for the six months ended 31 march 2014...7 african bank investments limited group results % change...

UNAUDITED INTERIM

RESULTS PRESENTATION

for the six months ended

31 March 2014

Our purpose

Our purpose is to impact positively on

people’s lives through the provision of credit-

led, risk-based financial services. We assist

our customers to affordably meet their needs,

achieve their dreams, and manage the

unanticipated financial events that occur

through life.

We achieve this purpose by actively engaging

with our people and through them, with our

customers.

3

African Bank Investments Limited

Key themes

• Continued heightened risk emergence in a challenging consumer environment

• Elevated NPL formation from pre-July 2013 sales

• Compression of yield through lower sales and higher NPLs

• Pressure on collections, particularly on higher NPL portfolios

• Required higher coverage including a higher general provision

• Retail business continues to operate under stress

This resulted in a decision to raise a general credit impairment provision of R2,5 billion in

the bank and to write-off of remaining goodwill, trademarks and deferred tax assets

• Better positioned with a cleaner balance sheet

• Will need to focus on capital to achieve medium-term internal minimum levels

• New business at lower volumes continues to perform in line with expectations

• Revision of strategy to position the business through the expected tough period and

return to acceptable risk-adjusted returns

4


Weak economic conditions to remain in the near term

(10)

(5)

0

5

10

15

20

(%)

The BER consumer confidence index

Source: Bureau of Economic Research

Forecast

Forecast

(4)

(2)

0

2

4

6

8

10

12

14

(%)

Economic conditions remain weak

GDP CPISource: SARB, StatsSA, ABIL

The economy, and unsecured lending in

general, is at cyclical lows, this has and will

continue to impact on customers – both in

terms of asset quality and lending volumes.

• GDP is expected to grow, but slowly.

• CPI is expected to remain at the upper end

of the Reserve Bank’s target range.

• Our customers’ disposable income

continues to be eroded.

• Consumer confidence remains particularly

low (below level experienced during 2008/9

financial crisis).

5


Lower (but more sustainable) growth in the unsecured lending

industry

African Bank and the unsecured lending industry

has seen a sharp pullback in growth rates from a

peak in August 2012.

• African Bank implemented an initial cut back in

December 2012 and a new sales incentive

scheme focussed on quality in March 2013.

• In July 2013 African Bank implemented a new

underwriting model based on a reduced risk

appetite.

• During this period the market also tightened

lending criteria.

• As a result, growth in unsecured lending is now in

line with the growth in the overall retail lending

industry.

• We see this as a huge positive in terms of the

overall sustainability of the industry.

(10)

-

10

20

30

40

50

60

2008Q

4

2009Q

1

2009Q

2

2009Q

3

2009Q

4

2010Q

1

2010Q

2

2010Q

3

2010Q

4

2011Q

1

2011Q

2

2011Q

3

2011Q

4

2012Q

1

2012Q

2

2012Q

3

2012Q

4

2013Q

1

2013Q

2

2013Q

3

2013Q

4

(%)

Retail credit lending YoY growth

Retail lending YoY % Unsecured lending YoY %

Source: National Credit Regulator

0

5

10

15

20

25

30

35

40

45

50

Jan

09

Ap

r 09

Jul 09

Oct 09

Jan

10

Ap

r 10

Jul 10

Oct 10

Jan

11

Ap

r 11

Jul 11

Oct 11

Jan

12

Ap

r 12

Jul 12

Oct 12

Jan

13

Ap

r 13

Jul 13

Oct 13

Jan

14

(%)

Personal loans YoY growth

African Bank Market (excluding African Bank)

Source: BA900 returns

The acquisition of EHL has been excluded from African Bank YoY growth for the period

between September 2010 and August 2011

6


ABIL’s 5 point strategy

Rebase the business

• Decrease the unsustainably high risk charge,

through better credit underwriting, better

collections and making the right sales

• Focus on costs

• To ensure business transitions to its new form

supported by the right balance sheet structure

• Decreased maximum loan term from 84 months

to 60 months effective 9 May 2014

Strengthen the core

• Continue development of customer life cycle

journey (loans, insurance ,savings)

