African Bank Investments Ltd. (ABL), South Africa’s largest provider of unsecured loans, fell the most in almost three months in Johannesburg after a 4.6 billion rand ($468 million) goodwill impairment resulted in a full-year loss.
The loss of as much as 4.3 billion rand for the 12 months through September compares with a profit of 3 billion rand a year earlier, the Johannesburg-based bank said in a statement today. The stock dropped as much as 7.9 percent.
The impairment relates to the lender’s unprofitable Ellerines furniture-retailing business, which African Bank is trying to sell. African Bank, which targets low-income earners with credit not backed by assets, increased bad-loan provisions as consumers struggle to repay debt amid higher fuel and power prices and a slowing economy.
“The revised conservative write-off criteria of impaired loans will provide the potential for recoveries in future years,” the lender said. Increasing the non-performing loan coverage to 66 percent and boosting capital ratios “will strengthen the balance sheet,” it said.
African Bank fell 5 percent to 16.06 rand as of 10:46 a.m. in Johannesburg trading, bringing this year’s decline to 50 percent, the second-worst performer on the 165-company FTSE/JSE Africa All Share Index after Harmony Gold Mining Co.
To maintain capital levels, African Bank said it will increase a planned rights offer, underwritten by Goldman Sachs Group Inc., to 5.5 billion rand from 4 billion rand. Tier 1 and total capital ratios after the offer are expected to increase to as much as 26 percent and 34 percent respectively, it said.
African Bank will release full results for the year through September on Nov. 11.
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