Johannesburg – African Bank Investments [JSE:ABL]
(Abil) expects sales growth to moderate in the last quarter of its financial year‚ given the current market conditions.
In a trading update for the third quarter‚ to end-June 2012‚ the financial services group said credit disbursements in the banking unit were up 26% from a year ago‚ at R19.5bn.
“The EHL-based kiosks and carve-outs contributed positively to sales‚ as did new products and high commitment levels from our staff‚” the company said‚ referring to kiosks in Ellerines stores.
“This was countered to an extent by strategies to reduce risk in certain segments of the target market. The latter had the effect of reducing approval rates from 75% in June 2011 to 69% by June 2012.”
Gross advances grew by 27% to R50.5bn on a year-to-date basis or 36% year on year‚ on the back of the higher sales and extended term.
African Bank’s loan advances grew by 35%‚ the credit card portfolios increased by 47%‚ while EHL advances grew by 33% year on year.
Total income yield declined marginally from the interim results level‚ as expected. Fee income continued to be affected by a shift in the sales mix towards internal consolidation loans‚ on which no initiation fees are charged.
The company said operating costs remained elevated although the monthly run rate started to decline.
“Credit quality continued to be satisfactory. Non-performing loans (NPLs) as a percentage of advances increased marginally to 28%‚ as the high sales of the past 18 months started to mature.
“NPL coverage remained steady relative to the interim period and was slightly higher than at September 2011. Vintages continued to track in the middle of historical ranges and in line with expectations‚” it said.
EHL stores generated R2.7bn of additional credit sales over and above furniture credit‚ relative to R1bn for the comparative period last year.
African Bank increased the size of the Basel 3 entry-level Tier II capital issued during the period to R1bn.
EHL recorded merchandise sales of R3.7bn for the nine months to June 30 2012‚ a 3.4% increase from last year. Comparable sales - on a square metre basis - were 6.9% higher than last year.
Sales in the third quarter were affected by the tough trading conditions and risk measures implemented in the credit environment which continued to reduce offer rates.
The furniture sector experienced further deflation although the level was lower‚ at 1.8%.
Cash sales of R1.4bn were 7% higher than the prior year.
Credit sales amounted to R2.3bn‚ marginally higher than the comparable period in 2011.
The credit sales mix at 62.9% was below last year’s 64.1%‚ as a result of the lower offer rates and more stringent credit criteria.
The decline in the credit sales mix trend was especially prevalent in Beares and Geen & Richards‚ and more recently in the balance of the portfolio.
* Follow Fin24 on Facebook, Twitter and Google+.