African Bank is still awaiting approval from Finance Minister Enoch Godongwana for its amalgamation with Grindrod Bank, which it acquired in November last year, and the two banks are still operating on separate banking licences.
Grindrod Bank on Friday released results for the year to September 30 that showed it had delivered an “acceptable financial performance for the nine months ended September 30, 2023,” despite the economic headwinds still facing South Africa.
Last week, The African Bank Group, which includes Grindrod Bank, reported a net profit after tax of R505 million, indicating robust financial health overall.
Grindrod Bank reported net profit after tax of R134.76m for the period, 25.3% lower than R180.42m at December 31, 2022. Its financial year end was changed from December 31 to September 30 to align with its new holding company’s financial year-end and as a result, the amounts were not entirely comparable;
Grindrod Financial Holdings, the holding company of Grindrod Bank, became a wholly owned subsidiary of African Bank from November 1, 2022.
Its results said that the “banking company (African Bank and Grindrod Bank)” were currently still operating under two banking licences, and African Bank “intends to amalgamate Grindrod Bank, such that the assets and liabilities of Grindrod Bank would be transferred to African Bank, and Grindrod Bank’s banking licence subsequently cancelled”.
The amalgamation application was filed with the Prudential Authority on April 23, 2023.
“Subject to approval by the Minister of Finance, and in terms of Section 54, the assets, liabilities, operations and human capital of Grindrod Bank will be transferred to African Bank and will form the new Business Banking division within African Bank, and continue to operate under African Bank’s banking licence,” the directors said in the results.
“Given the planned Section 54 amalgamation, it appears that the Grindrod Bank legal entity will have no realistic alternative but to cease trading. Hence Grindrod Bank will, in accordance with the Standard, no longer be considered a going concern …”
Grindrod Bank’s lower profit was attributed largely to lower net interest margins and deteriorating credit performance.
The statement of financial position grew to R15.17 billion (December 31, 2022: R14.22bn) and the growth was largely attributable to growth in the funding base to R13.18bn (December 31,2022: R12.30bn).
Loans and advances for the nine months ending September 30, 2023 were reported at R9.77bn (R8.55bn). The majority of the bank’s liquid assets portfolio were invested in short-to-medium tenor instruments with the SA Reserve Bank. The net bond position was R100m at year-end.
The net impairment charge was R54.24m (R27.12m) , attributed largely to an increase in the loan book growth, and worsening economic conditions.
African Bank’s fledgling Business Banking division contributed a substantial R682m to its total net revenue in just 11 months. Its directors could not be reached for further comment this weekend.
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