• African Bank may find a partner for consumer banking venture
  • Funding mix won't be dominated by retail deposits, bank says

African Bank Ltd., the unsecured lender that collapsed almost two years ago, said it will offer a broader range of financial products and services when it starts operating under a new banking license next month, including the expansion of retail deposits from 2017.

By the third quarter of next year the lender will offer transactional banking, allowing customers to have their salaries deposited into their accounts, Brain Riley, chief executive officer of the new bank, told reporters in Johannesburg on Thursday. To build the retail business African Bank may partner with another lender, but there are no such deals on the table right now, he said.

The lender’s parent, African Bank Investments Ltd., collapsed in August 2014 after saying it needed to raise at least 8.5 billion rand ($553 million) to survive. That caused the stock to drop 95 percent in three days, while bond prices slumped by more than half. The central bank stepped in and split the lender into a “good bank” and a “bad book.”

The company’s banking unit was mostly a provider of unsecured loans and had about 100 million rand of retail deposits. While shareholders lost everything and bondholders will be able to recoup some of their investments, consumer deposits were fully protected by the government. African Bank will start operating under a new license from April 4 after securing an agreement with bondholders and receiving central bank and government approvals.

The lender wants to make significant inroads with consumer banking in the next three to five years, according to Gavin Jones, African Bank’s treasurer, who spoke at the same event. Even so, Africa Bank doesn’t expect consumer deposits to dominate the lender’s funding mix within the next five years, he said.

The bank also plans to offer insurance products with Sanlam Ltd. and will restart with 10 billion rand of equity and 24 billion rand of cash, it said Thursday.

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