S&P Global Ratings has revised African Bank’s outlook to positive from stable as the lender continues its resurrection since its near collapse almost a decade ago.
The bank, which plans to list on the JSE in 2025, said on Friday the revised outlook took into account its funding profile.
“S&P noted that the positive outlook reflects the prospects that the bank’s franchise and funding profile will strengthen while it sustains strong capitalisation and improves or maintains asset quality indicators,” it said.
S&P in March unexpectedly lowered its outlook on SA’s junk-rated debt to stable from positive, as load-shedding set back efforts to regain an investment-grade rating.
African Bank, led by Kennedy Bungane, is funded by three main sources, including bonds raised under the bank’s domestic medium-term note programme. The bonds are listed on the JSE. It also raises bonds under the Euro medium-term note programme. The majority of these bonds are listed on the London Stock Exchange and Swiss Stock Exchange.
Another source of funding is bilateral deposits raised from SA corporate asset managers on a one-on-one bilateral basis.
African Bank swung to a R44m loss in the six months ended March from a profit of R372m for the corresponding period the previous year. This was largely due a 240% surge in impairments to R2.2bn as consumers struggled to keep up with loan repayments as high interest rates eat into disposable incomes.
The results also show that the bank is now a diversified banking business with a balance sheet consisting of a net advances book of R32.4bn, up from R19.6bn in the comparative period. The lender has a funding base totalling R33.9bn and liquidity and cash reserves amounting to R8.6bn.
The bank has benefited from the acquisition and integration of Grindrod Bank and Ubank. It splashed out R1.5bn to buy Grindrod, gaining a foothold in business banking.
The lender was chosen as a successful bidder to buy most of Ubank’s assets and liabilities. The transactions are part of the group’s “Excelerate25” strategy aimed at expanding its core.
The “new African Bank” emerged from the ashes of African Bank Investments (Abil) in 2016 — after going into curatorship in 2014 — a process which saw the Reserve Bank take up a 50% stake in the lender.
The planned 2025 initial public offering will give investors an opportunity to buy the 50% stake owned by the central bank, which under normal circumstances is not allowed to have ownership in banks.
The Government Employees Pension Fund holds a 25% stake in the bank, and a consortium of SA’s five largest banks holds the remaining 25% on a pro-rata basis.
African Bank recently appointed Anbann Chetti as an executive director and CFO after approval by the Prudential Authority. Chetti, who previously worked at Nedbank, Standard Bank and Capitec, will take up the position from Tuesday.
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