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Johannesburg - African Bank Investments [JSE:ABL] (Abil) posted an expected 88% plunge in full-year earnings on Monday, after a sharp increase in bad loans.
The bank said headline earnings per share totalled 45.1 cents in the year to end September, down from 378.2c a year earlier.
Although interest income rose 21% to R11.96bn, Abil said it took a hit from bad debt charges, which rose 89% to R9.15bn.
To prop up its diminishing balance sheet, Abil is raising nearly R5.5bn in a rights issue and disposing off its furniture retail unit Ellerines.
The bank, South Africa's biggest unsecured lender, purchased the seller of sofas and beds in 2007 hoping to plump up its loan portfolio through selling furniture on hire purchase.
Banks are pulling back on lucrative yet risky unsecured loans, which they depended on for the past few years to boost dwindling income in a tough economic environment.
Abil shares have lost more than 40% of their value this year as the lender issued successive profit warnings.
Johannesburg's All-share index is up 16%t.
Capitec Bank, Abil's main competitor in extending the loans without the backing of collateral, has added nearly 10% this year.
Unlike Capitec, Abil does not take deposits and relies solely on bonds for capital. Its has also been more liberal with bad loans, choosing to hold on longer to them on its balance sheet.
The bank said headline earnings per share totalled 45.1 cents in the year to end September, down from 378.2c a year earlier.
Although interest income rose 21% to R11.96bn, Abil said it took a hit from bad debt charges, which rose 89% to R9.15bn.
To prop up its diminishing balance sheet, Abil is raising nearly R5.5bn in a rights issue and disposing off its furniture retail unit Ellerines.
The bank, South Africa's biggest unsecured lender, purchased the seller of sofas and beds in 2007 hoping to plump up its loan portfolio through selling furniture on hire purchase.
Banks are pulling back on lucrative yet risky unsecured loans, which they depended on for the past few years to boost dwindling income in a tough economic environment.
Abil shares have lost more than 40% of their value this year as the lender issued successive profit warnings.
Johannesburg's All-share index is up 16%t.
Capitec Bank, Abil's main competitor in extending the loans without the backing of collateral, has added nearly 10% this year.
Unlike Capitec, Abil does not take deposits and relies solely on bonds for capital. Its has also been more liberal with bad loans, choosing to hold on longer to them on its balance sheet.
