The SA Reserve Bank said on Friday that it is seeking a transaction adviser for the sale of its 50% stake in African Bank Holdings, offering the prospect of a new equity partner that could shake up SA’s banking sector.
The Reserve Bank’s stake was acquired due to one of SA’s biggest banking scandals, when African Bank Investments collapsed under a mountain of bad debt in 2014.
The Reserve Bank acquired its 50% stake in African Bank Holdings in 2016 as part of the restructuring of the group, with the Public Investment Corporation (PIC) taking a 25% stake, and a banking consortium the remaining 25%.
The support package resulted in the shareholders giving R10bn in capital to refinance the African Bank Holdings.
“Since the new African Bank began operations in April 2016, the [African] Bank has made good progress towards achieving its strategic objectives, while increasing profits and building a stronger balance sheet,” the Reserve Bank said in a statement.
“The SA Reserve Bank believes that this is an opportune time for the bank to obtain a long-term sustainable shareholder who is better aligned to its growth aspirations,” the statement read.
Mergence Investment Managers investment analyst Nolwandle Mthombeni said an important question is who would be eligible to buy the stake, given that the Reserve Bank will already have a view on foreign versus local ownership, as well as private individuals versus a company.
“They will most likely lean towards a local company that can prove to be a long-term investor, given that African has a retail banking licence,” said Mthombeni. Insurers or telecommunications companies that provided financial services could be a good fit, she said.
African Bank had experienced a “commendable turnaround”, but it still facing challenges and increased competition within the banking industry, she said.
The Reserve Bank has said previously that it wants to sell its stake when African Bank has stabilised, and said on Friday that it wants to avoid the conflict of interest between being a regulator and a bank shareholder.
The Reserve Bank has issued a request for a proposal for a transaction adviser for the sale of its stake, saying it expects the disposal process to be completed within 18-24 months after a suitable buyer is identified.
Shareholder support
African Bank’s other shareholders are FirstRand, Standard Bank, Absa, Nedbank, Capitec, Investec and the Government Employees Pension Fund (GEPF) — through the PIC.
These shareholders support the Reserve Bank’s decision to appoint a transaction adviser and to commence a process to exit its shareholding, African Bank said on Friday.
“We appreciate the support received from the Reserve Bank as a major shareholder since 2016,” said African Bank CEO Basani Maluleke, adding that the company was aware that the Reserve Bank’s shareholding would always be short term in nature.
Maluleke said on Friday that while African Bank may have an opportunity to give input about who becomes the next shareholder, this would ultimately be the Reserve Bank's decision.
“Whoever becomes the shareholder will likely be able to advise [African Bank] and contribute meaningfully,” said Maluleke, adding that the announcement “shows we are becoming an investable proposition”.
The Reserve Bank has strict partner criteria and governor Lesetja Kganyago has strong feelings about the stability of the financial system, she said.
African Bank priorities are on growing its customer base and offering a more diverse set of products, with the group on track to relaunch its credit card products in the next two months, Maluleke said.
“Our customers can rest assured that this process will have no impact on our ongoing efforts to advance their lives by providing relevant and affordable financial products together with great customer service.”
African Bank has said that its focus on product diversification and digital transactions is paying off, reporting that earnings after tax increased by 13% to R1.15bn during its year to end-September.
The group launched a zero-fee online banking channel MyWorld during the period, with the company seeing retail deposit growth of 115% to R2.4bn.
Update: February 14 2020
This article has been updated with additional comment.
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