African Bank to Add Credit Cards, Overdrafts to Diversify Income

JOHANNESBURG(Capital Markets in Africa) – African Bank Holdings Ltd. plans to offer overdrafts as the South African lender adds income sources to draw more distance between itself and its collapsed former parent.

“We are looking to relaunch our credit-card product next year and we are looking to launch an overdraft product as well,” Chief Executive Officer Basani Maluleke said by phone. “The diversification of our funding is also a critical success factor for the bank.”

The lender’s retail-customer deposits more than doubled to 2.4 billion rand ($162 million) in the 12 months through September from 1.1 billion rand a year earlier. African Bank is seeking to attract more salaried customers by offering among the highest interest rates on positive balances, while also joining competitors in a push into digital services.

The firm’s former parent, African Bank Investments Ltd. was rescued by its peers and South Africa’s central bank in 2014 after too many customers defaulted on their unsecured loans and investors balked at giving it more cash.

 “The health of African Bank is still judged predominately on the health of its loan book, which I think is right,” the CEO said. “The fact that the credit-loss ratio continues to come down should give a lot of investors comfort that we continue to lend prudently, and are cautious given the state of the economy.”

The Johannesburg-based lender’s credit-loss ratio improved to 6.8% at the end of September, from 11.1% a year ago, African Bank said in a statement on Tuesday. Credit disbursements rose 17% to 5.6 billion rand.

Client Projections
While African Bank is making progress toward financial performance targets for 2021, it is falling behind its projection for customer numbers of 2.5 million in two years, adjusting this down to 1.7 million, Maluleke said. New clients were added too slowly to its MyWorld account launched in May, a year later than expected.

“We set these targets in 2016 and the world now looks considerably different from what it did then,” she said. “If you think about competition, the economy, growing unemployment — all of these have made us reconsider what is a more reasonable 2021 target for customer

Source: Bloomberg Business News