African Bank Investments Ltd., South Africa’s largest provider of unsecured loans, posted a 4.2 billion-rand ($407 million) loss for the fiscal year through September after writing down its furniture retail unit.
The loss compares with restated profit of 3.1 billion rand a year earlier after a 4.6 billion-rand impairment charge at its Ellerines business, the Johannesburg-based lender said in a statement today. Earnings per share excluding one-time items fell 88 percent to 45.1 cents and the ordinary divided per share dropped 85 percent to 30 cents, the company said.
Lower consumer confidence, pressure on disposable incomes, higher levels of indebtedness and labor market unrest led to lower demand for credit products and merchandise, lower collections and increased arrears, African Bank said.
“The events of the past year have proven that we did not act boldly enough” when there were signs of increased risk, it said, adding that the bank took on low-quality loans last year.
African Bank, which targets low-income earners with unsecured credit, increased bad-loan provisions as consumers struggle to repay debt. It bought furniture company Ellerines in 2008 for 9.2 billion rand and now wants to sell the unprofitable unit which has more than 1,000 stores. To buoy capital levels the bank is issuing a 5.5 billion-rand rights offer, underwritten by Goldman Sachs Group Inc.