African Bank reported a surge in bad debt provisions, with impairment charges increasing by 240% to R2.2 billion, due to rising credit risks and a tough economic environment in South Africa.
- The bank has responded by curtailing lending and becoming more selective in granting loans, adjusting its risk appetite accordingly.
- Despite the challenges, African Bank increased operating income before credit impairments by 47% to R3.9 billion and more than doubled non-interest income to R668 million.
- The bank’s CEO, Kennedy Bungane, stated that the credit risks have been occasioned by the general stress in SA’s macro environment, which has rendered its customers unable to meet obligations as they become due.
- The bank’s joint CFO, Chrisanthi Michaelides, noted that the hyper food inflation, transport inflation, and energy crisis are affecting customers’ ability to repay their loans, with stage 3 loans (held by consumers in financial distress) now making up 35% of its loan book.
- Despite reporting an interim loss, African Bank anticipates returning to profitability when it publishes its full year results to 30 September 2023 in November, and has implemented a strategy to improve its coverage ratio and reduce impairments.