African Bank, which recently announced a R1.5bn deal to buy Grindrod Bank, is now seeking additional scale in an R80m deal to buy the assets of Ubank, which is under curatorship.
Ubank, with about 4.7-million accounts, has a strong presence across certain mining and rural communities, and was placed under curatorship in May for failing to maintain adequate capital levels.
The proposed transaction, which needs approvals, including from the Treasury, would see African Bank take on Ubank’s disclosed assets and liabilities, and its employees, but not Ubank as a legal entity.
“Ubank has a unique market position within the mining sector and a distribution footprint that complements African Bank’s existing national offering,” the company said.
The deal would give customers of Ubank immediate access to African Bank’s nationwide distribution footprint, the group said, while Ubank customers will be migrated to African Bank’s MyWORLD product which “offers a higher degree of personalisation, lower fees and greater competitive value.”
Reserve Bank governor Lesetja Kganyago said in May Ubank had a capital adequacy ratio of about 3% compared with an industry average in SA of just more than 15%.
Ubank has been providing basic financial services to mineworkers since the mid-1970s, a time when SA’s mainstream financial institutions largely ignored that segment of the market,
Originally formed as Teba Cash Financial Services, it provided financial services to mineworkers ranging from remittance of funds to basic account facilities.
In the early 1990s, when SA was transitioning from apartheid rule to democracy, it changed from a savings fund to a commercial bank and eventually obtained a banking licence in June 2000 under its previous name of Teba Bank, though its ownership remained in a trust managed by trustees elected by the National Union of Mineworkers and the SA Chamber of Mines.
It changed its name to Ubank in October 2010, with a revised vision to become a retail bank.
African Bank’s announcement also comes at it looks to drive a strategy to build a large, diversified, business, and it had announced a R1.5bn deal to buy Grindrod Bank in May, which would bulk up its business banking offering.
Grindrod Bank was established as a boutique merchant bank in 1994 and received its licence two years later.
With Garth Theunissen
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