DURBAN – African Bank said on Monday that it had entered into an R8 billion support arrangement with its shareholders to re-enter the South African wholesale funding market.
The bank, which is a 100 percent subsidiary of African Bank Holdings Limited (ABHL), said the support facilities would be provided over a period of three years and four months from December.
African Bank was recapitalised with new equity of R10bn after it collapsed in 2014 and was placed under a curatorship.
The biggest shareholders now include the South African Reserve Bank (SARB), which holds a 50 percent stake, and the Government Employees Pension Fund, with a 25 percent stake. South African banks hold the remaining 25 percent stake.
The support arrangement comes after the SARB informed African Bank Holdings in February about its intention to dispose of its 50 percent stake in the bank and open the way for a long-term sustainable shareholder that was better aligned to the bank’s growth aspirations.
The SARB acquired the shareholding in ABHL in 2016 as part of the restructuring of African Bank after the bank was placed under curatorship. The central bank provided a R5bn capital injection to refinance the group’s operations.
African Bank chief financial officer Gustav Raubenheimer said these support arrangements should provide further comfort and confidence to South African funders for future funding requirements.
“The bank does not immediately require any additional wholesale funding or increased liquidity and we do not anticipate a requirement to enter the domestic wholesale funding market in 2020 for any listed issuance, despite the Covid-19 pandemic,” Raubenheimer said.
He said African Bank would continue to focus on diversifying its funding sources, across its retail deposit book. “The retail deposit products continue to be attractive to savers searching for the best interest rates in the domestic market. The retail book has grown significantly over the last few years, totalling approximately R4.8bn as at the end of June.”
He said the bank would be able to call for financial support at market related-funding from the shareholders. Raubenheimer said the specific requirements provide that the aggregate support available from shareholders would not exceed R2bn in the period from December 1, 2020, to March 31, 2021, and R2bn in each of three 12-month periods thereafter commencing April 1, 2021, to March 31, 2024.
He said the shareholder support, if required, would enable the bank to manage its funding base appropriately and manage liquidity risk effectively, as well as manage the balance sheet more effectively.
“The bank has made good progress over the past years, providing a diversified set of financial services and products, operating through a single channel and diversifying its funding base,” he said.
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