Interim resultsfor the six months ended 31 March 2010

Introduction

Tough trading conditions but improving operational performance

External environment

• Subdued economic conditions and lower consumer spending

• Unemployment claims lower, but remaining high

• Competitive trading conditions

• Tentative signs of gradual recovery

Operations

• A slow start to the first half, but performance beginning to turn

• Substantial improvement in funding base, funding costs and maturity profile

• Positive effect of African Bank credit model in Ellerines stores

• Ellerines Retail restructuring starting to deliver results

• Credit risk performance substantially improved

Financial features

6 months to 31 March 20106 months to

31 March 2009

% ch ABIL African Bank Ellerines ABIL

Headline earnings (Rm) (2%) 914 713 201 937

HEPS (cents) (2%) 113,7 116,6

Weighted # of shares (m) 803,7 803,7

Return on equity (%) 15,3 44,2 10,1 15,8

Economic profit / (loss) (Rm) (41) 455 (119) (11)

Dividends per share (cents) 85 85

• Headline earnings of R914m and HEPS of 113.7 cents, down 2%

• African Bank contributed R713 million and Ellerines R201 million

• RoE and economic profit continue to be diluted by investment in Ellerines

• Ordinary DPS maintained at 85 cents, dividend cover steady at 1,3 times

Overview of the African Bank

Financial overview

R million % ch6 months to

31 Mar 2010

6 months to

31 Mar 2009

Headline earnings (5%) 713 747

Economic profit (15%) 455 537

Return on equity (%) 44,2 56,8

Income from operations 11% 3 808 3 431

Gross advances 19% 21 977 18 528

Funding (incl. subordinated bonds) 52% 22 525 14 853

Capital adequacy (per Basel II) (%) 24,6 26,7

Financial overview

Growth in income offset by higher charges

• Income from operations increased by 11%

18% increase in net advances

310 basis point decline in income yields

• Charge for bad debts increased by 25%, resulting in a 6% increase in risk adjusted income.

• Operating expenses increased by 10%, with staff costs up by a similar amount.

• Net funding costs increased by 24%

52% increase in the funding base

Average funding rates declined from 11.4% to 10.5%

• Net result is a 7% decline in income before tax, and a 5% decline in headline earnings

Return on equity

%6 months to

31 Mar 2010

6 months to

31 Mar 2009

Total income yield 36,0% 39,1%

Charge for credit losses (10,7%) (10,4%)

Operating expenses (7,0%) (7,7%)

Net finance costs (incl pref div) (8,2%) (8,1%)

Taxation & other (3,4%) (4,4%)

Total charges (29,3%) (30,6%)

Return on advances 6,7% 8,5%

Advances/assets 85,7% 97,9%

Return on assets 5,8% 8,3%

Multiply Multiply

Gearing (x) 7,7 6,8

Equals Equals

Return on equity 44,2% 56,8%

Sales

Conservative underwriting led to flat sales

• A substantial shift to lower risk client segments

• Improved segmentation models and higher offer rates impacted positively from Q2

• Emphasis on growth and focus on enlarged customer base

• Re-energised sales teams, new products and improved risk appetite starting to lift sales

200 300 400 500 600 700 800 900

1 000 1 100 1 200

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

R m

illio

n

Sales of new loans

2009 2010 ytd

0%10%20%30%40%50%60%70%80%90%

100%

2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2

Debit Order Capital Risk Distribution

1Low 2LowMed 3Med 4MedHigh 5High 6Thin

Advances

Gross advances increased by 19% to R22 billion

• Mix effect of 7% higher number of loans and 11% increase in average loan balance

• Number of customers up 10% to 1,9 million

• Increase in average term based on new segmentation models and focus on low risk segments

• Credit card portfolio grew 51% to R2,3 billion

0

5

10

15

20

25

30

35

40

45

5

7

9

11

13

15

17

19

21

23

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep-

07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-

08

Nov

-08

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-

09

Nov

-09

Jan-

10

Mar

-10

Mon

ths

R bi

llion

Monthly advances growth

Advances Average term of new sales

Yield analysis

Income yield of 36,0%, relative to 39,1% in H1 2009

• Proportionally higher NPL’s (33,6% vs. 26,9%) resulted in increased interest suspension and in duplum impact

• Sales mix favoured lower risk, lower priced loans

• Claims on insurance policies remained higher than historical levels

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2007

10

2007

12

2008

02

2008

04

2008

06

2008

08

2008

10

2008

12

2009

02

2009

04

2009

06

2009

08

2009

10

2009

12

2010

02

Monthly retrenchment claim volumes

54.8

52.9

49.8

48.7

43.8

41.8

39.1

37.2

36.0

1500

2000

2500

3000

3500

4000

30

35

40

45

50

55

60

H1

06

H2

06

H1

07

H2

07

H1

08

H2

08

H1

09

H2

09

H1

10

R m

illio

n

%Income and yield

Total income Total income yield

Operating costs

Overall cost base increased by 10%, cost to advances declined to 7%• Staff costs increased by 10%, given salary increases and medical aid subsidies

