JOHANNESBURG – African Bank says it will partner with insurance company, Sanlam in a pilot project, offering a full suite of long-term insurance and investment products to customers across 13 branches.
African Bank intends to launch on April 4, with an equity base of R10 billion and a cash position of some R24 billion. Under the logo, ‘We are You’, it plans to become a fully fledged retail bank, said CEO, Brian Riley, launching a transactional banking platform in the second quarter of 2017 and bringing a stokvel product to market this year.
It has hired DDB, which developed the Steve campaign for FNB, to do its advertising and will roll out television adverts next month.
With the exception of credit life, which is embodied in the loan product and offered via a cell captive insurance arrangement with Guardrisk, Sanlam will, through FAIS-accredited individuals, sell insurance and investment products to African Bank customers. The concept will be tested in 13 Gauteng-based branches in the coming months, before potentially being rolled out on a wider basis.
The tie-up has been driven Sanlam Personal Finance head, Hubert Brody and Riley, who know each other from their days as the respective heads of Imperial and WesBank.
African Bank’s transactional banking platform will be “comprehensive” and target existing loan customers, unbanked individuals and competitors’ clients, Riley said. The bank has 1.5 million loan customers who fall into monthly salary bands of between R3 000 and R40 000.
African Bank will launch a product for event-based stokvels this year, whereby it pools the funds in a safe environment and creates additional value for customers, Riley noted. Old Mutual estimates the size of the stokvel market in South Africa to be around R44 billion.
It will also offer a funeral insurance product, with various value added benefits. “We’re looking for 20% returns on this business, not 50% or 60% as some players in the market,” Riley said.
Customers will be able to apply for loans online by June, Riley said. It had to switch off its online loan product, as it was non-compliant with new regulations, he said.
A new dawn?
“It will be a challenging road ahead but we believe that our ambition to become a successful retail bank will be supported by good governance and a set of values including transparency, empathy, innovation, collaboration and being profit conscious, which will build the reputation and restore creditability to the bank,” Riley maintained.
He said that staff is excited about the future, with turnover levels having reduced to 16% (including contact centre turnover) from a peak of 40%. “The staff left in droves” following the curatorship, according to Riley, including (almost) the entire internal audit team. This after 50+ PwC executives were flown in from the UK to “shadow” various African Bank executives in the days following the curatorship announcement of August 10 2014.
Since then, the bank has made wide-ranging changes to crucial aspects of its business, including its credit granting criteria and provisioning policies. It has also beefed up its board, which is now chaired by Louis von Zeuner, former deputy group chief executive of Absa.
The residual book – amounting to R4.8 billion – remains with curator, Tom Winterboer and is collected on under a service level agreement between African Bank and Residual Debt Services. The first R3 billion recovered will go to the South African Reserve Bank (Sarb), as a super senior creditor, with potential additional recoveries going to senior debt holders and finally subordinated debt holders.
To improve efficiencies in its balance sheet, African Bank will consider buying back some of its debt – which is currently trading at high yields on Euro Medium-Term Note (EMTN) and Domestic Medium-Term Note (DMTN) programmes and creating a negative carry – Riley said.
African Bank said it does not expect to need to raise funds for a number of years.