA
RATIOS 30-SEP-00 30-SEP-99
R'000 % R'000 %
RETURN ON TOTAL AVERAGE ASSETS 14.9% 14.5%
RETURN ON AVERAGE SHAREHOLDERS' FUNDS
POST GOODWILL WRITE OF 41,0% 54.6%
PRE GOODWILL WRITE OF 15.6% 14.9%
PROVISION FOR BAD AND DOUBTFUL DEBT AS
A % OF GROSS ADVANCES 14.5% 8,5%
LIFEFUND AS A % OFF GROSS ADVANCES 1.5% 2.7%
OPERATING COSTS /NET INCOME BEFORE CHARGE
FOR BAD DEBTS 31.3 26.6
LONGTERM (PRIMARY AND SECONDARY)
CAPITAL/TOTAL ASSETS 54.2% 37.9%
30-SEP-00 30-SEP-99
AVERAGE ADVANCES PORTFOLIO YIELD R'000 % R '000 %
INTEREST 1,800,512 39.7% 1,342,780 43.9%
OTHER INCOME AND INSURANCE 593,765 13,0% 444,011 14,5%
GROSS YIELD ON AVERAGE ADVANCES 2,394,277 52.7% 1,786,791 58.4%
INTEREST PAID 440,514 9.7% 449,646 14.7%
NET CREDIT LOSSES 210,919 4.6% 85,279 2.8%
RISK ADJUSTED REVENUE 1,742,844 38.4% 1,251,866 40.9%
GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED
30 SEPTEMBER 2000
AUDITED RESTATED AUDITED
YEAR ENDED 2000 YEAR ENDED 1999
R'000 R'000
CASH GENERATED FROM OPERATIONS 1,417,964 1,210,576
INCREASE IN INCOME EARNING ASSETS (893,706) (1,199,197)
(INCREASE)/DECREASE IN DEPOSITS AND OTHER
LIABILITIES AND PROVISIONS (269,552) 776,291
NORMAL TAXATION PAID (182,973) (251,714)
CASH OUTFLOW FROM INVESTING ACTIVITIES (141,363) (218,467)
CASH FLOWS FROM FINANCING ACTIVITIES 783,448 28,623
NET INCREASE IN CASH AND CASH EQUIVALENTS 713,818 346,112
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE YEAR 499,903 153,791
CASH AND EQUIVALENTS AT END OF YEAR 1,213,721 499,903
SEGMENTAL REPORT
' SEPTEMBER 2000
R'000
TOTAL TOTAL TOTAL
ASSETS ASSETS LIABLILITIES
AND
SECONDARY
CAPITAL
2000 1999 2000
AFRICAN BANK 4,566,498 3,998,192 2,716,413
ASSURANCE 832,394 451,654 294,216
THETA INVESTMENTS 722,766 204,628 523,553
OTHER AND CONSOLIDATION (349,346) (104,359) (382,372)
5,772,312 4,550,115 3,151,810
TOTAL TOTAL NET INCOME
LIABLILITES INCOME BEFORE TAX
AND BEFORE
SECONDARY TAX
CAPITAL
1999 2000 1999
AFRICAN BANK 3,172,377 550,797 472,089
ASSURANCE 204,039 369,413 258,303
THETA INVESTMENTS 143,784 191,500 44,726
OTHER AND CONSOLIDATION (195,035) (38,464) 2,840
3,325,165 1,073,246 777,958
SEPTEMBER 2000 ANNUAL FINANCIAL STATEMENT
GROUP INCOME STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2000
AUDITED 2000 RESTATED
R'000 % AUDITED 1999
R'000
REVENUE
INTEREST INCOME 1 874 714 25.4 1 495 418
INTEREST EXPENSE (440 514) (2.0) (449 646)
NET INTEREST 1 434 200 37.1 1 045 772
CHARGE FOR BAD AND DOUBTFUL ADVANCES (311 423) 3.5 (300 858)
