Losses at Failed African Bank Narrow as Impairments Plunge

  • Collections stabilize as loan disbursements increase
  • Losses ease as collapsed bank brought back on its feet

Residual Debt Services Ltd., which took on assets of failed African Bank Investments Ltd., said losses narrowed during the fiscal first half as impairment charges declined.

The company’s loss eased to 646 million rand ($43 million) in the six months through March compared with 2.8 billion rand a year earlier, the Johannesburg-based lender said in a statement on Thursday. The credit impairment charge declined to 1.5 billion rand from 5.4 billion rand, it said by e-mail.

“There were some recoveries,” Tom Winterboer, the curator of Residual Debt Services, told reporters on Thursday. Better-than-expected impairments compensated for lower-than-forecast income from interest on loans, while foreign-exchange losses were better than the company predicted as were re-organization costs, the company said.

The earnings include the final operational results from African Bank’s bad assets and a portion of its viable assets. The lender’s good assets, together with its liabilities, were transferred to a new company named African Bank Ltd., which was given a cash injection of 10 billion rand and restarted trading in April. Residual Debt Services, which is still under administration, was left with the rest of the company’s book.

Money Recovered

The lender collapsed in August 2014 after saying it needed to raise at least 8.5 billion rand to survive, causing the stock to be almost wiped out in the space of three days, and bond prices to slump by more than half.

The company has repaid 1.8 billion rand of a 3.3 billion rand loan from the central bank and recovered 460 million rand that was lent to Ellerine, African Bank Investments Ltd.’s furniture unit, Winterboer said. The new bank will begin offering products this year, such as internet banking and credit cards, as it attempts to recapture customers, he said.

The Public Investment Corp., which manages pension-fund money for South African government workers, lost 4 billion rand because of the failure, with other investors including Coronation Fund Managers Ltd., Allan Gray Ltd., Barclays Africa Group Ltd. and Old Mutual Plc’s Nedbank also suffering losses.

The new bank will take about two years to raise 3 billion rand for an indemnity fund, which will revert to the company’s senior creditors, including Coronation, Investec Plc and about 50 others, after eight years, Winterboer said. It has also adjusted provisioning policies so they are more effective, he said.

In May, a central-bank probe into the collapse found that directors allowed ex-Chief Executive Officer Leon Kirkinis to dominate the board, weren’t qualified enough to oversee a bank and were negligent in providing loans to the company’s furniture-retail unit. Two groups of black shareholders, which held a combined 4.9 percent of the lender, are suing the directors for 2 billion rand. The directors have said in court documents that they aren’t liable.

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