Reserve Bank governor Gill Marcus announced yesterday a raft of support measures to save African Bank Investments Limited (Abil), which crashed onto its knees last week with the share price closing for the week at a low of 31c after it forecast a record annual loss of almost R8 billion on Wednesday as it announced the departure of its founder and chief executive, Leon Kirkinis.
Abil’s slide last week shaved off more than R7bn in market value as investors signalled discontent at the poster child of unfettered lending.
Abil announced last week it expected a basic loss of at least R7.6bn for the year to September compared with R4.2bn in the previous year, and a headline loss of at least R6.4bn for the full year, from headline profit of R365 million previously.
It also said it planned to raise at least R8.5bn in fresh capital to plug a gaping hole in its balance sheet, the second capital raising in a year.
Marcus said yesterday that Abil’s curatorship was with immediate effect and unveiled a R10bn recapitalisation for the “good” bank, which would be provided by a consortium comprising Absa, Capitec, FirstRand, Investec, Standard Bank and the Public Investment Corporation.
“The first important measure has been the conclusion reached by the registrar of banks and the decision by the minister of finance to place African Bank under curatorship ,” Marcus said.
She said PwC’s financial services leader for Africa, Tom Winterboer, had been appointed as curator and would be assisted by a team of experts.
Speculation last week that the bank would be split into a “good” bank and “bad” bank was confirmed as part of the rescue plan involves the purchase by the Reserve Bank of a substantial portion of the non-performing and underperforming assets and other high-risk loans from African Bank in order to separate them from the “good” bank.
The “bad” book currently has a book value net of specific impairments of R17bn, for which the Reserve Bank would pay R7bn.
“Collection against the bad book will be continued, and indeed strengthened: there is no payment holiday for anyone owing on a loan from African Bank,” Marcus said.
Marcus said that current shareholders and subordinated debt holders would be provided with an opportunity to participate in the recapitalisation of the new entity, that is the “good” bank, which had a book value of R26bn net of portfolio impairments.
Marcus told reporters that whether or not Abil would be suspended from trading on the JSE would be a decision taken by the stock exchange in consultation with the curator.
She said it was intended that the “good” bank holding company would be listed on the JSE in due course and would include the acquisition at fair value of the various insurance entities within the Abil group.
Marcus was comfortable that the Reserve Bank’s actions did not create a precedent for other banks to behave recklessly in the hopes that Pretoria would come to their rescue.
“We are always conscious of the moral hazard, but I don’t think that would be a result of the steps we’ve taken here,” she said.
Marcus said the curatorship was part of implementing a resolution plan “capable of ensuring that the business of African Bank gains a secure perspective for the future as a lending institution with a transformed business model.” – Additional reporting by Banele Ginindza