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African Bank To Stand On Its Own 2 Feet

In 2014 after a scandal about some reckless lending in one branch in KZN and the sudden jumping of ship by senior staff African Bank share prices collapsed leaving the bank in ruins.

How To Save a Failing Bank

The SA Reserve Bank (SARB) jumped to the rescue and along with other big banks put in over R10 Billion to try save the bank. With some clever accounting, the bank was split into a “good” part and a “bad” part. Everyone agreed to kind of ignore the bad part for a while and pretend it wasn’t there (unless they were collecting debts for that part). New leadership was also brought in and some new NCRCP numbers etc issued in the background.

The bank was able to keep its branding and branches and staff the same for the most part. From the outside, it simply looked like they opened their doors again and carried on banking as before. This did not convince shareholders though and the road to recovering investor and public confidence was set to be a long and hard one.

After many years, the SARB feel that African Bank is self-sustaining and are now moving their investment out of African Bank.

Various other banks are shareholders such as FirstRand, Standard Bank, ABSA, Nedbank, Capitec Bank, Investec and the GEPF as well. At present only SARB is moving on and the other shareholders are staying put but it is said that eventually, it is likely all the other banks will sell off their shares in the future.

Growth Since Coming Out of Curatorship

In the 3 years since the bank has come out of curatorship, Basani Maluleke, CEO of African Bank (see picture above) says that the bank has slowly been growing and getting back on its feet. Deposits have doubled and some larger institutions are finally beginning to bank with them again. As at the end of 2019, African Bank now have R2.4 Billion in deposits and 23 000 active clients.

‘African Bank now have R2.4 Billion in deposits and 23 000 active clients’

African Bank seem to have learned from their past mistakes and have increased their risk buffer by a quarter (25%) over what it was before in anticipation of many consumers becoming financially distressed in the months ahead. This is one reason why their book is taking a long time to grow. It is, however, a much safer book than before with lower risk of significant defaults.

African Bank are also now competing with the new banks such as TymeBank and Discovery and others for new clients. This has forced them to take a slow and measured approach to taking on clients and their risk appetite. It seems as African Bank now begin to stand on their own two feet that it is a case of once bitten, twice shy and the bank will in future be a lot more cautious of reckless credit.