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African Bank reports loss a day after CEO’s surprise resignation

The unsecured lender swung to a R560 million loss in the 12 months through September, compared with a year-earlier profit of R267 million.
Image: Waldo Swiegers/Bloomberg

African Bank reported a full-year loss a day after announcing the unexpected resignation of Basani Maluleke, the only Black women to lead one of South Africa’s top banks.

The unsecured lender swung to a R560 million ($37 million) loss in the 12 months through September, compared with a year-earlier profit of R267 million, Johannesburg-based African Bank said in a statement Tuesday. The coronavirus pandemic and the nation’s moribund economy caused credit impairments to soar 58%, resulting in a credit-loss ratio of 11.7% from 7.5% previously, it said.

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“Unfortunately, our financial numbers have not withstood the worsened economic climate and the overlay of the effects of the Covid-19 pandemic,” Maluleke said in the statement. The second half of the year saw “signs of reduced risk and improved earnings.”

The chief executive officer is leaving at the end of April after three years in the top post to pursue other career opportunities, African Bank said on Monday. Maluleke took over after the South African central bank and six of the nation’s largest lenders stepped in to save the firm with an equity injection when African Bank Investments Ltd. went into administration in 2014.

South Africa’s central bank has appointed financial advisers to assist the lenders exit their shareholding, African Bank said.

“The bank has started working with these advisers and the South African Reserve Bank anticipates that their exit will be completed within 18 to 24 months, after the identification of a suitable buyer,” the lender said.

The bank has 1.35 million customers and largely caters to low-income clients. Under Maluleke, African Bank has managed to boost deposits, giving it access to a cheaper source of funding and transaction fees, while also increasing the cross-sale of products, such as insurance, to diversify away from only providing small loans.

Chief Financial Officer Gustav Raubenheimer, who was also instrumental in the rescue process of African Bank, will take over as acting CEO. South Africa’s financial sector leadership ranks have been dominated by White men. The only other woman besides Maluleke to have led a bank as CEO is Maria Ramos, who was at the helm of Absa Group Ltd. for a decade until February 2019.

© 2021 Bloomberg

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Unfortunately, further challenges lie ahead for the banking industry. The global economy is facing extreme hardship with widespread unemployment – the jobless rate in the US stood at 11% in July 2020 – soaring government deficits and businesses struggling to survive.

While joint action with governments and regulators is likely to be required to address the immediate non-performing loans overhang, the repercussions for businesses and individuals are expected to be longer lasting.

I am worried about the smaller SA Banks and the fact that their financial performance cannot withstand the worsening economic conditions especially with the lock-down effects of the Covid-19 pandemic.

Small Banks like Investec with their off-shore operations as well, will start wearing the brunt of this slowdown both locally and offshore. The Investec de merger (with asset-manager Ninety One) did cost them a lot of money and could not have come at a worst time.

These types of shifts in the market have led to fee pressure and commoditization, decreasing the value of scale. When coupled with a worsening regulatory environment, as well as depressed economic environment it will likely serve as a catalyst for bank consolidation.

……… Cooked books?

Well now we know why the CEO “resigned”. With losses of over half a billion they can try hire someone else to stem the destruction of the balance sheet.

We are truly broke here (financially) and worse-broken( as a society) !

The CEO did the honourable thing.

really? No accountability after earning megabucks?? Suddenly just resign. Another BEE success story brought to you by the ANC.

She ran away — Ja that is real honourable !!!

Does anyone have any proof that it were mistakes made by the CEO that led to the bank making a loss?

Plus if she made a serious mistake it will most likely be announced.

What about the other executives?
What was their part?

Maybe the bank was not supposed to have been rescued in 2014.

End of comments.

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