• Further development of credit card product as a

bundled offering

• Distribution channels – physical and virtual

Regulatory and stakeholder management

• Market conduct – dti, NCR

• Prudential – SARB, FSB

• Shareholders

• Funders

Invent the new

• Refine the customer value proposition &

product offering balancing risk/reward

relationship

• Funeral product

• Savings and Investments

EHL

• Continue to work on disposal, while returning

the business to profitability

• New CEO implemented a turnaround strategy to

return the business to profitability

Medium-term financial target: risk / yield relationship < 40%

7


Group results

% change

Unaudited for the six

months ended 31 March

2014

Restated for the six


2013*

Earnings before adjustments R million (>100) 8 604

Headline (loss)/earnings R million (>100) (3 123) 604

Banking unit R million (>100) (1 939) 604

Retail unit R million (>100) (1 186) 4

Consolidation adjustments R million 2 (4)

HEPS cents (>100) (240,7) 62,3#

Dividend per share cents (100) 0 25

TNAV per share cents (28) 623 870#

Total risk charge % 28,5 16,8

Credit impairment charge % 26,3 13,5

Claims paid % 2,2 3,2

Capital adequacy (%) ABIL African Bank ABIL African Bank

Tier 1 capital adequacy % 17,7 19,0 19,9 19,5

Total capital adequacy % 25,2 26,4 27,6 27,6

*With the exception of capital adequacy numbers, these were restated. #Adjusted for effect of rights issue

8


Unpacking the group’s performance

604 8

(3 123)

379

247

686

(287) (788)

(114) (33)

(2 494)

(600)

(723)

Headlineearnings

March 2013

Grossmargin on

retailbusiness

Incomefrom loans

Expectedcredit

impairmentcharge andinsurance

claims

Interestexpenseand otherinterestincome

Operatingcosts

Taxation Earningsbefore

adjustments

Increase ingeneral

provisions

Increase inspecific

impairments

Deferred taxasset write-

down

Taxation Headlineearnings

March 2014

Change in headline earnings/(loss) (R million)

9


Unpacking the impact of the material adjustments

We recognise the severity, and take responsibility for our role in these results.

• Banking unit: general provision for credit impairments relating to performing loans increased by R2,5

billion.

NPL formation for the poorer quality business written pre July 2013 remains at an elevated level.

The R2,5 billion general provision effectively accelerates the provisions for the pre July 2013

business and its future above normal NPL formation.

By doing this the business’ future results should be, to an extent, immunised from the impact of any

abnormal NPL formation due to loans written pre July 2013.

• Retail unit: ceased raising any further deferred tax on losses within this unit and the opening balance of

deferred tax assets of R723 million has been impaired.

The decision was taken in light of the continued operating losses generated.

The deferred tax asset will only be recognised in the future once the business is profitable.

A R100 million provision (before tax) for discontinued, phased-out and damaged inventories.

Further decisions impacting basic earnings:

Write off the residual Retail unit goodwill of R831 million.

Trademarks were impaired by R582 million in light of continued operating losses.

10

Banking Unit

The Banking unit

%

change

Unaudited for the

six months ended

31 March 2014

Restated for the

six months ended

31 March 2013

Earnings before additional impairment charge R million (52) 289 604


Gross advances R million 5 61 623 58 799

Yield % 32,2 32,8

Total risk charge % 28,5 16,8

Credit impairment charge % 26,3 13,5

Base impairment charge % 16,1 13,5

Impact of additional specific and general

impairments % 10,2 0,0

Claims paid % 2,3 3,2

NPL Coverage % 82,9 68,6

Written off book cents/R 5,9 10,2

Total disbursements R million (21) 9 855 12 542

Average net loan size (current sales)* Rand 8 13 868 12 817

Average gross loans size (current sales) Rand 5 20 346 19 429

Average term (current sales) Months 10 54 49

*Net loan size includes external debt settlements but excludes any internal settlements.

