Bailed-out [DATA ABL:African Bank Limited] plunged to an annual loss of 9.3 billion rand ($750 million) and warned of more pain ahead as it cuts back on the risky lending that forced South Africa to orchestrate a rescue last year.
The unsecured lender crumbled under a mountain of bad debt in August, forcing the South African government to appoint external administrators to oversee a restructuring that includes carving out a “good bank” using its healthy loan book worth 26 billion rand.
Its parent African Bank Investments (Abil), which also owns an insurance business and failed furniture retailer Ellerine, is under business rescue, or protection from creditors.
African Bank said it lost 9.3 billion rand in the year ended September 2014 compared with a loss 6 billion a year earlier. It also flagged as much as 2.8 billion rand in 2015 losses.
“Unsecured lending is a long term annuity business. It is going to take time to reflect better results and we don’t anticipate substantively improved operational results for the year ended 30 September 2015,” external administrator and PriceWaterhouseCoopers executive Tom Winterboer said.
The bank made loans worth about 600 million rand per month from August 2014 to March 31, 2015, significantly below the more than 1.2 billion rand between October 2013 and July 2014.
Winterboer said the company, which has applied for a new banking licence, was on track to create a “good bank” by October.
But it would take about two years for it to build a track record acceptable to potential equity investors, before a stock market flotation on the Johannesburg bourse, he said.
The bank has already reached an agreement in principle with bondholders, which includes an offer of 1.65 billion rand on junior creditors’ 4.4 billion rand claim, or a recovery rate nearly 40 percent on an investment many had written off.