• Bank charges declined by 2%, despite growth in advances

• Card transaction costs increased by 25% after 51% growth in credit card advances book

15.1% 15.4%14.7%

11.8%

9.0%

7.2% 7.0%

7.7% 7.9%8.5% 8.9%

10.1%10.4% 10.7%

5%

10%

15%

20%

04 05 06 07 08 09 H1 10

% o

f ave

adv

ance

s

Bad debts vs. operating costs

Cost to advances Bad debt to advances

Multitude of initiatives being implemented to reduce costs

Asset quality

Higher sales in 2008 still a major contributor to new NPLs• Risk mix and new risk segmentation improved vintages

• Recent vintages act as leading indicator while bad debt charge impacted by older vintages

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Months on book

Dent curves - Total portfolio (% of qtrly sales moving to NPL status, overlaid with actual NPL formation)

2008 - Q3 2008 - Q4 2009 - Q1 2009 - Q2 2009 - Q3 2009 - Q4

R70m

R60m

R45mR45m

Funding and liquidity

• Healthy funding and liquidity position

• Total bank funding liabilities increased by 52% to R22,5bn

• Funding rate reduced from 11,7% to 10,5%, despite lengthened maturity profile

• Total bank cash reserves increased to R6,5 billion to: Fund growth in advances book Prepare for transfer of the Ellerines book

14.9

22.5

2.4

6.5

0

5

10

15

20

25

H1 2009 H1 2010

R bi

llion

Funding and liquidity

Total funding Cash & stat. assets

7%

8%

9%

10%

11%

12%

04-S

ep

05-M

ar

05-S

ep

06-M

ar

06-S

ep

07-M

ar

07-S

ep

08-M

ar

08-S

ep

09-M

ar

09-S

ep

10-M

ar

Cost of funding

2010 targets

ObjectiveActual 6 months to 31 Mar 2010

Original target for 2010

Revised target for 2010

Advances growth 19% 25% 20% - 25%

Decline in yield on advances 3,1% 2% 3,0% - 3,5%

Cost to advances 7,0% 6% 6,0% - 6,5%

Bad debt to advances 10,7% 10% 10,5% - 11,0%

Average funding cost 10,5% 11% 10,0% - 10,5%

• Advances growth to benefit from customer growth, product innovation and sales strategies

• Relatively stable income yields

• Improvement in asset quality and collections

• Lower growth in operating expenses and lower absolute funding rates

• More efficient use of cash resources

The targets above are ABIL’s internal objectives and are not forecasts for the financial year. Actual results may differ from these objectives.

6 months to 6 months to

R million 31 Mar 2010 31 Mar 2009

Headline earnings 201 190

Retail 132 (31)

Financial services 69 221

Economic loss (119) (170)

Return on equity (excluding goodwill) (%) 10,1 8,4

Financial overview

Turnaround in Ellerines has begun• Improved sales performance, with like-for-like sales up 6,5%

• Yield declined from 50,0% to 39,4% as a result of price reductions, interest suspension and in duplum impact

• Bad debt charge declined by 24%

• Retail business benefitted from sharp decline in operating expenses

Return on sales

6 months to

31 Mar 2010

%

6 months to

31 Mar 2009

%

Sales/sales 100 100

Cost of sales/sales (56,8) (56,3)

Gross margin 43,2 43,7

Non-interest income/sales 6,6 7,2

Operating cost / sales (43,0) (51,8)

Operating margin 6,9 (0,9)

Financing costs/sales (0,6) (1,0)

Taxation/sales (0,7) 0,5

Return on sales (RoS) 5,6 (1,3)

• Sales increased by 2% (l-f-l sales increased by 6,5%)

• Greater operational efficiency reduced Retail operating expenses by R184 million

Retail division generated earnings of R132 million for the 6 months

Retail sales

Substantial benefits from new merchandise and African Bank credit platform

• Cash sales declined by 8%, credit sales increased by 10%

• Differentiated and innovative product ranges received wider approval

• Benefit from cheaper credit, higher approval rates and larger credit limits

3%

18%

-1%

22% 21%

-17%

6%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Elle

rine

s

Bear

es

Furn

iture

City

Gee

n &

Ric

hard

s

Dia

l-a-B

ed

Wet

herl

ys

Tota

l

Comparable sales growth

-5%

0%

5%

10%

15%

20%

25%

Oct Nov Dec Jan Feb Mar

Year-on-year sales variance

Sales Credit sales Comparable sales

Gross margin and operating costs

• Gross margins of 43,2% on back of improved merchandise mix

• Operating costs declined by 10%

Lower collections costs, bank charges, IT and telecommunication costs, consulting fees

Lower staff complement and benefits of brand consolidation and new marketing strategies