11

Banking Unit

Unpacking the Banking unit’s performance

604

289

(1 939)

418

49 126 2

866

(795) (115)

(2 494)

(600) Headlineearnings

March 2013

Income fromloans

Expectedcredit

impairmentcharge andinsurance

claims

Interestexpense andother interest

income

Operatingcosts

Taxation Preferenceshareholders'

dividend

Earningsbefore

additionalimpairment

charge

Increase ingeneral

provisions

Increase inspecific

impairments


March 2014

Change in headline earnings/(loss) R million

Impact of escalated Jan –

Mar 2014 NPL migrations

12

Banking Unit

Portion of increased general provisions used to cover pre July 2013

business

- Used April 2012 – March 2013 for this analysis as it contained the highest vintages for this period

15 108

11 366 8 512

26 499

18 543

12 482

12 429

21 077

41 607 42 338 42 071

Mar 2013 Sep 2013 Mar 2014

African Bank performing loans (R million)

From sales after March 2013

From sales between April 2012 and March 2013

From sales pre-April 2012

16

20 18

24

0

5

10

15

20

25

30

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Ou

tsta

nd

ing

rep

aya

ble

of

NP

L o

ve

r to

tal o

rig

ina

l re

pa

ya

ble

(%

)

Months on book

Personal loans vintages

From sales pre-April 2012

From sales between April 2012 and March 2013

Forecast

Used in pricing

models

4%

An additional 4% of the original total repayable* (R50 billion) from sales between April 2012 and March 2013,

this represents the future cash value at risk. The R2,5 billion general provision raised is to address this

unexpected loss together with potential lower collections.

Difference between

lines = risk not

included in pricing

*Original total repayable = instalment amount multiplied by number of instalments.

Currently ±2%

difference already

included in specific

provisions

13

Banking Unit

1 186

926 1 029

3,4%

2,8% 2,9%

1,3% 1,6%

1,1%

Jan 14 Feb 14 Mar 14

Increase in net NPL migrations

870 838 859 844 937 953

1 036

840

1 002 894 863

2,5% 2,5%

2,7% 2,9% 2,9% 2,9%

3,3%

2,8%

3,1%

2,8% 2,8%

1,0% 1,1%

1,4%

2,0%

1,6% 1,5%

1,8% 1,7%

1,5% 1,6%

1,8%

Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13

Net NPL migration

Net NPL migration(R million)

PL to NPL NPL to PL Significantly increased specific (R600 million) and

general (R2,5 billion) provisions in anticipation of

continued elevated net NPL migrations

14

Banking Unit

NPL formation escalation predominantly due to 2012 business

195 180

156 168

146 128 124

116 105 99 105 91 89

76 76 90

66 64

10

57

136

209

230 242 255

231 223

238

183 190

162 151

173

139 131

65 161

262 323

316 347

268 289

235 216

251

190 189

8 29

87

124 158

0

200

400

600

800

1 000

1 200

1 400

1 600

Oct2012

Nov2012

Dec2012

Jan2013

Feb2013

Mar2013

Apr2013

May2013

Jun2013

Jul2013

Aug2013

Sep2013

Oct2013

Nov2013

Dec2013

Jan2014

Feb2014

Mar2014

Gross NPL formation split by quarterly tranche of business (R million)

2014Q1

2013Q4

2013Q3

2013Q2

2013Q1

2012Q4

2012Q3

2012Q2

2012Q1

2011Q4

2011Q3

2011Q2

2011Q1

Pre 2011

*per calendar

NPL formation peaks at 9-10

months on book

• 2012Q4 business peaked in

August 2013

• 2012Q3 business peaked in

May 2013

This quarter

has produced

the highest

NPL formation

15

Banking Unit

Oct – Dec 2012 business has had a disproportionate negative

impact on NPL formation and risk charge

195

180

156 168

146

128

289

235

216

251

190 189

-

50

100

150

200

250

300

350

12 13 14 15 16 17

NP

L m

igra

tio

n (

Rm

)

Months on book

2011Q4

2012Q4

Tranche Sales volume

(R million)

Oct – Mar NPL

migration % of

sales

Increase YoY

(R million)

