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Story of a revenant lender

African Bank timeline: from that fateful August 6th, to today.
Curator, Tom Winterboer has played a crucial role in African Bank's restructuring.

JOHANNESBURG – The all-new African Bank Limited officially launched on Monday, some six months later than initially hoped. Moneyweb takes a brief sojourn down memory lane to show just how far the lender has come. 

  • August 6 2014: Abil drops a bomb

Abil issues a statement on the stock exchange announcing an expected full-year loss of at least R6.4 billion; the resignation of long time group chief executive Leon Kirkinis; and the need to raise at least R8.5 billion in additional capital.

Abil also announces that it has applied for the business rescue of Ellerine Furnishers, the furniture retailer it purchased for R10.6 billion in 2008 and then tried to sell in 2013.

The shares plunge 60% as questions are raised over whether African Bank is ‘too big to fail’.

  • August 7 and 8 2014: the share price plummets

Abil continues to shed value on the Thursday and Friday following its shock announcement, falling more than 89% to a low of 28 cents on Thursday before closing Friday at 31 cents per share, a far cry away from a high of R38 reached in June 2012. 

  • August 10 2014: curatorship announced

The South African Reserve Bank (Sarb) holds a media briefing on a Sunday afternoon to announce that it has placed African Bank, the banking subsidiary of Abil, under curatorship. The appointed curator is Tom Winterboer, PwC’s financial services leader for Africa.

At the briefing, the Sarb reveals plans to separate the bank’s performing loan book – ie the ‘good bank’ – from the its non-performing loans, the ‘bad book’.

Good bank has a value of R26 billion in core lending assets, net of portfolio impairments, at the time and receives a R10 billion recapitalisation from a private sector consortium, including Absa, Capitec, FirstRand, Investec, Nedbank, Standard Bank and the Public Investment Corporation (PIC).

Sarb buys the ‘bad book’ – with a value at the time, net of specific impairments, of R17 billion – for R7 billion. 

  • August 11 2014: trading suspended

Trading in Abil shares is suspended on the Monday following the curatorship announcement, as 50+ executives from PwC UK descend on African Bank’s Midrand headquarters to shadow its executives and determine what exactly is going on at the now failed lender.

  • August 15 2014: SA is introduced to ‘side-pockets’… and the risks of money market funds

The Financial Services Board (FSB) announces that unit trusts can ‘side-pocket’ Abil debt, effectively separating it out of their main portfolios, in order to provide protection to investors. Questions are raised as to the benefits of this process.

Meanwhile, investors are inconveniently reminded that money market funds are not entirely risk free, as Abil’s senior debt holders get a 10% haircut on their investment.

  • May 5 2015: CEO designate appointed

Brian Riley, retired WesBank CEO, is announced the CEO designate of African Bank Good Bank, following the appointment of Louis von Zeuner, the former deputy group chief executive of Absa, who in March 2015 is appointed chairman designate of African Bank Good Bank.

The bank’s monthly loans vary between R550 million and R750 million, in line with its lower risk appetite post curatorship, but below the stated target of R1 billion a month. 

  • May 28 2015: who gets what

The curator issues details on the restructure of the Good Bank, specifically what senior and subordinated debt holders, who took a haircut on their claims, can expect to get out of it

  • June 5 2015: Abil applies for business rescue

Abil applies for business rescue, a move that has no bearing on its now former subsidiary, African Bank, which remains under curatorship and “open for business”, according to the curator. Abil’s application for business rescue follows letters of demand served by creditors, regarding the repayment of loans made to Ellerine Furnishers. 

Abil remains in business rescue at April 4 but is successfully repaying creditors, according to the business rescue practitioners.

  • June 11 2015: that’s got to hurt

African Bank issues results for the year to September 2014 posting a R9.3 billion loss for the period, a 53% increase on its restated R5.9 billion loss for the 2013 financial year.

The bank continues to grant and collect on loans, with the creation of Good Bank anticipated for October 2015. This is later postponed, following a delay in the issuing of an Information Memorandum, providing further details of the Good Bank’s restructuring.

  • June 26 2015: still hurts, but a little bit less

African Bank reports a R2.8 billion loss for the six months to March 31, as Winterboer says the restoration to profitability of the bank will take “time, effort and commitment”.  

  • September 17 2015: a strategy emerges

African Bank announces that it plans to offer transactional banking and will launch the Good Bank in February 2016. Profit projections forecast that the new bank will post a profit only in 2017.

  • October 23 2015: the Stangen curveball

But then Stangen’s BEE shareholders throw a curveball and Good Bank’s official launch date is pushed out to April 2016. African Bank wanted to buy Stangen from Abil for R1.4 billion but two of Abil’s BEE shareholders brought an urgent interdict to prevent the sale from happening, as they considered the price to be too low. 

  • December 9 2015: we’ll just start our own insurer then

African Bank announces that it is in talks with Guardrisk to establish a cell captive insurance arrangement. CEO designate, Riley says the bank has been issued a banking licence on the basis that it diversifies across products, customers and channels. 

  • January 18 2016: African Insurance Group launched

 The newly established African Insurance Group Limited – a cell captive insurance company underwritten by Guardrisk – represents a big step forward in finalising the restructuring of African Bank for April, says Riley. 

