African Bank in Talks With Guardrisk on Insurance Joint Ventureby
Discussions at advanced stage after Stangen deal fell through
Revived bank is due to start operating in April 2016
African Bank Investments Ltd.’s lending unit, which collapsed last year, said it is in “advanced” talks with MMI Holdings Ltd.’s Guardrisk business to form an insurance joint venture that will support a revived bank when it starts afresh in April.
African Bank, a provider of unsecured loans, previously worked with an insurer called Stangen that was part of the same group of companies. Opposition from some shareholders prevented the transfer of Stangen into the structure of the so-called good bank due to be established next year. African Bank said in October it would have to find an alternative way to offer insurance on loans. The lender said Tuesday it intends to use a tie-up with Guardrisk to diversify its business.
“We’re considering three or four new insurance products,” Brian Riley, who will be the chief executive officer of the rejuvenated bank, said at a presentation in Johannesburg. African Bank, which already offers credit life insurance and funeral policies, will give more information on the insurance products in the second quarter of next year, he said.
African Bank’s full-year loss narrowed to 7.2 billion rand ($496 million) in the 12 months ended September from 9.3 billion rand, it said in a statement earlier Tuesday. Since June, the bank has been lending about 800 million rand a month, up from an average of 540 million rand earlier in the year. Monthly collections from loan customers have been stable at just less than 2 billion rand, it said.
The remaining viable assets of the South African lender are due to start operating in April after a new board was put in place and authorities granted a banking license. Shareholders aren’t due to recoup any of their investments even if the bank holds an initial public offering in the next two to three years. Senior bondholders will recover 90 percent of their investments, with 10 percent to be paid in cash along with interest earned on the bonds on April 4.
African Bank intends to target higher-income clients starting next year and is considering offering transactional banking in 2017, allowing clients to have their salaries deposited into accounts at the lender, Riley said. Staff morale is better, the quality of loans is improving, the business is generating cash and the board is confident the proposed start date can be achieved, he said.