Full integrated annual report - African Bank - Investoreports

Credit products
EHL made good progress in its objective of providing an affordable and differentiated credit proposition.
It implemented numerous innovations which added to its customer proposition, including 0% interest
products, deferred payment options, product bundles, product and cash bundles and a credit Price Beat
challenge (a market fi rst).
The rollout of Ezi*Cash, Ezi*loans, kiosks and carve-outs also added to the range of credit options available
to our customers.
S3. Maintaining a foundation of fi nancial strength
Capital
ABIL aims to achieve the optimal balance between acceptable returns to shareholders and appropriate
levels of capital adequacy to achieve our growth objectives. To this end the group focuses on optimising
the existing balance sheet to strengthen our capital base, develop new and alternative funding strategies,
expand our funding sources, and aim to achieve a balance between a strong dividend fl ow and retaining
earnings to support growth.
ABIL maintained its conservative approach to capital management during the period which continued to
ensure stable credit ratings for the Bank, a steady fl ow of available funding and a further reduction in the
cost of funding. The group continued to sustain healthy capital ratios in 2011, (refer page 52) despite the
strong balance sheet growth. During the year it issued R515 million in subordinated debt, R243 million of
preference shares and generated organic earnings which were supported by an ongoing optimisation
programme for risk weighted assets and qualifying capital. In order to support the targeted growth in
advances, the group expects the dividend cover to rise to between 1,8 and 2,0 times in 2012. The cover
will be re-evaluated as the anticipated improvement in RoE gathers momentum.
Funding
The group ensures that it maintains conservative liquidity buffers to meet maturing liabilities and other
operational demands for cash at all times and raises suffi cient funding to achieve its growth ambitions over
the short to medium term.
African Bank successfully increased its funding to R33,8 billion to fund the asset growth during the year.
The Bank issued long term bonds under the DMTN programme totalling R1,5 billion, issued inaugural
Commercial paper with a six-month term of R1,2 billion and issued its debut listed bond under its EMTN
programme of US$300 million. At the same time, it managed to bring the average cost of funding down
from 10,4% in 2010 to 9,4% in 2011, despite the volume of additional funding raised. Through the EMTN
bond, the Bank also acquired an additional 90 debt investors, further diversifying the funding base.
Moody’s maintained its investment grade ratings with a stable outlook, which is an important driver that
supports the group’s fund raising activities.
The group will continue to broaden its group of funders, sources of funding and the funding products it
offers in the new year, with the launch of a pilot to secure retail deposits through remote channels, amongst
others.
For further information refer to the fi nancial section in this report on page 52 and the web-based risk
report at http://africanbank.investoreports.com/africanbank_ar_2011/risk/
Integrated report 2011 | African Bank Investments Limited
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