African Bank improves its credit-loss ratio, looks to diversify funding & product portfolio

African Bank has been making significant strides in improving its credit-loss ratio and forging stronger relationships with its customers. During a recent interview on CNBC Africa, African Bank CEO Basani Maluleke shared insights into the bank's performance and future strategies. One key highlight was the launch of the online banking channel, MyWorld, which has played a pivotal role in enhancing trust and attracting retail depositors. Maluleke emphasized the importance of the credit-loss ratio, stating that it serves as a key indicator of the bank's health and credibility. The continuous improvement in the ratio has been instrumental in instilling confidence among customers and stakeholders. As the bank diversifies its operations and moves towards accepting retail deposits, the growth in customer deposits has been remarkable, soaring by 115% to reach R2.4 billion. The CEO highlighted the significance of this growth, noting that the number of customers availing deposits has surged by over 200%, indicating a growing trend of trust and confidence in the organization. Despite starting from a low base of 6,000 customers, the trajectory of growth is promising. Moreover, the average size of deposits has increased from R72,000 to R88,000, reflecting deeper engagement and commitment from customers. These positive trends underscore the rebuilding of trust in the African Bank brand and showcase the progress the bank has made in attracting and retaining customers. On the financial front, African Bank's gross advances book has seen a notable 9% increase, reaching R30 billion. Maluleke attributed 4% of this growth to a change in the accounting policy, aligning the bank's growth trajectory with the market dynamics. Notably, 84% of the bank's lending portfolio comprises lower-risk customers, indicating a prudent approach to managing risks and ensuring sustainable growth. In response to the evolving banking landscape, African Bank has been proactive in diversifying its product distribution channels. The shift towards digital channels and alternative sales platforms has been pivotal in broadening the bank's reach and enhancing customer convenience. From originating 100% of loans via branch networks in 2016, the bank has successfully transitioned to 80% origination through digital and remote channels. Maluleke underscored the importance of providing customers with multiple touchpoints and seamless banking experiences, especially in an era dominated by digitalization. The strategic investments in digital and TV sales channels have paid off, as customers increasingly opt for non-face-to-face interactions for their banking needs. Despite a competitive landscape and economic challenges, African Bank has managed to stay resilient and report robust financial performance. By focusing on prudent risk management and customer-centric strategies, the bank has demonstrated sustainable growth and profitability. Maluleke highlighted the deliberate efforts to cater to lower-risk customers, reduce the size and term of loans, and expand the deposit base. Looking ahead, the key themes for African Bank's sustainability revolve around diversifying funding sources and enhancing the product portfolio. The bank aims to reduce dependence on wholesale deposits and increase the share of retail deposits to 25% by 2021. Currently standing at 12%, this shift signals a strategic move towards long-term sustainability and resilience. Furthermore, the launch of MyWorld and upcoming product offerings are expected to attract a wider customer base and drive revenue diversification. African Bank remains committed to innovation, creativity, and value creation for its customers, as it navigates the competitive landscape and charts a path for sustained growth in the banking sector. In conclusion, African Bank's success story is a testament to its unwavering commitment to customer trust, financial prudence, and strategic foresight. Through a blend of innovative products, digital transformation, and risk management practices, the bank is poised for continued growth and relevance in the dynamic banking industry.