Bad debts bite into African Bank profit

Johannesburg - Mass market lender African Bank Investments [JSE:ABL] posted a 26% drop in first-half earnings on Monday, hit by rising bad debts from its heavily leveraged customers.

The company also warned its retail furniture business would likely fall to a loss for the year, as demand from cash-strapped consumers wanes.

African Bank, known as Abil, said headline earnings for the six months to March totalled 125.7 cents, compared with 170.4 cents a year earlier.

The bank targets millions of low-income South Africans through loans and furniture, which it sells on credit.

The furniture business is likely to see a "small loss" for the full-year, Chief Financial Officer Nithia Nalliah told reporters on a conference call.

Abil and its rivals are seeing a spike in bad loans after years of aggressive lending in South Africa.

Household debt levels currently stand at around a record of 76% of disposable income.