PRETORIA: South Africa’s central bank stepped in to rescue unsecured lender African Bank Investments on Sunday, placing it under external supervision and announcing plans for a $940m capital injection underwritten by local lenders.
The rescue, which will see the South African Reserve Bank acquire the lender’s 17bn-rand ($1.6bn) bad loan portfolio, follows an investor exodus from African Bank earlier this week after it warned of a full-year loss and said it needed a massive capital raising.
Abil, as the bank is widely known, has been crushed by waves of bad loans as its core market of low-income borrowers have failed to repay debts, struggling with high unemployment and rising fuel and food costs. “This is something that is not done lightly,” central bank governor Gill Marcus told a news conference. “There is a private (and) public sector responsibility, given the nature of African Bank and its clients and its role.”
Abil has been put under curatorship, or outside supervision, led by Tom Winterboer, an executive from Pricewaterhouse Coopers, Marcus said. A group of local banks, including Standard Bank and FirstRand as well as Abil’s second-largest shareholder, the state pension fund, would form a consortium to underwrite a 10bn rand capital raising.
Abil would be split into a “good bank”, representing a loan book worth 26bn rand after bad debts, and a “bad book”, Marcus said. The central bank would acquire the 17bn rand “bad book” for 7bn, she said.
Reuters
