Threat of further downgrade of Abil if losses exceed 10%

African Bank curator Tom Winterboer is not certain when the suspension of Abil's shares will be lifted. Photo: Simphiwe Mbokazi

African Bank curator Tom Winterboer is not certain when the suspension of Abil's shares will be lifted. Photo: Simphiwe Mbokazi

Published Apr 1, 2015

Share

Banele Ginindza

AFRICAN Bank Investments (Abil) might still be downgraded further by ratings agency Moody’s Investors Service if losses imposed on senior debt holders and wholesale depositors exceed the 10 percent level communicated by the Reserve Bank.

Abil went under curatorship last August after its dramatic collapse due to outstanding unsecured lending collections.

The agency said ratings could be downgraded if there were any lapses or significant delays in the implementation of the bank’s restructuring plan that would endanger the viability of the restructuring plan.

Restructuring

In a notice, Moody’s said the expected losses and recovery rates expected for Abil's remaining creditors at the conclusion of the restructuring would determine the bank’s ratings.

In another development, Abil’s curator

Tom Winterboer said yesterday that he would next month finalise the audited financial results for the year to September.

In an update published on the JSE news service yesterday, Winterboer said it was not certain yet when the suspension of trading in Abil’s shares would be lifted on the JSE.

The release of the financial results would reveal the extent of recovery that the “good bank” had made since the split was made last year after the collapse of the unsecured lender.

In a similar update earlier last month, Winterboer said Abil continued to operate in a stable manner, with loan disbursements and loan collections in line with expectations, albeit that loan disbursements were at lower levels but higher quality on a year-on-year basis.

He said total monthly disbursements had varied between R550 million and R750m between August 2014 and January 2015, in line with the lower risk appetite and expectations.

Winterboer said it was expected that an Information Memorandum (IM) would be provided to affected parties detailing the intended restructuring approach to Abil towards the beginning of May 2015. The IM will be made publicly available and its expected publication date and outline will be communicated in a Stock Exchange News Service announcement in due course.

The collapse of Abil in August last year was the clarion call for the local bank industry to have more vigilance on lending practices, particularly unsecured lending.

Statistics

In another development, the National Credit Regulator (NCR) yesterday released statistics for the last quarter of last year, which indicated that unsecured credit increased by R468.34m (2.57 percent) quarter-on-quarter but decreased by R2.91 billion (13.48 percent) year-on year.

In its Consumer Credit Market Report and the Credit Bureau Monitor, which are based on the data submitted to the NCR by registered credit providers and credit bureaus respectively, Nomsa Motshegare, NCR chief executive, noted that unsecured credit debtor’s book decreased by R823.52m (0.49 percent) for the quarter to December. On a year-on-year basis the book decreased by R1.78bn.

“A significant proportion of consumers did not heed the call to spend wisely and prioritise reducing or settling their debts during the festive period. Consumers must learn to live within their financial means and borrow responsibly. Those experiencing financial distress must make arrangements with their credit providers or seek assistance from any debt counsellors before running into arrears,” she said. The number of consumers with impaired record has increased by 211 000 from 10.05m to 10.26m.

As a percentage of the total number of credit-active consumers at 44.9 percent, this reflects an increase of 0.2 percent quarter-on-quarter and a decrease of 3.2 percent year-on-year.

Related Topics: