African Bank has set its sights on the lucrative home loans market with a pilot mortgage lending project for its staff already launched, CFO Anbann Chetti said.
Chetti told Business Day on Tuesday that the bank is fine-tuning its home loan proposition before taking it to market, without giving definite timelines.
“When we look at our consumer banking, we have started giving our staff home loans as a pilot project as we focus on getting to the secured lending market. The intention is that once we understand the processes and how we can give clients the best customer experience, we will launch in the market,” Chetti said.
African Bank’s plans to make a foray into the home loan market come shortly after Discovery announced it will launch its mortgage product in the first quarter of 2024. SA’s home loan market is said to be about R1-trillion, with the big banks the dominant players.
Chetti said the mooted home loan offering is part of the bank’s strategy to have much of its credit book in the secured lending space in the coming years, with business banking expected to do the heavy lifting.
“A year ago business banking constituted just about 10% of our balance sheet and is now about a third of our balance sheet. The plan is for that secured business to be larger than a third,” he said.
The bank staged a strong comeback in the second half of its financial year, reporting an annual profit of just more than R500m.
The lender, which reported a loss of R44m in the six months to end-March, on Tuesday said profit after tax for the full year amounted to R505m.
CEO Kennedy Bungane said a highlight was 41% growth in the net advances book, which has reached R32bn, with secured business banking accounting for a third of loans to customers.
“This year’s financial results reflect our strong and audacious commitment to strategic growth and diversification driven by our Excelerate25 strategy,” he said. “Our net profit is a testament to our resilience and sustainability, and our dedication to realising the enduring vision of our founders.”
Non-interest income surged 144% to R1.6bn, largely due to strong growth in customers and transactions. The bank also made headway in its insurance business, with profit from that unit surging 92% to R670m.
The lender’s fledgling business banking division contributed R682m in total net revenue in just under a year after re-entering the sector with the R1.5bn acquisition of Grindrod Bank. African Bank beefed up the segment in October with the purchase of Sasfin Bank’s commercial equipment finance and commercial property finance units in a R3.2bn deal.
The bank, which is on course to list on the JSE in 2025, confirmed it is in the final stages of developing a digital lending product aimed at small, medium and micro enterprises (SMMEs). The offering is expected to go to market in the first quarter of 2024, as first reported by Business Day in October.
Chetti said the lender has successfully diversified its funding base, with retail and business deposits now accounting for 87% of the total R35bn. “Our diversified funding base is a critical component of our strategy, ensuring a stable and sustainable financial foundation.”
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