African Bank Investments Ltd. (ABL), South Africa’s largest provider of unsecured loans, fell the most in six weeks after it said full-year profit will decline as bad debts rise and the bank curbs lending growth.
Group earnings excluding one-time items will probably drop as much as 63 percent in the year through September, the Johannesburg-based lender said in a statement today. Retail unit Ellerines may post a loss after tax excluding one-time items of about 200 million rand ($20.3 million), while an increase in provisions for bad debts will reduce earnings by as much as 500 million rand, the lender said.
African Bank slumped as much as 7 percent and was trading 4.9 percent lower at 15.20 rand as of 1:34 p.m. in Johannesburg. It has lost 53 percent this year compared with the 1.1 percent gain in the six-member FTSE/JSE Africa Banks Index.
Consumer spending has been under pressure because of higher inflation, which accelerated to the fastest pace in four years in August, and slowing economic growth. African Bank said it plans to boost capital with a rights issue of as much as 4 billion rand.
“The South African economy and operating environment within which both the retail and credit businesses operate continues to prove challenging with little respite expected in the next year,” the bank said.
Earnings will probably recover in the second half of the next financial year, it said.
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