UPDATE 2-S.Africa's Abil puts the brakes on consumer loans
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Financials » * Full-year earnings up 18 pct, but short of forecast* Interest income jumps 36 pct, dividend up* Shares up 3 pct, down about 10 pct this year (Adds quotes, details)By Helen Nyambura-MwauraJOHANNESBURG, Nov 19 (Reuters) - African Bank Investments is slowing down its lending after years of rapidgrowth, the first sign South African banks may be turning morecautious about lucrative, but high-risk loans to increasinglyindebted consumers.African Bank, also known as Abil, helped pioneer the boomingSouth African market for unsecured lending - highly profitable,though risky, credit that is not backed by collateral.Abil, which fell short of expectations with an 18 percentrise in full-year profit on Monday, is now seeing competitionfrom South Africa's big banks, which are also lending tolow-income consumers.'We have cut back slightly on our credit and moreimportantly we're being more selective about who and how much wegive following the excessive supply in the market,' ChiefFinancial Officer Nithia Nalliah told Reuters.The central bank has said it is not unduly worried about therise in unsecured loans, but some analysts disagree. Unsecuredcredit surged 21 percent to $43 billion in the year to June,according to central bank data.The loans have helped underpin consumer spending, especiallyamong the poor. However, there is also vast potential fordefault, given that South Africa's household debt stands at 76percent of disposable income.'The fact that they are aware of the dangers of theunsecured lending is positive,' said Viv Govender, analyst atVunani Private Clients.'People have been nervous about this sector as a whole.There's been talk about the possibility of a bubble in unsecuredlending.'Abil's non-performing loans total nearly 28 percent of its50 billion rand ($5.6 billion) loan book, Nalliah said. Yet
itis still making money, as its average interest rate is justbelow 21 percent, well above the central bank's benchmark rateof 5 percent.FURNITURE LOANSAbil also owns furniture chain Ellerines, where it sellsdining room sets and sofas on credit, and offers personal loansinside its stores.Loans have grown at an annual rate of 25 percent in recentyears, but the company sees that slowing to about 15 percent.dining tableAbil plans to raise 15 billion rand this year, a third of itfrom international markets, Nalliah said. It issued 125 millionSwiss francs in a four-year bond earlier this month.Abil missed market expectations with diluted headlineearnings per share at 342.5 cents in the year to end-September,compared with 291
cents a year earlier.A poll of 12 analysts had expected earnings to increase 25percent to 362 cents, according to Thomson Reuters data.Earnings were held back by growing competition.Headline EPS, which excludes some one-time and financialitems, is the main measure of profit in South Africa.dining tableThe company increased dividends by 5 percent to 195 cents,higher than the 183 cents expected in the poll of analysts.Interest income rose 36 percent to 9.9 billion rand andnon-interest income rose 12 percent to 3.3 billion rand.Helped by the higher dividend, shares of Abil were up around3 percent at 1245 GMT. However, they are down about 10 percentso far this year, compared with over 15 percent growth in thebenchmark Johannesburg Top-40 index.($1 = 8.9315 South African rand) (Editing by David Dolan and Mark Potter)
Financials » * Full-year earnings up 18 pct, but short of forecast* Interest income jumps 36 pct, dividend up* Shares up 3 pct, down about 10 pct this year (Adds quotes, details)By Helen Nyambura-MwauraJOHANNESBURG, Nov 19 (Reuters) - African Bank Investments is slowing down its lending after years of rapidgrowth, the first sign South African banks may be turning morecautious about lucrative, but high-risk loans to increasinglyindebted consumers.African Bank, also known as Abil, helped pioneer the boomingSouth African market for unsecured lending - highly profitable,though risky, credit that is not backed by collateral.Abil, which fell short of expectations with an 18 percentrise in full-year profit on Monday, is now seeing competitionfrom South Africa's big banks, which are also lending tolow-income consumers.'We have cut back slightly on our credit and moreimportantly we're being more selective about who and how much wegive following the excessive supply in the market,' ChiefFinancial Officer Nithia Nalliah told Reuters.The central bank has said it is not unduly worried about therise in unsecured loans, but some analysts disagree. Unsecuredcredit surged 21 percent to $43 billion in the year to June,according to central bank data.The loans have helped underpin consumer spending, especiallyamong the poor. However, there is also vast potential fordefault, given that South Africa's household debt stands at 76percent of disposable income.'The fact that they are aware of the dangers of theunsecured lending is positive,' said Viv Govender, analyst atVunani Private Clients.'People have been nervous about this sector as a whole.There's been talk about the possibility of a bubble in unsecuredlending.'Abil's non-performing loans total nearly 28 percent of its50 billion rand ($5.6 billion) loan book, Nalliah said. Yet itis still making money, as its average interest rate is justbelow 21 percent, well above the central bank's benchmark rateof 5 percent.FURNITURE LOANSAbil also owns furniture chain Ellerines, where it sellsdining room sets and sofas on credit, and offers personal loansinside its stores.Loans have grown at an annual rate of 25 percent in recentyears, but the company sees that slowing to about 15 percent.dining tableAbil plans to raise 15 billion rand this year, a third of itfrom international markets, Nalliah said. It issued 125 millionSwiss francs in a four-year bond earlier this month.Abil missed market expectations with diluted headlineearnings per share at 342.5 cents in the year to end-September,compared with 291 cents a year earlier.A poll of 12 analysts had expected earnings to increase 25percent to 362 cents, according to Thomson Reuters data.Earnings were held back by growing competition.Headline EPS, which excludes some one-time and financialitems, is the main measure of profit in South Africa.dining tableThe company increased dividends by 5 percent to 195 cents,higher than the 183 cents expected in the poll of analysts.Interest income rose 36 percent to 9.9 billion rand andnon-interest income rose 12 percent to 3.3 billion rand.Helped by the higher dividend, shares of Abil were up around3 percent at 1245 GMT. However, they are down about 10 percentso far this year, compared with over 15 percent growth in thebenchmark Johannesburg Top-40 index.($1 = 8.9315 South African rand) (Editing by David Dolan and Mark Potter)