Oct – Dec 2011 7 451 13,1%

397 Oct – Dec 2012 7 434 18,4%

Reporting

month Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013

Reporting

month Oct 2013 Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014

+94

+55

+60

+83

+44 +61

40%

16

Banking Unit

Post-July 2013 business is performing well but at lower sales

volumes

8*

44*

105*

162*

179*

8

29

87

124

158

0

20

40

60

80

100

120

140

160

180

200

4 5 6 7 8

NP

L f

orm

ati

on

(R

m)

Months on book

2012Q3

2013Q3

Tranche Sales volume

(R million)

Nov – Mar NPL

migration % of

sales

Decrease YoY

(R million)

Jul – Sep 2012 6 449 10,0% 236

Jul – Sep 2013 5 015 8,1%

Reporting

month Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013

Reporting

month Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014

(15)

(18)

(38)

(21)

19%

*After normalising for differential in sales from R6 449 million to R5 015 million

17

Banking Unit

Post-July 2013 cumulative vintages improving following

reduction in risk appetite

0

5

10

15

20

25

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Ou

tsta

nd

ing r

ep

aya

ble

of N

PL o

ve

r to

tal o

rigin

al re

pa

ya

ble

(%

)

Months on book

Vintage graph – African Bank (more than three cumulative missed instalments in arrears)

2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 Jul 13 Aug 13 Sep 13 Oct 13

18

Banking Unit

Post-July 2013 vintages showing delta having peaked

Newer vintages have improved but it will take time before the benefit of this has a

pronounced impact on the greater business

0%

1%

2%

3%

4%

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Net N

PL b

ala

nce

em

erg

en

ce

as a

% o

f o

rigin

al re

pa

ya

ble

(%

)

Months on book

Dent curve* – African Bank (more than three cumulative missed instalments in arrears)


Risk declining but

remains elevated

Post-July 2013

business showing

decreased risk through

lower dent curve slope

and peak

*Dent curves measure the rate of change in NPL formation

19

Banking Unit

The positive trend in post-July 2013 business also applies to

the Ellerines loans portfolio, albeit not as pronounced

0

5

10

15

20

25

30

35

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Ou

tsta

nd

ing r

ep

aya

ble

of N

PL o

ve

r To

tal O

rigin

al R

ep

aya

ble

(%

)

Months on book

Vintage graph – Furniture credit (more than three cumulative missed instalments in arrears)


20

Banking Unit

The positive trend in post-July 2013 business showing delta

having peaked

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Net N

PL b

ala

nce

em

erg

en

ce

as a

% o

f O

rigin

al R

ep

aya

ble

(%

)

Months on book

Dent curve – Furniture credit (more than three cumulative missed instalments in arrears)


21

Banking Unit

The positive trend in post-July 2013 business showing NPL

migration, cumulative vintage and delta

0

5

10

15

20

25

30

35

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Outs

tandin

g r

epaya

ble

of

NP

L o

ver

Tota

l O

rigin

al

Repaya

ble

(%

)

Months on book

Vintage graph – Furniture credit (more than three cumulative missed instalments in arrears)

2012Q2 2012Q3 2012Q4 2013Q1 2013Q2

Jul 13 Aug 13 Sep 13 Oct 13

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Net

NP

L b

ala

nce

em

erg

en

ce

as a

% o

f O

rig

ina

l R

ep

aya

ble

(%

)

Months on book

Dent curve – Furniture credit (more than three cumulative missed instalments in arrears)

2012Q2 2012Q3 2012Q4 2013Q1 2013Q2

Jul 13 Aug 13 Sep 13 Oct 13

-

50

100

150

200

250

0

1

2

3

4

5

Feb13

Mar13

Apr13

May13

Jun13

Jul13

Aug13

Sep13

Oct13

Nov13

Dec13

Jan14

Feb14

Mar14

(Rm

)

(%)

Net NPL Migration (EHL) - Balance

Net NPL migration PL to NPL NPL to PL

• Net NPL migration for March 2014 at

R160 million was down from a peak of

R203 million in July 2013.

• Vintages for post-July 2013 business

trending towards bottom end of range.

• Dent curves starting to show lower

peaks.