  • February 4 2016: offers to creditors made as ‘junk’ rating announced

Final exchange offers made to creditors are issued and they are called to vote on the restructure of the bank – one that they later overwhelmingly approve.

Meanwhile, ratings agency, Standard & Poor’s gives African Bank a preliminary B+/B global scale rating, four notches below investment grade. S&P says the rating reflects a negative economic risk trend in the SA banking system and its expectation that African Bank’s longer-term loan loss experience will be much higher than that of other South African banks.

  • March 15 2016: Bank gets nod from minister, Sarb

Minister of finance, Pravin Gordhan provides his formal consent to the restructuring of African Bank, while the registrar of banks, René van Wyk, approves a banking licence for African Bank Good Bank.

  • March 17 2016: African Bank has big plans

African Bank announces a partnership with Sanlam to pilot the distribution of insurance and investment products in its branches. The bank says it will launch a funeral insurance and stokvel product later this year, and its transactional banking platform will be up and running in 2017.

  • April 1 2016: all set for D-day

The restructure is officially complete and African Bank is good to go for its official April 4 launch. The ‘good bank’ is renamed African Bank Limited, now a private company with only debt, and no equity, instruments listed on stock exchanges.

  • April 4 2016: Well done Tom and team

African Bank Limited is launched under the logo, ‘We are You’, as Winterboer thanks all those involved in the African Bank restructuring.

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COMMENTS   15

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-> April 4th onwards.
The bank still have some of the the same incompetent people working there that drove ABIL into the gutter in the first place, so investors need to sleep with both eyes open and watch their investments non stop. Any sings of any plaster cracks and they must abandon ship.

Hi Sweetpea, thanks for the comment. Who are the “same incompetent people” working there? Please do email me on hanna@moneyweb.co.za if you have specific concerns. Important to note that African Bank is no longer a part of Abil.

Sweetpea – why don’t you mention the people you think are still employed by African Bank that are incompetent. We would not have achieved what we have this far with incompetent people. I am a PROUD African bank employee. Get your facts straight before shooting from the hip!!!

Riana,the rank and file staffmember at the branch i am sure are competent and follow orders.But up the line,the likes of Leon Kirkanis,Tami Sokutu(passed away) and Ian Whitley(he of Gupta brigade) must have caused endless destruction of shareholder value.For all his swagger during the heyday of the bank,Kirkanis is nowhere to be seen or heard from and how could a C.A with seemingly sound credentials not know what was going on..The buck stops with him for the mess and surrounding himself with people who were clearly not fit to run a bank,and that includes Kirkanis himself.All this talk about him being devastated is pure rubbish…

Is there any compensation for shareholders of African bank

Hi Screwed,

Please read this article: http://www.moneyweb.co.za/news/companies-and-deals/abil-halfway-out-of-business-rescue/

It’s very important to distinguish between Abil and African Bank. African Bank is Abil’s now former banking subsidiary and Abil shareholders do not necessarily have claims on African Bank in that their shares are in African Bank’s former parent – effectively an investment holding company – Abil.

Abil remains in business rescue and until such time as it pays off creditors and manages to come out of business rescue, it’s not clear what the ordinary equity holders in Abil will get.

Hanna, the question of Screwed is whether there will be compensation for African Bank (ABL) shareholders?

Hi Screwed and 24750, there are no shareholders of African Bank. The shareholders are the Sarb, the PIC and the six banks that bailed it out. African Bank has only debt holders, i.e. creditors. Its debt instruments resumed trading on three stock exchanges yesterday (See Friday’s article). I’ve covered what it is that African Bank’s creditors get out of the restructure extensively (see ‘Who gets what in African Bank restructure’). Hope this answers the questions? The shareholders that Screwed is referring to (I think) are ABIL shareholders… my earlier answer refers.

What about compensation for money market unit trust holders who were led to believe that their money was 100% safe!

Hi Bruce, I would recommend taking this up with the provider of your money market fund, as they would know what the status of that investment/side-pocket is. But see comment above to Screwed in terms of difference between Abil and African Bank.

Dear Bruce

If you have any knowledge about shares you will know that there are NO guarantees.!!!!!!!!!!!!!!!!! Nobody led anybody to believe anything. Things went well and the share price was up and then things went very bad. Can happen to any company!!

It is highly unlikely that stanlib or absa will collapse. The CEOs of those companies do not live in R60m homes and drive new Ferraris every one or two years, and this is probably only the tip of the iceberg

Riana,
when a Company goes broke it is because the directors and management never ran the show properly. Out, it is because they paid themselves more money in remuneration than the business could afford. Or, it is because wrong business decisions were made. Or, it is because unlike similar institutions they took risks because the money they were looking after was not theirs so they could not care less.

It is not as you say “it can happen to any company”. That is nonsense. That only occurs when the things mentioned above happen and then the Company goes broke. Another name for it is negligence. Please don’t defend ABIL. They cost a lot of people a lot of money.

Riana I didn’t buy shares in Abil and anybody who did must have been crazy.I would have expected investment houses like Stanlib who are supposed to be professionals to have stayed clear as well!

End of comments.

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