African Bank Ltd., which collapsed in August, plans to start a new lender built from its viable assets by October and forecast that losses posted in the previous fiscal year would continue into the first half.
The net loss was 9.3 billion rand ($752 million) in the year through September, compared with a restated loss of 5.9 billion rand in the previous 12-months, the Johannesburg-based lender said Thursday in a statement. The bank posted a 5.79 billion rand loss from operations and three non-operational items including an impairment charge of 1.4 billion rand and direct taxation of 2.16 billion rand. The bank expects a loss of as much as 2.8 billion rand for the six months through March.
Full-year results “were impacted by a weak operational performance on the advances book as well as certain once-off impairments,” African Bank said in an separate e-mailed statement. The bank shortened the time horizon on projections of cash flows to 60 months from 120 months. This drove up provisions for defaulted accounts, where customers missed more than four payments, to 80 percent from a restated 64 percent.
The central bank stepped in to attempt a rescue of the failed lender and appointed Tom Winterboer as curator after funding seized up in August. The results were delayed as Winterboer’s team went through the accounts while trying to win back business and negotiate with investors. If the rescue is successful, the lender will form what it calls a good bank in October from the remaining viable assets.
“It is going to take time to reflect better results and we don’t anticipate substantively improved operational results for the year ended September 2015,” Winterboer said in the e-mailed statement.
Disbursements of new loans and credit cards have stabilized at about 600 million rand a month, according to the lender. It said earlier this year that disbursements of 1 billion rand a month were needed to make the good bank viable. Monthly collections are stable at more than 2 billion rand.
The lender is finalizing the appointment of a chief financial officer, a chief technology officer and non executive directors for the good bank, it said in the e-mail. An application for a new banking license is nearing completion.
It will publish details in July of how the lender may be restructured, once first-half results are published.
An offer document may then be released in mid August, which will “list details of the offer to senior and Tier II creditors in African Bank to participate in good bank and the residual bank,” the lender said. It will be up to the finance minister to review the offer and grant consent by the end of September.
“I am neither surprised, nor disheartened by these results,” Brian Riley, who will be the chief executive officer of the new bank, said in the e-mail. “A pleasing outcome is the time and effort the curatorship team has taken to review the operations and accounting methodologies at African Bank.”