African Bank Holdings Limited (ABHL), a stalwart in the South African banking landscape, has announced its audited annual financial results for the fiscal year ending September 30, 2023. The release covers the consolidated results of ABHL Group and its subsidiary, African Bank Limited (ABL or the Bank), shedding light on the Group’s strategic initiatives, acquisitions, financial highlights, operational performance, and future outlook.
In the past two years, ABHL has executed its ambitious “Excelerate25” strategy, charting a course towards building a more comprehensive banking entity. The strategy has focused on the expansion of consumer and business banking divisions to foster diversified revenue streams and funding sources.
The cornerstone of ABHL’s growth strategy has been strategic acquisitions. During the reporting period, the Group welcomed Grindrod Bank and Ubank into its fold. These acquisitions have not only driven growth but also allowed ABHL to diversify its business, mitigating exposure to unsecured lending.
|Impact on Growth
|Entry into business banking, serving SMMEs
|Ubank assets and liabilities
|Strengthened Consumer Banking division
ABHL’s financial results underscore its commitment to building a robust and diversified banking institution. The Group’s balance sheet boasts impressive figures:
|Values (R Billion)
|Net advances book growth
|41% increase to R32.0 billion
|Funding base diversification
|87% of total funding from business and retail deposits (FY22: 76%)
|R9.9 billion (FY22: R2.8 billion)
|Capital adequacy post-acquisitions
|30.0% (FY22: 43.4%)
ABHL’s operational performance reflects the success of its diversification strategy, with notable achievements in various areas:
|Interest income on advances book growth
|30% increase to R7.3 billion (FY22: R5.7 billion)
|Cost of funding reduction
|7.9% in FY22 to 7.3%
|Non-interest income growth
|144% increase to R1.6 billion (FY22: R0.7 billion)
|Insurance profits from cell captive arrangements
|92% increase to R670 million (FY22: R349 million)
|Business Banking total net revenue (11 months post-acquisition)
|Total net revenue before impairments
|40% increase to R8.1 billion (FY22: R5.8 billion)
|Customer base growth
|158% increase to 4.0 million customers (FY22: 1.5 million)
With a focus on building a digital and data-enabled business, ABHL has made significant strides. Over 1 million customers utilize the MyWORLD transactional bank account, experiencing a 44% YoY increase. Transactional volumes surged to 53.4 million transactions, representing R58.6 billion in value.
Despite the positive operational performance, ABHL faced challenges in the fiscal year ending September 2023. Economic pressures, including rising food prices, transport inflation, and the energy crisis resulting in load shedding, impacted the Consumer Banking division. This led to a considerable rise in the credit impairment charge, culminating in the Group’s credit loss ratio increasing to 8.0% from 4.9% in FY22. However, the full-year credit loss ratio marks a significant improvement from the 11.1% reported in the first half-year to March 2023.
|Challenges and Responses
|Economic pressures on Consumer Banking
|Select credit policy and improved collections effectiveness
|Credit impairment charge increase
|More selective credit policy and improved collections effectiveness
With an eye on the future, ABHL remains committed to driving sustainable growth, further diversifying its business, and leveraging its robust balance sheet and liquidity. The Group aims to expand its business banking footprint, enhance consumer transactional and insurance revenues, and strengthen customer relationships.
ABHL’s forward-looking approach includes a binding offer to acquire the capital equipment and commercial property finance advances books and operations from Sasfin, aligning with its strategy to expand into new markets.
While ABHL showcased commendable results, African Bank Limited, the subsidiary, also demonstrated resilience in the face of economic challenges.
African Bank Limited witnessed improvements in net interest income and non-interest revenue. However, the tough economic climate led to the credit impairment charge more than doubling. The Bank consolidated entity reported a net loss after tax of R173 million for FY23, contrasting with a profit of R341 million in FY22.
|Financial Performance Metrics
|FY23 Values (R Million)
|FY22 Values (R Million)
|Net loss after tax
|R341 million profit
|Credit impairment charge increase
|More than double relative to FY22
Selective disbursements granted late in FY22 and FY23, along with tightened credit criteria, coupled with encouraging collections improvements, contributed to a significantly lower credit impairment charge in the second half of FY23.
African Bank Holdings Limited’s financial results for FY23 portray a journey of resilience, strategic acumen, and a commitment to growth. Despite economic headwinds, the Group’s focus on diversification, digital transformation, and prudent financial management positions it as a formidable player in South Africa’s banking sector. As ABHL looks towards the future, its vision for sustainable growth and customer-centric innovation remains unwavering, underlining its role as a trusted banking partner for South African consumers and businesses.