Ellerine's debts weigh on African Bank

By Staff Writer

From Business Day 

by Regis Nyamakanga

He said the company had set aside a further R340m in provisions for doubtful
debts at Ellerine, as the retailer's provisioning models were less
conservative than African Bank's.

African Bank had also adjusted Ellerine's accounting policies and the treatment of insurance income and loan fees to bring them into line with its own. This
contributed to the reduction in Ellerine's net asset value to R4,6bn as of
January 7, about R450m lower than at the end of August, African Bank said.
Goodwill for the acquisition amounted to R4,56bn.

In January, African Bank, which is SA's largest provider of unsecured credit,
paid R9,2bn in stock for Ellerine, the nation's first combined lender and
retailer. African Bank's stock fell 2,59% to R24,84 on the JSE yesterday as
2,6-million shares changed hands in 482 deals. "African Bank has conducted a detailed evaluation of the underwriting models and loan portfolios as at
January 7 2008, compared with the view that was obtained at the time of due
diligence, and during this process it became clear that, as a result of
changes to the underwriting models introduced at the time of the National
Credit Act, the probability of default on loans written by Ellerine has risen
sharply.

"In addition, cash collection rates in Ellerine also fell during the period
leading up to December 2007," he said.

Since gaining control, African Bank has made improvements to reverse the high defaults and expects the benefits from these to begin to feed through during the latter part of this financial year.

Recent Articles

Featured Do you need credit to survive Easter?

Easter weekend is here and with it the expectation of celebration. While there is nothing wrong with this, it often means spending more money than you bargained for.

 

Read more

Young woman building a legacy brick by brick

When her dad passed away, Siyasanga Ngcongca, an internal auditing graduate, took over the family business. Ngcongca Construction, as her company is known, is a service provider to five insurance companies, handling building and commercial claims.

Read more

Can you evict paying residential tenants?

One of the most common reasons for wanting to evict a tenant is non-payment of rent. But there are many other situations that landlords may encounter. These can range from damaging property and breaching contract, to being reported as a continuous disturbance by neighbours.

Read more

How one entrepreneur designed her financial future

From as early as Cannon remembers, she recalls her grandmother seated behind a sewing machine. Through this influence she was sewing her own aprons and doll dresses by the time she was ten, and by the time she was 16, she started designing and make her own clothes.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Hartbeespoort Romantic Weekend Special

Price: R2,999
When: Weekends
Where: North West

Da Vinci Happy Hour

Price: Available on request
When: Weekdays
Where: Cape Town

Glenburn Spa Easter Package

Price: From R1,065
When: 18 -22 April
Where: Muldersdrift