African Bank returned to profit in the six months to end-March, thanks to lower bad debt charges, a growing loan book and a continuing rise in its retail deposits.
The bank recorded a net profit of R257 million, bouncing back from a loss of R135 million in the six months ended on 31 March 2021.
At a group level – when one includes African Bank's insurance operations, net profit rose to R372 million from R152 million in March 2021.
The group's credit impairment charge fell from R850 million to R658 million.
Opening the lending taps
African Bank continued to attract more retail customer deposits. Including transactional banking balances, retail customer deposits rose to R10.96 billion from R8.6 billion.
Not only is the bank growing its retail deposit book, but its lending book is growing again. And this is positively impacting its net interest margins, said the bank.
In 2020, African Bank tightened its lending criteria, which led to a substantial decline in new loans disbursed since the start of the pandemic. But the bank gradually began to relax its lending criteria in the 2021 financial year, which started to bear fruits in the current reporting period. Also, in this half, African Bank also wrote its inaugural corporate loan.
The bank's retail loan disbursements increased by 89% year-on-year from R3.3 billion in March 2021 to R6.3 billion this March.
"This increase in retail disbursements has arrested the decline in the gross advances balance," wrote African Bank in the results announcement.
The bank's customer loan balances have climbed to R19.6 billion from R16.7 billion.
Thanks to this, African Bank is earning more interest income. Its net interest margin increased by 11% which also benefited from the fact that its cost of funding is falling after it re-entered the domestic wholesale funding market.
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