22

Banking Unit

Back test on September 2013 NPL portfolio: lower early 2014

collections resulted in additional specific provisions for NPLs

1 093

-

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

-

50

100

150

200

250

20

131

0

20

131

1

20

131

2

20

140

1

20

140

2

20

140

3

20

140

4

20

140

5

20

140

6

20

140

7

20

140

8

20

140

9

20

141

0

20

141

1

20

141

2

20

150

1

20

150

2

20

150

3

20

150

4

20

150

5

20

150

6

20

150

7

20

150

8

20

150

9

Cu

mu

lati

ve c

ash

Mo

nth

ly c

ollecti

on

s

Back test on September 2013 total NPL portfolio (R16 622 million) (R million)

Expected collections (lhs) Actual collections (lhs)

Cumulative expected collections (rhs) Cumulative actual collections (rhs)

Expected collections

Actual collections

R1 093 million collected to date vs

R1 170 million expected

23

Banking Unit

The ratio of provisions to gross loans has increased significantly

following the R2,5 billion increase in general provisions

Breakdown of impairment provisions Sep 2009 Sep 2010 Sep 2011 Sep 2012 Mar 2013 Sep 2013 Mar 2014

R million

Credit impairments 5 587 5 537 6 645 9 825 11 103 10 566 15 701

Specific impairments 5 430 5 472 6 529 9 669 10 804 9 981 12 472

General provision 157 65 116 156 299 585 3 229

Credit life reserves 37 18 0 339 698 512 500

Total provisions 5 624 5 555 6 645 10 164 11 801 11 078 16 201

Non performing loans 8 250 9 039 10 974 15 160 17 192 16 622 19 552

Book value of written off portfolio 1 003 1 700 1 928 1 659 1 321 1 321 1 321

Net uncovered NPLs 2 626 3 484 4 329 4 996 5 391 5 544 3 351

Provisions / gross loans 22,3 19,1 16,6 19,2 20,1 18,8 26,3

Total NPL coverage 68,2 61,5 60,6 67,0 68,6 66,6 82,9

Specific impairments + credit life reserves / NPLs 66,3 60,8 59,5 66,0 66,9 63,1 66,4

General provision / NPLs 1,9 0,7 1,1 1,0 1,7 3,5 16,5

66,3

60,8 59,5

66,0 66,9 63,1

66,4

1,9

0,7 1,1

1,0 1,7

3,5

16,5

68,2

61,5 60,6

67,0 68,6

66,6

82,9

NPL coverage (%)

General provision / NPLs

(Specific impairments + credit life reserves) / NPLs

24

Banking Unit

Collections initiatives introduced

Collections initiatives intensified to stem the

flow of performing loans to NPLs.

These are focused on both good faith and bad faith clients:

• Additional capacity in the call centre at 1 350 is now deemed

adequate

• Additional 150 collectors added to the EHL in store

collections network

• Intensified focus on high balance arrears totalling

R2,5.billion across 60 000 accounts (balance approximately

R42 000 per account)

• Champion challenger process to test internal collections

capacity against external agents – currently internal

processes outperforming external agents by 6%

• Analysing bureau data to determine if there are instances

where customers are paying third parties and not African

Bank and launching differentiated campaigns on these

customers

• Implemented a parallel collections process, running call

centre collections in parallel with tracing and legal

collections

• Earlier commencement of legal collections after 4 – 6

months delinquency, depending on status of account

• Issued 70,000 summonses since March 2014

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

(%)

First three missed instalments are down YoY

2012 2013 2014

Seasonal

increase

25

Retail Unit

The Retail unit

% change

Unaudited for the six

months ended 31

March 2014

Restated for the six


2013

(Loss)/earnings before tax adjustments R million (>100) (283) 4


Merchandise sales R million (15) 1 968 2 324

Cash sales R million 7 889 832

Credit sales R million (28) 1 079 1 492

Non-furniture credit sales R million 976 1 627

Credit merchandise sales % of total % 54,8 64,2

Gross margin % 38,4 44,8

Gross margin excluding impact of

inventories provision % 43,4 44,8

Impact of inventories provision % (5,0) 0

Operating margin % (19,1) 0,7

Stock turn times 3,1 3,3

Number of stores (3) 1 025 1 057

Retail trading area m2 (6) 621 650 663 840

26

Retail Unit

Unpacking the Retail unit’s performance

4

(283)

