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AFRICAN BANK LIMITED - ABKI ABLI - Release of the Audited Annual Financial Results

Release Date: 21/11/2023 08:26
Code(s): ABX01 ABJ01 ABKI04 ABJ02 ABJ05 ABJ04 ABJ03     PDF:  
Wrap Text
ABKI ABLI - Release of the Audited Annual Financial Results

(Incorporated in the Republic of South Africa)
(Registered Bank)
(Registration No. 2014/176899/06)
LEI: 2549008X8SL1B1J86F98
Company code: ABKI
(the "Bank" or "African Bank")

(Incorporated in the Republic of South Africa)
(Registration No.: 2014/176855/06)
Company code: ABLI
LEI: 254900UUEMIK0XL5A056
("ABHL" or the "Group")


African Bank Holdings Limited ("ABHL" or "African Bank Group") is pleased to announce that the
ABHL Group and its subsidiary company, African Bank Limited ("ABL" or "Bank"), released their
audited annual financial statements for the year ended 30 September 2023 ("FY23") ("Group
consolidated results", and "Bank results" respectively) today. The prior year comparative annual
financial statements are for the year ended 30 September 2022 ("FY22"). The more comprehensive
ABH Group consolidated results are addressed first, followed by the Bank's stand-alone results.

ABHL Group consolidated results – building a diversified bank for growth while trading in a
tough economic environment.

It has been two audacious years since the African Bank Group launched its "Excelerate25" strategy
and much progress has been achieved in this short period. The key focus has been the building of
a more fully-fledged bank with both consumer and business banking divisions by growing a
diversified client base and product offerings that results in more diversified revenue streams and
funding base.

The strategy of scaling up the business, and thus ensuring the Group's sustainability, is evidenced
by the two acquisitions we onboarded in this current reporting period. The acquisition of both
Grindrod Bank and the Ubank assets and liabilities have not only spurred on our growth aspirations
but have allowed us to diversify our business and de-risk our exposure to unsecured lending, while
maintaining a well-capitalised balance sheet that supports the scalability and sustainability of the
Group's operations.

The Grindrod Bank acquisition is in line with our founding fathers' vision that has enabled us to
enter the business banking arena, and so provide banking services to underserviced SMME's and
entrepreneurs which creates further opportunities to grow our client base, but most importantly,
fulfilling our customers' needs.

The Group's retail Consumer Banking division has also been bolstered with the successful
acquisition of Ubank's assets and liabilities. The Ubank operations have been successfully
integrated into the Consumer Banking operations, and we have turned this loss-making operation
into one that contributes positively to the Group's profitability. The Consumer Banking division
continues to expand their suite of products and service offerings with the launch of a secured
home loan product and financing tech deals, including offering handset subscriptions offered by
mobile companies. We continue to grow new retail customers, attracted by our competitive
savings and investment rates, insurance products, affordable banking fees, the unique
transactional banking opportunities afforded by our MyWORLD account, and our high level of
customer service.

The African Bank Group is now a diversified entity, with a larger and stronger balance sheet
consisting of:
   • Net advances book growing by 41% to R32.0 billion (FY22: R22.6 billion), with secured
     business banking loans making up more than a third of our loans to customers and providing
     the planned diversification,
   • A funding base that has further diversified with business and retail deposits, now making
     up 87% (FY22: 76%) of total funding of R34.6 billion (FY22: R16.6 billion),
   • Sufficient liquidity with cash reserves totalling R9.9 billion (FY22: R2.8 billion), and
   • A strong capital position that funded the two acquisitions, whilst maintaining an optimal
     capital adequacy post the acquisitions of 30.0% (FY22: 43.4%), exceeding regulatory and
     internal minimums.

This enlarged balance sheet has resulted in the following positive operational performances:
    • Interest income earned on the advances book growing by 30% to R7.3 billion (FY22: R5.7
      billion), with a net interest margin of 11.0% (FY22: 14.0%),
    • Diversification benefits have resulted in the cost of funding reducing from 7.9% in FY22 to
      7.3%, notwithstanding the 200 basis point increase in the repo rate over the same period,
    • Non-interest income has grown by 144% to R1.6 billion (FY22: R0.7 billion) as more
      customers transact on their MyWORLD and Credit Card account, and acquire value added
      services from the Group,
    • Insurance profits from cell captive arrangements have increased by 92% to R670 million
      (FY22: R349 million) mainly on the back of claims normalise,
    • Business Banking contributing R682 million in total net revenue for the 11 months from the
      effective date of acquisition (1st November 2022),
    • Total net revenue before impairments grew by 40% to R8.1 billion (FY22: R5.8 billion), and
    • Operating expenditure increases with a cost to income ratio of 58.7% (FY22: 56.3%) as the
      Group is in an investment phase whilst integrating the new businesses.

