Phoenix rising from the ashes: African Bank announces R1.5bn deal to buy Grindrod Bank

In the 2019 South African Customer Satisfaction Index report, African Bank was rated number one in customer satisfaction, outshining all other banks. Picture: IOL

In the 2019 South African Customer Satisfaction Index report, African Bank was rated number one in customer satisfaction, outshining all other banks. Picture: IOL

Published May 26, 2022

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African Bank, just like the mythical Greek firebird, the Phoenix, has risen from the ashes since it was placed under curatorship in 2014 and subsequently reinvented itself with the oversight of the SA Reserve Bank (SARB).

African Bank is on a positive path after the group’s announcement just last week that it has lifted taxed profit by 145 percent and today has announced it has acquired 100 percent of Grindrod Bank, which will allow it to accelerate its entry into the South African business banking sector.

The South African market went into a tailspin in 2014 after it was revealed the bank had collapsed due to years of reckless lending and a spiral in bad debt. It created huge uncertainty in the trustworthiness of the local banking sector.

Taking lessons from this, SARB this month has announced it has placed Ubank under curatorship due to corporate governance concerns and before it suffers the same fate as African Bank.

African Bank was separated into a "good" and "bad" bank, and recapitalised with R10bn from SA’s commercial banks, as well as the SARB, which in February this year announced it was time to exit.

African Bank is seen as an important cog in South Africa’s economy as it is dedicated to creating relevant products that help to uplift South Africans, including loans, investment and insurance products.

African Bank’s CEO Kennedy Bungane says, “Following the release of our successful half-year results this week, our acquisition of Grindrod Bank enables us to further realise our business banking aspirations and advance our ambitions in this respect in acquiring valuable sectoral expertise and an existing customer base. We announced earlier this year the formation of 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.”

Grindrod Bank CEO David Polkinghorne says Grindrod Bank, founded in 1994, has had several suitors over the years.

The synergy with African Bank works well from a strategic and people perspective.

“This is an excellent fit for both parties. The deal has strong support from the shareholders and will enable diversification and growth. African Bank has 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.”

The deal will still take some months to formally conclude and is still subject to various regulatory approvals including the Prudential Authority, the National Credit Regulator, the Competition Authorities, and the Minister of Finance.

The integration of the two organisations will be measured and over time to ensure immediate and continued focus on customers and growth.

Bungane says it is critical that African Bank amplify its business banking credentials.

“We are committed to helping entrepreneurs achieve their aspirations by providing solutions that transcend the scope of banking. This means that entrepreneurs will soon have access to a support network, allowing them to focus on growing their business. “

Grindrod Limited CEO Andrew Waller says, “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. The sale aligns with Grindrod’s long-stated intention to separate its freight and banking services businesses.”

Earlier this year in March, the South African Reserve Bank (SARB) said it planned to list African Bank Holdings (ABH) on the JSE, as none of the interested investors for its 50 percent stake in the retail bank was suitable at the stage.

African Bank CEO Kennedy Bhungane said the planned listing was “great news” as culminated in the successful resolving of the curatorship over 7 years, and “more importantly” it resonated with the bank’s founding philosophy by entrepreneurs including Nafcoc of being “a bank for the people.”

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