(1 186)

111

(723)

(180)

(287) (84)

(10) (6) (11)

(1 400)

(1 200)

(1 000)

(800)

(600)

(400)

(200)

-

(200)

Headlineearnings

March 2013

Grossmargin on

retailbusiness

Otherincome

Impairmentcharge andinsurance

claims

Interestexpenseand otherinterestincome

Operatingcosts

Taxation Earningsbefore tax

adjustments

Deferred taxasset write

down


March 2014

Change in headline earnings/(loss) (R million)

27

Retail Unit

1098

374

179

217

142

117 197

788

327

169

229

146

112

197

Merchandise sales by brand R million

Ellerines

Beares

Furniture City

Geen & Richards

Dial-a-Bed

Wetherlys

Rest of Africa

Brand analysis

• Merchandise sales has declined by 15%

to R2 billion from R2,3 billion.

Credit sales decreased by 28% to R1.1

billion from R1,5 billion.

A result of more stringent credit granting

criteria implemented in June 2013 in an effort

to improve the yield risk relationship.

• This had a particularly negative impact on

the Ellerines brand where total sales

declined by 28% to R788 million from

R1.098 million.

• EHL cash sales increased by 7% to R889

million from R832 million.

1H13

1H14

85

62

56 51

7

66

85

62

53 52

4

59

78

55

41 43

3

59

Ellerines Beares FurnitureCity

Geen &Richards

Dial-a-Bed Rest ofAfrica

Credit Sales by brand (%)

1H12 1H13 1H14

28


Balance sheet management

Capital adequacy

Capital adequacy

%

ABIL

Mar 14 Dec 13 Sep 13 Mar 13

Core Equity Tier 1 15,8 22,9 13,0 17,8

Additional Tier 1 1,9 2,1 2,1 2,1

Tier 1 17,7 24,9 15,1 19,9

Tier 2 7,5 7,6 8,1 7,7

Total CaR 25,2 32,5 23,2 27,6

Group:

Tangible shareholders’ equity = ordinary shareholders’ equity – goodwill – intangible assets – Retail unit deferred tax assets

Net uncovered NPLs = gross NPLs + written off book – impairment provisions – credit life reserves

Bank:

Tangible shareholders’ equity = ordinary shareholders’ equity – goodwill – intangible assets

Net uncovered NPLs = gross NPLs + written off book – impairment provisions including general provisions

Capital adequacy

%

African Bank

Mar 14 Dec 13 Sep 13 Mar 13

Core Equity Tier 1 19,0 24,3 15,7 19,2

Additional Tier 1 0,0 0,0 0,0 0,0

Tier 1 19,0 24,3 15,7 19,2

Tier 2 7,4 8,2 8,3 8,1

Total CaR 26,4 32,5 24,0 27,3

2 9

19

5 2

02

6 2

59

6 9

94

7 3

77

7 3

77

5 1

72 3

321

4 9

80

6 5

77

6 8

41

7 6

72

12 4

22

10 2

90

114%

96% 105%

98% 104%

168%

199%

Reported Reported Reported Restated Reported Pro forma* Reported

Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 13 Mar 14

African Bank Tangible shareholders’ equity/net uncovered NPLs

Net uncovered NPLs

Tangible shareholders' equity

Ratio of tangible shareholders' equity/net uncovered NPLs

3 6

29

5 1

84

6 2

59

6 6

55

6 8

65

6 8

65

4 6

71

5 3

88

5 9

28

6 6

74

6 3

44

6 3

12

11 5

22

9 3

33

148%

114% 107%

95% 92%

168%

200%

Reported Reported Reported Restated Reported Pro forma* Reported

Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 13 Mar 14

ABIL Tangible shareholders’ equity/net uncovered NPLs

Net uncovered NPLs

Tangible shareholders' equity

Ratio of tangible shareholders' equity/net uncovered NPLs

*Pro forma following the rights issue *Pro forma following the rights issue

29


ABIL and African Bank target the following regulatory capital adequacy ratios and reaffirm the previous

targets over the medium term:

