African Bank has tightened its lending criteria in an effort to restore profitability following over R600-million net loss in its interim results.
Zweli Manyathi, African Bank CEO, acknowledged during the results presentation on Tuesday that the customer base had become increasingly concentrated in credit due to the bank’s aggressive risk appetite for higher-risk borrowers.
This has left the business exposed to defaults as consumers come under mounting financial pressure.
“Credit has been our biggest pain among other things, and you can actually see if you look back to vintages of 2022 post-Covid, as well as 2024. There was rapid book growth in these periods, and we actually found ourselves, for two reasons, with elevated risk and cost of credit because the risk appetite that we had was actually too high.
“Another piece that we had as a problem is just the malfunctioning of our affordability model, which has since been sorted,” said Manyathi.
He said the bank has since reassessed its approach to credit underwriting and is now applying strict risk standards when evaluating loan applications.
This has resulted in fewer loans being approved and a decline in customers, but Manyathi highlighted that these measures were necessary to improve the quality of the bank’s loan book and strengthen long-term earnings.
“We need to rebalance the bank, instead of leading with credit, we want to be able to present our credit offering and our transactional banking in full. What is required of us to do is to strengthen our customer and data analytics bases. That would be useful because it feeds into credit as well,” said Manyathi.
Enhanced collections capabilities
He said the bank has also enhanced collections capabilities to ensure that the money that goes out as loans makes its way back to the bank.
The South African Reserve Bank (SARB) had placed African Bank under curatorship due to a liquidity crisis and unsustainable bad debts in 2014. The collapse was primarily driven by aggressive unsecured lending, mounting bad debts, and a lack of capital
The curatorship successfully restructured the institution, allowing a new, stable bank to emerge in 2016, while the legacy, distressed assets were isolated into a rundown vehicle.
Anbann Chetti, African Bank CFO, said the half-year results have been challenging due to various reasons, including the credit environment, high cost base and lower revenue and decline in non-interest revenue.
Some clients vanish after securing loans
He said there are clients that are unable to repay their loans, while some clients tend to disappear after taking loans, changing their contact details, which makes it hard for the bank to reach out for rescheduling or other alternative methods.
African Bank has recently invested in a series of strategic acquisitions that have not yet delivered the level of earnings initially expected. Since 2022, the bank has acquired Ubank, Grindrod Bank, and Sasfin’s Capital Equipment Finance (CEF) and Commercial Property Finance (CPF) businesses as part of its diversification strategy.
These deals have expanded the group’s customer base, strengthened its funding profile and added secured lending capabilities. However, the financial benefits have taken longer than anticipated to materialise, prompting the bank to focus on integrating the acquired businesses, creating synergies and unlocking greater value from the investments.
“The group reported a net after-tax loss of R624-million for the period, reflecting the continued impact of transformation costs, integration activities, higher impairments, and a challenging operating environment,” the bank said in its financial results.
- African Bank reported a net after-tax loss of over R600 million, largely due to high credit risk, elevated impairments, and a challenging operating environment.
- CEO Zweli Manyathi acknowledged an overly aggressive risk appetite for higher-risk borrowers and issues with their affordability model, now addressed with stricter lending criteria.
- The bank is tightening credit underwriting, resulting in fewer loan approvals and a reduced customer base, aiming to improve loan quality and long-term profitability.
- African Bank has enhanced collections capabilities to better recover loans and is focusing on integrating recent acquisitions (Ubank, Grindrod Bank, Sasfin financing businesses) to strengthen its diversified offerings.
- The bank's past liquidity crisis and curatorship in 2014 were driven by unsecured lending and bad debts; current measures seek to rebalance the bank away from aggressive credit and build stronger customer analytics and transactional banking services.
African
Zweli
“Credit has been our biggest pain among other things, and you can actually see if you look back to vintages of 2022 post-Covid, as well as 2024.
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He said the bank has since reassessed its approach to credit underwriting and is now applying strict risk standards when evaluating loan applications.
“We need to rebalance the bank, instead of leading with credit, we want to be able to present our credit offering and our transactional banking in full. What is required of us to do is to strengthen our customer and data analytics bases.
He said the bank has also enhanced collections capabilities to ensure that the money that goes out as loans makes its way back to the bank.
Anbann Chetti, African
He said there are clients that are unable to repay their loans, while some clients tend to disappear after taking loans, changing their contact details, which makes it hard for the bank to reach out for rescheduling or other alternative methods.
African
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