African Bank CEO: How COVID-19 has impacted the bank’s earnings

African Bank has reported a half-year loss of 550 million rand after taking a charge for bad debts. The company made a net loss after tax of 111 million rand compared to a profit of 533 million rand in the same period last year. Basani Maluleke, the CEO of African Bank, joined CNBC Africa to discuss the impact of COVID-19 on the bank's earnings and the strategies being employed to navigate through these challenging times. Maluleke highlighted that while the bank had to make a loss, it was a significant improvement from the initial projections. He emphasized that the bank had taken a total impairment of 850 million rand due to the effects of the pandemic, but pre-COVID, the bank was still on track to make a profit. Maluleke acknowledged the slow recovery expected for the bank and the country as a whole, but expressed confidence in their ability to navigate through the storm safely. He mentioned that the bank caters to individuals in the mass market and middle market segments, and the defaults were seen across these groups. Despite the challenges, Maluleke noted an increase in deposits, indicating the diverse stresses faced by different customer groups. African Bank also recorded a 10% increase in customers to 1.2 million, showing resilience in customer acquisition despite the economic uncertainties. On the lending front, Maluleke shared the bank's conservative approach to lending, emphasizing the importance of lending to the right customers to manage risks effectively amidst the pandemic. He mentioned that the bank had been tightening credit even before COVID-19 to address economic challenges. Maluleke highlighted the bank's focus on lower-risk customers, with 85% of lending directed towards this segment. Looking ahead, Maluleke expressed uncertainty about the duration of the economic impact of COVID-19, mentioning estimates ranging from two to five years. He emphasized the bank's commitment to prudent lending practices and risk management to weather the current economic turmoil. In anticipation of the emergency budget announcement by Tito Mboweni, Maluleke expressed interest in seeing how state-owned enterprises' financial health would be managed and any structural changes planned to stimulate economic recovery. The CEO stressed the importance of transparency and effective strategies to support the economy's revival. Overall, African Bank remains cautious yet optimistic about its outlook amid the ongoing challenges posed by the pandemic.