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Johannesburg - There seems to be no end in sight for the enduring good performance by microlenders Capitec [JSE:CPI] and African Bank Investments Limited [JSE:ABL], despite the economic slowdown.
Shares in Capitec were up 2.5% (191c) in Wednesday morning trade after an announcement on Tuesday that it expected earnings for the year to end-March to rise by between 30% and 50% on 2009's reported earnings.
In a quarterly trading update released on Wednesday, Abil said bad debts had peaked, adding it has almost R5bn in capital on its balance sheet.
"The quarter ended December 31 2009 continued to be characterised by a conservative underwriting appetite and muted trading conditions, given the challenging consumer environment," said CEO Leon Kirkinis. "Indications are that market conditions have stabilised, however, with job losses in particular appearing to have peaked."
Gross advances in the Abil lending business rose by 4% over the quarter to R21.9bn. Average loan sizes increased 11% over the same period in 2008 to R7 600, while the average term of these loans increased to 39 months, compared to 33 months before.
A move sure to please shareholders is that troubled furniture retail subsidiary Ellerines appeared to have taken some steps in the right direction. Merchandise sales for the quarter were R1.4bn, raising 1.4% over the same period last year.
Commenting on Ellerines, Kirkinis said: "The quarter was characterised by far more stability in the operating environment, given the extent of the changes that have taken place over the last two years.
"This, together with a better understanding of the key business levers, including the effect of better priced credit, has enabled us to establish a platform on which to build critical mass for the benefit of customers over the medium to long term."
Paul Theron from asset management firm Vestact said the comment on Ellerines was welcome news. "Abil looks steady to me," he said. "It is working on an international bond issue, which is a sign that its status in global credit markets is rising."
However, Independent Securities analyst Simon Fillmore was less buoyant on Abil's announcement. "It does not look like it [Abil] will make consensus forecasts this year though," he said, adding it may take another 18 to 24 months before the firm would be able to extract value from Ellerines.
During late trade on Wednesday, Abil shares were down 0.75% for the day at 2 893 cents per share.
- Fin24.com
*The writer holds shares in both Capitec and Abil.
