ABIL trading update is decent enough

This morning we had a trading update for the third quarter ended 30 June for African Bank. On the face of it, it looks pretty good. The update is very informative going through the banking and retail units in detail.


Banking Unit. Credit disbursements for the 9 months reached R19.5bn. That is a 26% increase from last year. This was as a result of the success of the Ellerines kiosks and new product offerings. The average loan size has also increased by 24% to R12 420 while the average term increased from 45 to 47 months. The increase in disbursements was despite the reduction of approval rates from 75% to 69%. This was done to further manage risk.


Overall advances have peaked above R50bn to R50.5bn for the first time ever. Loan advances have grown 35%, the credit card portfolio grew 47% while Ellerines credit advances grew 33%. The EHL kiosk network brought in R2.7bn over and above retail sales which are up from R1bn last year.


These are all strong numbers of growth from a combination of good company practices and strong demand from the market. As an investor we have full faith in the management team to maintain their innovative ways of grasping the growing consumer. The big risk for this business at the moment is the macro environment. I am going to the Abil investor presentation this afternoon where the micro lending environment will be discussed in detail. I will report on this tomorrow.


Retail Unit. This sector is not doing as well as the banking unit. Sales came in at R3.7bn which is 3.4% higher than the corresponding period. These sales were impacted by tough trading conditions. The retail sector has been strong but the furniture guys like Lewis and JD Group have been a lot slower with both these companies having tough years so far. This compared to the clothing and food retailers have really underperformed. I remain fairly neutral on the sector but the fact that African Bank use these retail outlets as kiosks remain this businesses core contribution to the group.


In the interim report for the 6 months the company had grown earnings by 25%. That was off 47bn in loans. A 7.4% growth to R50.5bn for these 3 months shows that the company is maintaining its strong growth levels and we expect earnings to follow suit. We remain buyers of stock and a more detailed report on the macro conditions will be covered tomorrow.