Shareholders to support African Bank’s re-entry into wholesale funding market

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African Bank says it has received shareholder support along with eight billion rand in assistance to help it re-enter the South African wholesale funding market.

The lower-income lender is controlled by the central bank after a 2014 bailout by the regulator.

In a statement, African Bank says it plans to re-establish itself as a reliable counterpart in the domestic wholesale funding market.

It adds that this will be based on the development of a  robust and sustainable long-term operating model.

Hit by the impact of the coronavirus, it reported a net loss after tax of R311 million for the six months to March 31, compared to a profit of R69 million a year earlier.

“The bank continues to maintain robust capital levels and surplus liquidity,” it said in its results statement.

African Bank’s bid to restore itself to viability was gaining some traction before the coronavirus hit, dealing a hefty blow to South Africa’s already shrinking economy and its lenders.

The South African Reserve Bank (SARB) in February appointed an adviser to manage the sale of its 50% stake in its parent company, African Bank Holdings (ABH), marking a vote of confidence in the lender.

It said the loss was mostly due to a R550 million credit impairment charge covering an expected spike in bad loans.

The bank focuses on lower-income customers set to be hard hit by the pandemic’s economic impact.

As well as the SARB, ABH is owned by six big South African banks and the government’s pension fund.

It also operates an insurance business which increased its provisions by R303 million due to the pandemic.

ABH fell to a mid-year loss of R111 million from a profit of R533 million a year earlier.