Property expenses lower despite annual escalations

Operating costs - Retail and Financial services

(R million)% ch

6 months to

31 Mar 2010

6 months to

31 Mar 2009

Staff costs (4) 710 736

Administration expenses (34) 228 348

Property and lease expenses (1) 305 309

Delivery and logistics costs (9) 94 103

Depreciation and amortisation of intangibles 9 98 90

Advertising and marketing costs (21) 72 91

Total (10) 1 507 1 677

• Further cost savings to be generated by restructuring of logistics and African Bank interface

Store productivity

Efficiency improvements continued in the retail business

-16.2% -0.8%

3.4%

17.9% 17.2%

23.4%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Oct 08

Nov 08

Dec 08

Jan 09

Feb 09

Mar 09

Apr 09

May 09

Jun 09

Jul 09

Aug 09

Sep 09

Oct 09

Nov 09

Dec 09

Jan 10

Feb 10

Mar 10

Productivity variances

% Change in 3 month rolling sales per employee (quarterly)% Change in 12 month rolling sales per employee% Change in 12 month rolling sales per m²

% Change in 12 month rolling sales per store

Return on equity

%6 months to 31 Mar 2010

6 months to 31 Mar 2009

Total income yield 39,4% 50,0%

Charge for credit losses (12,7%) (16,5%)

Operating expenses (18,7%) (18,1%)

Net financing costs (3,6%) (2,4%)

Taxation (1,8%) (4,9%)

Total charges (36,8%) (41,8%)

Return on advances 2,6% 8,2%

Advances/ assets 111,3% 127,6%

Return on assets 2,9% 10,5%

Multiply Multiply

Gearing (times) 1,9 1,4

Equals Equals

Return on equity 5,5% 14,4%

Decline in ROA Reduction in total charges not sufficient to offset lower income yields, as interest suspension and price reductions fed through.

Sales of new loans

• New credit deals of R1,4bn advanced, up 10%

• Average loan size grew by 28% to R6 951

• Average term increased to 28 months

Approval rates and credit sales mix considerably improved across all brands

0

4

8

12

16

20

24

Ellerines Beares Furniture City Geen & Richards

R '0

00

Average size of credit deals advanced

2008 2009 H1 2010

0

10

20

30

40

50

60

70

80

Ellerines Beares Furniture City Geen & Richards

Credit sales mix %

H1 2009 H1 2010

Advances and yield

• Gross advances increased by 6% to R5,5 billion

• Yield decreased

Pre acquisition legacy impact of

Increased proportion of advances on which interest is suspended

Increased proportion of advances on which in duplum applies

Price reductions in 2009

53.550.7 50.0

41.439.4

30

35

40

45

50

55

60

H1 08 H2 08 H1 09 H2 09 H1 10

% Total income yield

0

500

1000

1500

2000

2500

3000

3500

4000

Ellerines Beares Furniture City Geen & Richards

Advances (Rand million)

H1 2009 H1 2010

Asset quality

0%

5%

10%

15%

20%

25%

30%

35%

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

Out

stan

ding

repa

yabl

e of

NPL

ove

r tot

al o

rigi

nal r

epay

able

Months on book

Vintage graph - Ellerines (more than 3 cumulative missed instalments)

Pre acquisition 200803 - 200807 200808200809 200810 200811 200812 200901200902 200903 200904 200905 200906200907 200908 200909 200910 200911

Medium term targets

Objective6 months to 31 Mar

2010Original targets Medium term

Revised targets

2014

Retail

Sales R2,3 bn (6 mths) R9 bn – R10 bn pa R8 bn – R9 bn pa

Credit sales to total sales 59% 70% 70%

Operating cost to sales 43% 30% - 35% 35% - 40%

Return on sales 5,6% > 10% > 10%

Stock turn 3,0x 5,0x 5,0x

Financial services

Yield 39,4% < 40% < 40%

Cost to average advances 18,7% 7,5% 7,5%

Bad debts to average advances 12,7% 11,0% 11,0%

Continuing improvement in financial performance expected in 2010, based on:

• Modest improvement in sales performance

• Margin delivery, further reduction in costs, stabilising yield

• Benefits from completion of integration project

Looking ahead

A progressively more integrated agenda

Ellerines Financial Services integration

• Migration to African Bank credit on track, majority of stores converted, with positive impact on sales and risk

• Integration to be completed by September 2010

• Existing Ellerines book to be converted in phases before financial year-end

Revitalising Retail

• Brand consolidation and store and head count optimisation yielding planned efficiency improvements

• Implementation of supply chain strategy according to plan

• Good progress on new merchandising strategies

• Substantial strengthening of retail skills

Growing the customer base

• Multitude of new credit products piloted/launched in both African Bank and Ellerines

• Credit card offering to Ellerines customer base imminent

• Focus now on maximising opportunities from acquisition

• Reinvigorated emphasis on removing internal impediments to growth in African Bank

Looking ahead

Trading environment expected to remain subdued.

Key priorities for the remainder of the year:

• African Bank:

Renewed emphasis on growth

Focus on our people and customers

Evolving culture to drive growth

• Ellerines:

Financial services integration

Logistics project

Wetherlys’ performance

Supply chain