African Bank is scaling up its operations fast with the announcement Friday of acquiring the struggling Ubank for R80 million, hot on the heels of the recent announcement that it was buying Grindrod Bank for R1.5 billion.
African Bank which only came out of curatorship at the beginning of 2020, said it was the successful bidder for Ubank and will buy its assets, liabilities and employees. Ubank has been under curatorship since May 16, 2022.
The Bank pipped investment group Sekunjalo to the post for Ubank - Sekunjalo had indicated it would commit R250m to capitalise Ubank and it would raise a further R250m for the bank.
Ubank’s clients are mainly in rural and mining communities, and it has continued to operate in spite of the curatorship. African Bank will not be acquiring the Ubank legal entity.
African Bank said the deal fits its ‘Excelerate25’ strategy of building a scalable and sustainable bank with a compelling listable proposition. African Bank aimed to fulfil its founding philosophy of being “a bank for the people, by the people, serving the people”.
“Ubank has a unique position within the mining sector and a distribution footprint that complements African Bank’s existing national offering,” African Bank said.
Ubank’s lending book could be efficiently absorbed into African Bank’s larger lending book. Ubank’s deposit base would accelerate African Bank’s efforts to diversify its funding sources.
The deal would also give Ubank customers access to African Bank’s nationwide distribution footprint.
Ubank customers would be migrated to African Bank’s MyWORLD product which offered a higher degree of personalisation, lower fees and greater competitive value.
Meanwhile, Grindrod, the parent of property focused specialist bank Grindrod Bank, said on Friday that the procedures required to finalise the sale of Grindrod Bank were underway.
In the six months to June 30, Grindrod Bank reported strong growth in earnings of 63 percent. Advances were static at R8.3 billion compared with the end of December 31, 2021 while its deposit funding base grew to R11.7bn from R11.2bn over the same period.
African Bank was placed under curatorship in 2014 after it collapsed from high bad debts from unsecured lending and poor risk management. It separated into a "good" and "bad" bank, it was recapitalised with R10bn from SA's commercial banks as well as the Reserve Bank.
As indication of how it has been restored to health, in the six months to March 31 its taxed profit increased 145 percent to R372m. Improved profitability was also due to increased income on loan disbursements, which were up 89 percent to R6.35bn.
The balance sheet remained highly liquid with available cash resources of R4.8bn.
Sekunjalo has expressed disappointment that the curators of Ubank advised they could not allow the Sekunjalo Consortium an opportunity to purchase Ubank, as they had been given instructions by the Prudential Authority (PA) of South African Reserve Bank (SARB), to only sell Ubank to other banks.
Chairman of Sekunjalo, Dr Iqbal Survé expressed concerned about the outcome, saying: “This is extremely disappointing and worrying.
“Despite our best efforts to transform the banking sector and committing capital and resources to ensure that Ubank could be retained in the hands of workers such as NUM, it is patently clear SARB has no intention of allowing diversification of the banking industry,” said Survé.
In a letter to SARB, Sekunjalo expressed a formal interest in acquiring or recapitalising Ubank, confirming it would immediately commit R250 million to the capitalisation and expressing its confidence it could locally raise a further R250 million.
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