From CNBC Africa

South Africa is unlikely to see banks completely exiting the unsecured lending space.

“We’ve seen the big four starting to tighten on their credit extension in the unsecured space and I think African Bank has also started to pull back. I don’t think people are necessarily going to exit the space completely – it still remains a very lucrative space if you look at the kind of interest rates that people are earning,” Afrifocus’ head of research Johan Scholtz told CNBC Africa.

“My concern is the South African Reserve Bank and others have, on numerous occasions, indicated that we are not seeing a systemic issue but within the unsecured space, there is systemic risk. If you start seeing people pulling back from credit extension, you are putting further pressure on consumers that are already under a lot of pressure.”

African Bank Investments Limited’s (Abil) shares fell seven and a half per cent after the unsecured lender said it expected full year headline earnings per share to be 87 to 90 per lower.

“There were three issues that were new in this trading update. The first one is additional impairments that they need to take against their non-performing book that amounts to about 600 million. That really takes us down to the 90 percent down level indicated in today’s trading update,” Scholtz explained.

“They also came out and announced that they will have to take an additional one and a half billion of equity capital that they’re going raise through the rights issue. The last issue is the fact that they will have to impair the goodwill that they paid for the Ellerines business, to the tune of 4.6 billion.”

Scholtz also admitted that he was bewildered when he saw an increase in Abil’s share price after their last trading update because it was far from bullish.

Read more at CNBC Africa.