JOHANNESBURG – Failed unsecured lender African Bank reported a R2.8 billion loss for the six months to March 31 – a 53% improvement on the comparable period last year, but nonetheless on the upper end of what the market was told to expect.
“While these results are disappointing, they are in line with our expectations,” commented African Bank curator, Tom Winterboer. “The restoration to profitability and subsequent achievement of acceptable investor returns in the ‘Good Bank’ will take time, effort and commitment.”
Earlier this month, African Bank said collections were “stable”, at more than R2 billion a month and flagged an expected loss for the six months to March 31 of between R2.3 billion and R2.8 billion.
The South African Reserve Bank (Sarb) placed African Bank under curatorship in August 2014, after it collapsed under a pile of bad debt. Winterboer has been tasked with restructuring Good Bank, the portion of the lender’s book separated from toxic loans; reaching settlements with holders of African Bank debt and putting in place a new management team for Good Bank.
In a stock exchange filing issued on Friday, African Bank said half-year earnings were negatively impacted by a decline in the number and value of loans advanced.
New loans have settled at levels of around R600 million a month, from levels above R1.2 billion a month from October 2013 to July 2014. Winterboer has previously said the bank ideally needs to issue R1 billion in loans a month.
The credit impairment charge fell 37% from the prior period to R5.4 billion (2014: R8.5 billion). “The comparative charge was heightened as a result of the adjustments made to provisioning,” African Bank said.
African Bank’s loss for the six months to March 2014 was also restated to R5.9 billion from a previously reported R2.7 billion. This is primarily due to a change in provisioning policy and a restating of impaired loans. Previously, loans were categorised as impaired when debtors had defaulted on four instalments or more. This is also when provisioning for these loans began.
This has now been changed to reflect impairment even where only one loan is missed or any amount less than the full instalment has been paid.
For the 12 months to September 2014, African Bank’s loss jumped 58% from the prior period to R9.3 billion. Winterboer, who recently appointed Brian Riley as CEO designate of African Bank Good Bank, hopes to complete the restructuring of Good Bank by October.
A listing on the JSE will likely take more than two years from the date on which the restructuring is complete. At the announcement of the bank’s full year results, Riley said he had created an “enormous amount of dissatisfaction with the status quo”. “Loans must be more customer centric. If we do things the same way we know where that will take us,” Riley said.