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Johannesburg - African Bank Investments [JSE:ABL] (Abil) swung to an expected six-month headline loss of 240.7 cents per share after the lender booked more bad loans.
The bank had already flagged that non-performing loans were R600m higher than had been expected, compelling the lender to set aside R2.5bn more for future loans.
Abil had aggressively pushed unsecured loans to the mass market but stubborn inflation, high levels of indebtedness and labour strife in the platinum mines have crippled the ability of many borrowers to meet their obligations.
"The success of an unsecured lending business is based on the future ability of customers to timeously meet their contractual repayment on loans granted and their credit card debt," Abil said in a stock exchange filing.
"Notwithstanding stricter underwriting standards and periodic pullbacks in risk, tough economic cycles negatively impact this ability." Interest income was up 7% to R6bn and non-interest income, or revenue from fees and commissions, declined by 10% to R1.47bn.
The credit impairment charge more than doubled to R8bn from R3.89bn a year ago. Banks face an increase in bad loans due to rising interest rates and the prevalence of unsecured lending, according to ratings agency Moody's.
Abil shares have extended losses this year, dropping 30% after a 50% plunge in 2013. South Africa's five biggest banks have reported a decline in impaired loans, which fell to R84bn in December 2013, or 3.1% of total loans, according to the central bank.
But impaired credit is a bigger problem at smaller banks, ballooning to a peak of R24bnd, or 17.4% of their total loans, in July 2013.
Unsecured lending accounts for almost 12% of total gross credit exposure in the banking sector, according to Reserve Bank data.
* Struggling with debt? Help us help you by taking our second annual Debt survey and you could win R3 000, or add your voice by sharing your debt experiences, debt-busting tips and insights. Have a question? Ask our experts.
The bank had already flagged that non-performing loans were R600m higher than had been expected, compelling the lender to set aside R2.5bn more for future loans.
Abil had aggressively pushed unsecured loans to the mass market but stubborn inflation, high levels of indebtedness and labour strife in the platinum mines have crippled the ability of many borrowers to meet their obligations.
"The success of an unsecured lending business is based on the future ability of customers to timeously meet their contractual repayment on loans granted and their credit card debt," Abil said in a stock exchange filing.
"Notwithstanding stricter underwriting standards and periodic pullbacks in risk, tough economic cycles negatively impact this ability." Interest income was up 7% to R6bn and non-interest income, or revenue from fees and commissions, declined by 10% to R1.47bn.
The credit impairment charge more than doubled to R8bn from R3.89bn a year ago. Banks face an increase in bad loans due to rising interest rates and the prevalence of unsecured lending, according to ratings agency Moody's.
Abil shares have extended losses this year, dropping 30% after a 50% plunge in 2013. South Africa's five biggest banks have reported a decline in impaired loans, which fell to R84bn in December 2013, or 3.1% of total loans, according to the central bank.
But impaired credit is a bigger problem at smaller banks, ballooning to a peak of R24bnd, or 17.4% of their total loans, in July 2013.
Unsecured lending accounts for almost 12% of total gross credit exposure in the banking sector, according to Reserve Bank data.
* Struggling with debt? Help us help you by taking our second annual Debt survey and you could win R3 000, or add your voice by sharing your debt experiences, debt-busting tips and insights. Have a question? Ask our experts.
