African Bank Investments (Abil) is in a financial struggle as it is vying to build a USD 406 million or ZAR 4 billion fund and sell of additional shares via a rights offering. Abil announced the rights offering of its retail furniture business to gather USD 406 million or ZAR 4 billion. The proceeds of the sale would be used to strengthen its balance sheet hit by slow demand and increasing bad loans. In the first half of the year, Abil experienced a 26% drop in profits. It also said it expects profits to fall further in the second half. It also intends to sell Ellerines as the business is not anymore in line with its overall strategy. Ellerines is where Abil sells furniture on credit.
The inability of low-income South Africans to pay off their loans largely affected Abil. In the quarter covering April-June, loans rose to USD 6.11 billion, representing a 19% rise year-on-year. This rise was, however, slower than the 25% growth accomplished the preceding quarter. Nonperforming loans, meanwhile, increased from 29.2% to 30.2%. Goldman Sachs will be underwriting Abil's rights offering. Unlike other banks, Abil does not accept deposits.
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