AFRICAN Bank swung to a profit during the year ended September 2021 from a loss a year earlier and unveiled its 2025 strategy aimed at ensuring the bank remains relevant in a competitive environment.
African Bank yesterday reported a net profit after tax of R534 million compared to a reported loss of R27m for the same period last year.
Chairperson Thabo Dloti said the bank’s results, while encouraging, remained significantly lower than the 2019 financial year’s pre-pandemic results of a profit of R1.2 billion.
“This slower return to pre-pandemic profitability levels is mainly due to a slower-than-expected recovery of the South African economy and the conservative, but necessary, stance adopted by the group towards credit advancement,” Dloti said.
On the positive side, he said, the group’s net profit after tax of R382m in the second half of the 2021 financial year was more than double the R152m generated in the first half of 2021, reflecting an accelerated economic recovery.
“Prior to the outbreak of the novel coronavirus pandemic in South Africa, and given an already weakened macro-economic environment, the group took proactive steps to tighten various credit-granting criteria,” Dloti said.
He said further tightening measures occurred in 2020, given the impacts of the Covid-19 extended lockdown on the financial well-being of consumers.
“As a key outcome, the level of disbursements granted to customers remained low during the current reporting period, resulting in the year-end gross advances balance declining by 6 percent year-on-year,” he said.
The total net revenue, including insurance income, reduced by 13 percent year-on-year, from R6.053bn to R5.28bn.
The group’s available cash resources stood at R9bn, representing a 30 percent increase from the R6.9bn in 2020.
Commenting on the performance of the business, African Bank’s chief executive, Kennedy Bungane, said: “The financial year has been a story of two halves at African Bank, with the first six months being about business resilience as we emerged from the harsh effects of the first three waves of Covid-19.
“The second half of the financial year was about transitioning the business to our new 2025 Excelerate strategy, while instituting necessary risk aversion measures ahead of a fourth wave of Covid-19, which is now unfolding.”
Bungane succeeded Basani Maluleke, who stepped down in January as the group’s chief executive and executive director to pursue new opportunities outside of the African Bank group. Bungane, affectionately referred to as ‘KGB’ by colleagues, was previously chief executive of Absa’s Africa operations.
The group’s retail deposits book grew by 73 percent to R10.315bn from R5.985bn in 2020, constituting 61 percent of total funding. The group said some 59 percent of retail deposits were invested into the 60-months fixed-term product.
Dloti said it was clear to the board and group executive committee that how to develop and position African Bank within the retail banking sector going forward was crucial to ensuring that the organisation remained relevant, competitive and continued returning value to its stakeholders and society as a whole.
“Our 2025 financial year strategy is underpinned by our values, sustainability levers and digital ways of working,” Dloti said.
He said the 2025 strategy mirrored the bank’s heritage dating back to 1975 when Dr Sam Motsuenyane envisioned a bank for the people and by the people.
BUSINESS REPORT ONLINE