African Bank has recorded a profit for the financial year ended September 2023 – rescuing itself from a challenging start to the year.

Over the financial year, the group said that it saw a successful acquisition and integration of Grindrod Bank and Ubank assets, liabilities and operations.

With the more extensive operations, the group is now servicing 4 million active customers across its platforms, a massive 158% increase (FY22: 1.5 million).

Over the period, the net advances book grew by 41% to R32.0 billion (FY22: R22.6 billion), with secured business banking loans totalling over one-third of the group’s loans.

The funding base has also been diversified, with business and retail deposits making up 87% (FY22: 76%) of the total funding of R34.6 billion (FY22: R16.6 billion).

Despite the two acquisitions, the group said that it has sufficient liquidity and cash reserves totalling R9.9 billion (FY22: R2.8 billion).

With the larger balance sheet, the group saw its interest income on the advances book grow by 30% to R7.3 billion (FY22: R5.7 billion), with a net interest margin of 11.0% (FY22: 14.0%).

Diversification also saw the cost of funding reduced to 7.3% (FY22: 7.7%), notwithstanding the 200 basis points increase in the repo rate over the same period.

Non-interest income also grew by 144% to R1.6 billion (FY22: R0.7 billion) as more customers transacted on their MyWORLD and Credit Card accounts and purchased other value-added services.

Insurance profits from cell captive arrangements skyrocketed by 92% to R670 million (FY22: R349 million) as claims normalised,

Business banking also contributed R682 million in total net revenue for the 11 months from the date of acquisition of Grdindrod (1st November 2022).

The group’s total net revenue before impairments jumped by 40% to R8.1 billion (FY22: R5.8 billion)

The group’s operating expenditure did, however, increase, with a cost-to-income ratio of 58.7% (FY22: 56.3%), as the group is in an investment phase while integrating its new businesses.

“Negative economic environment affected Consumer Banking’s customers resulting in rising credit impairment charge and a group credit loss ratio of 8.0% (FY22: 4.9%),” it said.

It added that it reported a net profit after tax of R505 million (FY22: R736 million profit).

The group’s performance in the second half of the financial year was mainly responsible for the overall profit – after it recorded a loss after tax of R44.4 million in H1 2024.