Imperial Bank
Overview
Imperial Bank Limited, which was incorporated in 1996, is a niche bank engaged primarily in asset-based financing. The bank has two shareholders, Nedbank Limited (owning 50,1%) and Imperial Holdings Limited (49,9%). Nedbank provides funding for Imperial Bank, as well as risk management support, which includes having representatives on the bank's Credit Committee and Asset and Liability Committee. Imperial Holdings provides the bank with access to its extensive business operations across South Africa.The bank has four operating divisions. Motor Finance is the largest division with 62% of advances, followed by Property Finance with 18% of advances, Medical Finance with 12% and Supplier Asset Finance with 8%.
Review of the year
The bank has had another successful year with net profit after tax increasing 24,1% from R386,1 million to R479,2 million. Nedbanks' share of this profit increased by 17,6% from R193 million to R227 million. Return on equity (ROE) was 23,9%, while the efficiency ratio showed further improvement from 35,4% to 30,2%. Loans and advances grew from R27,7 billion to R35,3 billion, which reflects growth in market share in most of the bank's selected markets.In a market characterised by lower new-business volumes and increased credit pressure on consumers, Motor Finance Corporation (MFC) had a successful year increasing its presence in the market and growing advances 27,5% from R17,1 billion to R21,8 billion. As expected, impairments have increased 73,2% and represent 1,9% of average advances compared with 1,5% the previous year, which reflects the impact of higher interest rates. Expenses remain well-managed with the cost-to-income ratio improving from 32,1% to 29,5%. Profit after tax increased by 19,3% from R173,4 million to R206,8 million.
Property Finance had an excellent year, with a focus on commercial and industrial lending, and advances grew from R2,4 billion to R3,8 billion. There was continued demand, particularly in the lower end of the market, for residential development finance, which resulted in the book growing from R2,5 billion to R2,7 billion. Overall, profit after tax increased by 49,5% from R113,6 million to R169,9 million.
Supplier Asset Finance increased deal flow, which assisted the division in growing the transport, aviation and materialhandling books. Demand for office equipment remained buoyant. Costs remained well-controlled with a cost-toincome ratio of 34,7%. Profit after tax increased 12,3% from R76,4 million to R85,8 million.
Medical Finance continued to grow in its niche market, with advances growing 40,0% from R3,0 billion to R4,2 billion. Profit after tax increased 21,3% from R15,9 million to R19,3 million. The division remains on track to achieve more appropriate returns as it increases in scale.
| Rm | % change | 2007 | 2006 |
| Headline earnings (Rm) | 17,6 | 227 | 193 |
| Margin (%) | 4,59 | 4,47 | |
| Efficiency ratio (%) | 30,2 | 35,4 | |
| Credit loss ratio (%) | 1,28 | 0,87 | |
| Average advances (Rm) | 32,9 | 31 528 | 23 716 |
| ROE (%) | 23,9 | 24,7 | |
Prospects
The main focus of MFC during 2008 will be on improving service levels to both clients and dealers to build on the increased levels of support received during 2007. In these relationships the credit scorecards remain a key driver of efficiency and delivery times, and the division looks forward to implementing, in the first half of 2008, new and additional scorecards tailored to specific subportfolios in line with international best practice.Property Finance will continue to focus on growing the book of commercial and industrial mortgage loans, while still servicing the residential development market.
Medical Finance is again looking to achieve strong balance sheet growth by continuing to focus on the medical practitioners as well as the corporate medical market.
Supplier Asset Finance intends to build on the increased deal flow achieved in 2007. The infrastructural developments in the country should enable the division to achieve its growth targets.
Imperial Bank anticipates more difficult trading conditions than experienced in 2007, but expects satisfactory results across its four business units.
| This page was updated on 21 August, 2008 |  Return to top |
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