NET INTEREST INCOME AFTER PROVISIONS 1 122 777 50.7 744 914
ASSURANCE INCOME 346 637 50.6 230 152
NON-INTEREST INCOME 252 349 18.0 213 859
INCOME FROM OPERATIONS 1 721 763 44.8 1 188 925
OPERATING COSTS (634 360) 57.7 (402 228)
NET INCOME FROM OPERATIONS 1 087 403 38.2 786 697
SHARE OF ASSOCIATE COMPANIES'
RETAINED INCOME 16 147 126.8 7 121
NET INCOME BEFORE TAXATION 1 103 550 39.0 793 818
INDIRECT TAXATION: VALUE ADDED TAX (30 304) 91.1 (15 860)
TAXATION (313 605) 34.0 (234 049)
NET INCOME AFTER TAXATION 759 641 39.7 543 909
MINORITY INTEREST (36 457) 119.0 (16 649)
NET PROFIT FOR THE YEAR 723 184 37.2 527 260
CENTS CENTS
HEADLINE EARNINGS PER SHARE (CENTS) 121.9 26.1 96.7
EARNINGS PER SHARE (CENTS) 122.8 28.1 95.9
GROUP BALANCE SHEET AS AT 30 SEPTEMBER 2000
AUDITED RESTATED
2000 AUDITED
R'000 % 1999
R'000
ASSETS
FIXED ASSETS 96 660 92.8 50 147
INVESTMENT IN ASSOCIATES 28 705 (37.5) 45 900
INVESTMENTS - (100.0) 127 249
NET ADVANCES 3 979 766 18.5 3 357 219
DEFERRED TAX ASSET 49 998 27.9 39 090
LIQUID ASSETS, SHORT TERM DEPOSITS
AND CASH 1 483 963 90.4 779 573
OTHER ASSETS 133 220 (11.7) 150 937
TOTAL ASSETS 5 772 312 26.9 4 550 115
EQUITY AND LIABILITIES
LIABILITIES
LIFE FUND 69 644 (28.9) 97 918
DEFERRED TAX LIABILITY 186 875 75.5 106 476
LOANS AND DEBENTURES 1 282 167 (28.5) 1 793 282
LIABILITIES TO DEPOSITORS 642 688 40.3 457 990
BANK OVERDRAFT 33 258 (67.7) 102 907
OTHER LIABILITIES 430 837 65.4 260 473
TOTAL LIABILITIES 2 645 469 (6.2) 2 819 046
CAPITAL AND RESERVES
ORDINARY SHAREHOLDERS' INTEREST 2 555 851 115.4 1 186 508
OUTSIDE SHAREHOLDERS' INTEREST 64 651 68.2 38 442
SECONDARY CAPITAL 506 341 0.1 506 119
TOTAL CAPITAL AND RESERVES 3 126 843 80.6 1 731 069
TOTAL LIABILITIES AND EQUITY 5 772 312 26.9 4 550 115
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 SEPTEMBER 2000
RESTATED
AUDITED AUDITED
2000 1999
R'000 R'000
SHAREHOLDERS' FUNDS AT THE BEGINNING OF THE YEAR 1 186 508 418 530
MOVEMENTS IN SHARE CAPITAL AND PREMIUM 647 447 191 357
SHARE CAPITAL AND PREMIUM RECEIVED ON
ALLOTMENT AND ISSUE OF SHARES 986 893 1 277 919
WRITE-OFF OF GOODWILL ON ACQUISITION OF
SUBSIDIARIES (339 446) (1 086 562)
MOVEMENTS IN RESERVES 721 896 576 621
DISCOUNT ARISING FROM ACQUISITION OF SUBSIDIARIES (1 288) 23 794
NET PROFIT FOR THE YEAR 723 184 527 260
EFFECT OF CHANGES IN ACCOUNTING POLICY:
DEFERRED TAX ASSET RAISED - 25 567
SHAREHOLDERS' FUNDS AT THE END OF THE YEAR 2 555 851 1 186 508
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