African Bank swings into loss as pandemic hits economy

South Africa's African Bank recently reported a shift from profit to loss for the year ending September 2020. The bank's Chief Financial Officer, Gustav Raubenheimer, highlighted the impact of the challenging macroeconomic environment, exacerbated by the global pandemic, on the bank's profitability. Raubenheimer pointed out that the increase in provisions and claims were the primary factors contributing to the reduction in profitability. However, he noted that the bank managed to turn a profit in the second half of the year, showcasing signs of recovery. Despite reporting a 27 million rand loss for the year, this figure was an improvement from the 111 million rand loss reported at the halfway mark. Raubenheimer also addressed the decline in lending activities, attributing it to reduced economic activity and the necessity to tighten credit criteria in response to heightened risks. The CFO emphasized that recent business branches showed promising performance, indicating positive growth potential in the future. The bank's loan book predominantly comprises individual loans, with no corporate loans in the portfolio. Revising underwriting criteria to consider the impact of COVID-19 on various sectors, Raubenheimer highlighted industries such as tourism, transport, and construction as significantly affected by the pandemic. The interview shed light on the bank's strategic steps towards recovery, evident in reduced losses related to insurance claims and impairments, signifying a prudent provisioning approach and effective management actions. Amid changes in leadership with the CEO's resignation, Raubenheimer remained confident in the bank's executive team and board, emphasizing a robust strategy endorsed by both management and the board. With a conservative balance sheet boasting ample capital and liquidity, he dismissed concerns of a relapse, affirming the bank's commitment to executing its strategic objectives and maintaining financial stability.