The African Bank Group's diversification and scaling of the business is evident in the 4.0 million
customers (FY22: 1.5 million) serviced on all Group platforms, up 158% from a year ago. The
Consumer Banking division services 1.9 million customers who have credit products, transactional
bank accounts, savings products, funeral and credit life products. A further 2.1 million customers
access products provided through our alliance partner networks consisting of Shoprite Checkers,
Lesaka and MTN's Momo. The Business Banking division is already serving 19 thousand business
customers across investments and secured loans.

Part of African Bank's mission is to build a digital and data enabled business. Over 1 million
customers make use of our MyWORLD transactional bank account with its shared banking features,
which increased by 44% year-on-year. Transactional volumes have increased to 53.4 million
transactions (FY22: 35.0 million), representing R58.6 billion in value.

Notwithstanding the Group's positive operational performance highlighted above, the current
financial year's results were negatively impacted as the Consumer Banking customer came under
severe economic pressure, brought about by the rapid rise in food prices, transport inflation and
the loadshedding energy crisis. This resulted in the Consumer Banking division's credit impairment
charge rising considerably, culminating in an increase in the Group credit loss ratio to 8.0% (FY22:
4.9%). The full year credit loss ratio is however a considerable improvement from the 11.1%
reported in the first half year to March 2023, brought about by a more select credit policy, and
improved collections effectiveness.

Overall, the Group reported a net profit after tax of R505 million (FY22: R736 million profit) for
the financial year ended 30 September 2023.

Looking towards the future, we remain focused to drive sustainable growth while diversifying our
business further and ensuring we build on our strong Group balance sheet and liquidity. Our focus
is on growing our business banking footprint, consumer transactional and insurance revenues by
cultivating strong relationships with our customers and expanding our reach into new markets.
The recently announced binding offer to acquire the capital equipment and commercial property
finance advances books and operations from Sasfin speaks to fulfilling this strategy. The Group is
confident in our ability to maintain our position as a trusted banking partner for our customers.

African Bank results

The African Bank's consolidated Annual Financial Statements represent the financial position and
financial results of African Bank, its 100% directly held subsidiary (Grindrod Financial Holdings
Limited) and its 100% indirectly held subsidiaries.

Similar to the Group's results above, the Bank has performed well, with improvements in its net
interest income and non-interest revenue. However, the credit impairment charge for the year
has more than doubled relative to that of the prior year because of the tough economic climate
negatively affecting customers affordability. Selective disbursements were granted late in FY22
and in FY23 resulting following tightened credit criteria, and together with the encouraging
collections improvements, have resulted in the second half of the FY23 charge being significantly
lower than the first half.
This mainly contributed to the Bank consolidated entity in FY23 making a net loss after tax of R173
million (FY22: R341 million profit). See the results publication material below for more detail.

Results publication material

The following published documents are accessible on African Bank's                         website   at under the "Investors/Financial Reporting" section:

1. African Bank Holdings Limited audited group consolidated annual financial statements for the
   year ended 30 September 2023;
2. African Bank Holdings Limited group investor presentation;
3. African Bank Holdings Limited group integrated report for the year ended 30 September 2023;
4. African Bank Holdings Limited group environmental, social and governance report for the year
   ended 30 September 2023;
5. African Bank Limited consolidated audited annual financial statements for the year ended 30
   September 2023; and
6. African Bank Limited and African Bank Holdings Limited Basel Pillar III Disclosure documents
   as at 30 September 2023.
7. Grindrod Bank Limited's audited annual financial statements for the year ended 30 September
   2023 can be accessed at the following link:

The external auditors have issued unqualified audit reports on both the Bank and the Group's
annual financial statements, which include no modifications.

The governance report is incorporated into the Environmental, Social and Governance report,
and includes the various King IV disclosures, which can be accessed at
under the "Investors/Corporate information/Environmental, Social and Governance report"

Webcast details, presentation material and playback facility

Interested parties are invited to register for a webcast during which Kennedy Bungane, ABH Group
CEO, and several executives, will take participants through the ABHL consolidated annual year
end results. Details of the webcast are:

 Date                          Tuesday, 21 November 2023
 Time                          10h00 SAST/CAT
 Web pre-registration          Interested parties are requested to pre-register for this
                               webcast and follow the
                               instructions provided.

A recording of the webcast will be available on the Bank's website at
under "Investors/Financial Reporting".

21 November 2023

Debt sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)

Date: 21-11-2023 08:26:00
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