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African Bank 09 December 2024

Management meeting takeaways

Charles Russell

#themes: validation of 2025 strategy; balance sheet diversification; hopeful outlook from management

Event: We hosted meetings with African Bank management post their FY24 results. In this report, we include a summary of salient points from these meetings. 

This note elaborates on key qualitative and financial messages:

(1)     Strategic focus;

(2)     Comments on the FY24 financial performance;

(3)     Their progress towards reaching their goals ahead of listing; and

(4)     Outlook and prospects.

Building capabilities: The journey toward listing has included an accelerated acquisition of capabilities to diversify the business. Ubank, for branches and mining sector exposure. Grindrod for business banking. Sasfin for property development finance, capital equipment financing and transactional capabilities. The bid for Eskom’s home loan book to build secured scale and capabilities. The business is still looking for trade finance and FX capabilities. 

Business banking: BCB will be a strong growth lever for the business for the foreseeable future, not just as a new competitor but as an established incumbent in the mid-tier, aiming to get to 40% of net loans over the medium term. Landing transactional banking in around March / April 2025 will be incremental to success. 

Alliance partnerships: While African Bank has seen strong growth in card and transactional fees in FY24 (+27%), the opportunity that presents in deepening the relationship with alliance partners is viewed as significant. This includes lending, deposit-gathering, insurance and others. 

Conservative provisioning: The business expects to release c.R1bn of provisions in the retail book due to conservative recent underwriting, increased collection efforts and macro tailwinds.

Conclusion: Eventual valuation at listing will be contingent upon the achievement of several financial targets, most notably the journey towards 15% ROE. Loan growth, customer cross sell and scaling of revenue while diversifying into business banking and driving blended credit losses lower will be key components of this journey.


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