African Bank, which said earlier this year it wished to enter business banking, will acquire 100 percent of Grindrod Bank in a R1.5 billion deal that will accelerate its entry into a sector where the bank wants to be able to fund entrepreneurs.
African Bank CEO Kennedy Bungane said yesterday the acquisition would help them realise their business banking aspirations, and would entail the bank acquiring valuable sectoral expertise and an existing customer base.
Grindrod’s share price leapt 8.35 percent on the JSE yesterday afternoon.
“We announced earlier this year ... the formation our business banking division as part of a strategy to diversify and develop a fully-fledged middle of the pyramid business banking offering. This acquisition allows us to do that efficiently and rapidly and we look forward to incorporating Grindrod Bank into our stable,” Bungane said.
The deal is the latest in an increasingly active small bank sector – the SA Reserve Bank recently put Ubank into curatorship because it faced capital constraints and Sekunjalo Investment Holdings chairperson Dr Iqbal Survé signalled he would pay R250m to acquire Ubank if additional funding could be raised from other black funders..
Grindrod Bank CEO David Polkinghorne said Grindrod Bank, founded in 1994, had heard from several suitors over the years. The bank is currently a niche financier in the South African property market, known for its specialised expertise in commercial and industrial property finance.
“This is an excellent fit for both parties.The deal has strong support from the shareholders and will enable diversification and growth,” Polkinghorne said yesterday.
He said African Bank also had strong capital and liquidity positions to support the growth of the merged businesses going forward.
“Grindrod Bank will provide a strong entry point into the business banking and property finance market which will grow off African Bank’s larger balance sheet and additional capital allocation. Both banks are also pursuing opportunities in the platform economy and African Bank will continue with this strategy post acquisition,” Polkinghorne said.
The deal was expected to take some months to formally conclude and was still subject to regulatory approvals including the Prudential Authority, National Credit Regulator, Competition Authorities, and the minister of Finance.
“We are committed to helping entrepreneurs achieve their aspirations by providing solutions that transcend the scope of banking. This means entrepreneurs will soon have access to a support network, allowing them to focus on growing their business,“ Bungane said.
Grindrod Limited CEO Andrew Waller said the sale aligned with their long-stated intention to separate the group’s freight and banking services businesses.
“Both Grindrod Limited and Grindrod Bank believe African Bank, with its strategy of building a scalable and sustainable diversified offering across the consumer and business banking segments, is the appropriate shareholder to support Grindrod Bank’s growth strategy and is a perfect fit for its employees and clients,” he said.
Grindrod Financial Holdings’ net asset value was R1.67bn as at December 31, 2021 while its attributable net profit came to R109.4 million.
African Bank Group lifted taxed profit 145 percent to R372m in the six months to March 31. The balance sheet was strong, with available cash resources of R4.8bn.
Its capital adequacy ratio, which measures the ability of the group to protect itself against untoward events, improved to 45.8 percent from 43.6 percent.
BUSINESS REPORT