• 2014: Tier 1 ≥ 18% and Total ≥ 27% (revised down due to the R2,5 billion increase in general provisions)

• Medium-term: Tier 1 ≥ 20% and Total ≥ 30%


Capital adequacy

ABIL 2014 Medium term

Actual

Internal

minimum

Difference*

Internal minimum % Rm

Tier 1 17,7 ≥18,0 0,3 152 20,0

Total 25,2 ≥27,0 1,8 901 30,0

African Bank 2014 Medium term

Actual

Internal

minimum

Difference*

Internal minimum % Rm

Tier 1 19,0 ≥18,0 n/a n/a 20,0

Total 26,4 ≥27,0 0,6 275 30,0

The board has implemented certain measures to preserve and increase capital through

both operational and strategic initiatives and is pursuing additional measures.

*Difference calculated on March 2014 RWA

30



Liquidity

-

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

2013Q1 2013Q2 2013Q3 2013Q4 2014Q1

(Rm

)

Sales/collections dynamic generated R8.9 billion positive cash flow from Jan 2013 – Mar 2014

Payaways on new loans

Receipting

Net cash

Cumulative net cash flows

-

5 000

10 000

15 000

20 000

25 000

Up to onemonth

More thanone tothree

months

More than3 months to6 months

More than6 months to

1 year

1 year to 3years

More than3 year to 5

years

More than5 years

Noncontractual

(Rm

)

African Bank Limited net liquidity gap 31 March 2014

Assets

Liabilities

Cummulative on balance sheet liquidity gap

31


A strategic relationship explored with Edcon

Focus on smaller balance revolving credit facility

• In line with reduced risk appetite as per July 2013 cutback in loan size on medium and high risk

customers.

• Similar concept to credit card product which has been showing better risk experience.

• New customers to African Bank is a key focus.

0

5

10

15

20

25

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Ou

tsta

nd

ing

rep

ayab

le o

f N

PL

ov

er

tota

l o

rig

ina

l re

pa

yab

le (

%)

Months on book

Vintage graph – Credit card (more than three cumulative missed instalments)

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

Jul 13

Aug 13

Sep 13

Oct 13

32


Regulatory developments affecting unsecured lending

Credit amnesty (passed effective 1 April 2014)

• Removed from credit bureau:

• All adverse credit information of customer

behaviour and enforcement action taken by

the credit provider

• Paid up judgements

• Remains on credit bureau:

• Payment profiles

• Judgements with an outstanding balance.

• Notices such as sequestrations, etc

• Credit providers keep all customer

information

Affordability

• Initial NCR proposals under review

• Progress being made through consultation

Credit life

• Proposals including minimum benefits and price

caps under review

• Reviewing possible business mitigants

Pricing – interest and fees

• NCR intends reviewing as part of its ongoing

review of pricing in the industry

General observations

• Final regulatory changes proposed by the dti and passed by parliament are made in consultation with the

Ministry of Finance.

• We believe that the changes to affordability and pricing will be pragmatic, balancing the interests of the

affected stakeholders, and that the final changes will result in a fairer, better and more equitable

unsecured lending industry going forward.

• We have good visibility on prospective regulatory developments and the process of constructive

engagement continues.

33


ABIL’s BEE share schemes

Gearing significantly reduced

BEE Structure and impact of rights issue

September 2013 March 2014

Number of ABIL shares 74,3m

Proceeds

from sale of

rights used

to reduce

debt

74,5m

Eyomhlaba 48,5m 48,6m

Hlumisa 25,8m 25,9m

Percentage holding in ABIL 9,12% 4,97%

Eyomhlaba 5,95% 3,24%

Hlumisa 3,17% 1,73%

Preference shares outstanding R510m R177m*

Eyomhlaba R330m R112m

Hlumisa R180m R65m

*ABIL is now the holder of the preference shares

34


In Conclusion

• A very tough environment

• ABIL is going through a challenging period

• Bold decisions taken to hasten the turnaround

• Engaged and committed people focussed on delivery into the future

End of presentation

Questions

for the six months ended 31 march 2014...7 african bank investments limited group results % change...

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