African Bank flags R6.4bn loss, boss quitsComment on this story
Johannesburg - African Bank Investments warned on Wednesday it would fall to a full-year loss of R6.4 billion and said its chief executive would step down after more than 20 years with the struggling mass-market lender.
Shares of the bank lost more than half their value on the news, hitting their lowest since 1997 on widening concerns about its ability to ride out an economic downturn.
Abil, as the lender is widely known, has been hurt by rising bad debts as its core market of low-income borrowers come under strain from higher unemployment and rising food and fuel prices.
Credit agency Moody's in May cut Abil's international debt rating to “junk”, a major blow to a lender that has traditionally funded itself in the debt markets.
Abil said it expected a headline loss of at least 6.4 billion rand for the year to the end of September versus a profit of 365 million rand the previous year.
It said it would have to hike its bad debt provisions by 3 billion rand and was suffering from higher-than-expected bad loans, pushing it to a loss.
Leon Kirkinis, a 23-year veteran and one of the founders of the bank, had stepped down as chief executive with immediate effect, it said.
Chief financial officer Nithia Nalliah has been appointed acting chief executive.
Abil said it would ring-fence its “good” loan book and was exploring options to isolate itself from its “bad” loans.
“The Board is satisfied that there is a core 'good' advances book and a sustainable demand for unsecured credit at the appropriate level of risk to generate the commensurate returns for shareholders,” it said.
The stock fell as much as 62% to R2.60 from Tuesday’s close of R6.88.
The African Bank was last quoted down 59 percent by 11:10 SA time at R2.81. - Reuters