ubank Performance Overview

We are pleased to report that the year under review has seen a turnaround in earnings, with a profit before tax of R34 million. This was due to further growth of the loan book, continued cost controls, and a rise in non-interest income. The external environment provided challenges to the bank, most notably, on-going historically low interest rates, increasing competition in the mass market sector, and the effects of constraints to gold and platinum mining on our core target market.
During the year the Bank focused on consolidation, including the bedding down of key business initiatives such as the new brand, transactional products and system enhancements, as well as the continued improvement of the bank?s risk profile, capital management, asset quality and defense of the Bank?s dominant market share within the mining market.

Balance sheet

Despite a challenging external context, Ubank attained a year of steady growth in its balance sheet, to R3,5 billion for the 2012 financial year. This was largely a result of the continued focus on growth of the loan book, in line with the Bank?s long-term strategy. The net loan book grew 27,7% since 2011, to just under R1 billion.
The growth of the credit book has doubled in the four years from 2008, representing an average growth of 29% per annum with consistent focus on the quality of the loans written. This trend resulted in an increase in the loan to deposit ratio to 34% in FY2012, up from 27% in FY2011. In line with the strategy, the higher loan to deposit ratio further reduced the Bank?s reliance on low yielding investments of customer deposits.
Ubank?s capital adequacy ratio at the end of 2012 was 18.8%, with a focus during the year on strengthening the Bank?s capital and liquidity positions, allowing for the continued growth of higher yielding customer advances.

Income statement

Net interest income increased 25.7% during FY 2012. Loans generated 69,7% of the Bank?s interest income for the year and 45,0% of the Bank?s total operating income. Due to the continued growth in the loan book, and recent diversification to new markets, impairment charges on loans and advances rose to 8,6% of total loans and advances, up from 6.8% in FY2011.
Non-interest income increased 12,5% during FY2012, due to volume growth in the loan book, new electronic banking products and features introduced in late 2010, and pricing. Non-interest income accounted for 54% of total operating income for FY 2012.
Operating expenses reduced slightly during the year by 1%, on the back of a continued cost conscious approach to expenses and efficiency in overhead expenditure. Together with a 15% increase in operating income, this brought the Bank back into profit with a 78.2% cost-to-income ratio (pre impairment).


We are disappointed to report that an executive was dismissed on charges of fraud in early 2012. The matter is being followed up with criminal charges. The Bank has subsequently undertaken a general, cross-organisational, compliance review of the control environment of the Bank. This was conducted by independent specialists, with a view to further enhancing controls over the bank?s processes and procedures. The review has been completed and identified a need to refine certain processes and controls. Improvements are accordingly currently underway.

Going forward

In the short-term, the Bank will focus on further improving controls and asset quality, and increasing its competitiveness through efficient systems, distribution optimisation and the introduction of new products. Both macro-economic and mining prospects for 2012 indicate a subdued context for strong growth of the loan book and transactional banking products. The bank?s strategic plan for the next five years places a risk- and capital-adjusted approach at the core of the future plans. This will take into account increasing competition in both the unsecured lending and electronic banking areas, which constitute the Bank?s core current business, as well as the stricter and costlier capital adequacy and liquidity regulatory requirements (Basel 3) to be introduced in a phased approach from 2013 to 2019. In order to rapidly expand to national presence and attain critical mass, the Bank is seeking additional equity to finance its strategic growth initiatives. The Bank is currently exploring tier one and tier two capital options

Note to Editors:

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