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excluding the Saambou PLB acquisition
for the year to September 2003, some
7% lower than the comparable period
to September 2002. Including the
acquisition, the business managed to
bring down its cost-to-income ratio from
33,0% to 31,3%.
Specialised Lending’s costs increased
by 10,8% over the financial year. Its
cost-to-income ratio is 45,8%, which
is higher than the 42,3% in September
2002. The reorganisation and
divisionalisation of the unit will reverse
this trend.
While these cost-to-income ratios
appear competitive, the group also
manages its costs on a cost-to-assets
basis. The latter ratio climbed from
17,9% in September 2002 to 19,1% in
September 2003, as a direct result of
the rapid reduction in the pay down
books. The group has initiated
strategies including the integration of
the Collections businesses (Saambou
3 500
3 000
2 500
2 000
1 500
1 000
500
0
NPLs
R million
Sep
02
2 990 2 905
228 243
1 382 1 229
1 381
1 433
Dec
02
and African Bank), the divisionalisation
of the Specialised Lending operations
and other cost cutting drives, that have
started to have an impact on this ratio
and will continue into 2004.
Taxation
The total taxation charge has increased
from 34,4% to 37,4% over the period.
Apart from the 29,4% normal tax
charge on profits, the group paid
R33,0 million (2002: R9,3 million) in STC
and R51,9 million (2002: R29,1 million) in
apportioned input VAT disallowed, which
added 3,1% and 4,9% respectively to the
tax charge. (Refer page 34 for a
discussion on STC charges).
Asset quality – NPLs,
provisions and credit
losses
Non-performing loans
Non-performing loans (NPLs) are defined
as loans that have more than three
instalments in arrears. NPLs decreased
by R364,4 million from R2 989,7 million
2 781
252
1 157
1 372 1 334 1 289
Mar
03
2 714
280
1 100
Jun
03
in September 2002 to R2 625,3 million in
September 2003. NPLs in African Bank
Retail declined by R425,3 million
(15,4%) while NPLs in the lending
books of Specialised Lending declined
by R3,9 million. NPLs in the paydown
books of Specialised Lending increased
by R64,7 million. The latter was entirely
attributable to GEMS and ACFC which
are in the process of being wound down.
The decrease in NPLs and resultant
decline in provisions was as a result of:
an improving credit environment,
which resulted in a decline in new
non-performing loans. The vintage
chart of African Bank Retail reflects
that the twelve month nonperforming
capital default rate has
dropped from almost 17% in 2001
to 9,5% by 2003;
write-offs against 100% provisions
of R875 million, being 13,1% of
average gross advances;
increasing cash collections on the
non-performing portfolio.
2 625
288
1 048
Sep
03
29
African Bank
Saambou PLB
Specialised
Lending
African Bank Investments Limited