African Bank’s central Johannesburg branch. Picture: FREDDY MAVUNDA
African Bank’s central Johannesburg branch. Picture: FREDDY MAVUNDA

Residual Debt Services (RDS) — the “bad bank” portion of African Bank — reported a R68m operating loss for its year to end-September on Friday, an improvement of almost a third on the prior comparable period.

The company is planning to pay a further R500m to R550m to senior stub holders at the end of 2020, which would bring the total payments to these holders to as much as R2.95bn.

These are creditors, usually banks and bondholders, who are first in line to be paid when a company is declared bankrupt or goes out of business for any other reason.

When African Bank went into curatorship in August 2014, it was split into a “good bank”, which retained its brand name, and a “bad bank” renamed RDS. A “bad bank” refers to an entity established for the high-risk or bad loans of a financial institution.

The banks were separated from their JSE-listed holding company, African Bank Investments Ltd (Abil), which resumed trading under the new name Africa Phoenix.

RDS said on Friday the reduced loss from operations was primarily due to lower collection costs, due to the declining size of its loan book.

Net advances decreased to R398m for the year from R528m previously. The reduction in net advances is as a result of stable loan book collections, which are slightly ahead of expectations, the company said, albeit with reduced expectations for future collections, as the loan book continues to decrease in size.

We have had another successful year in our collections efforts and are pleased to report that a further payment of between R500m and R550m will be made to the senior unsecured stub instrument holders by the end of January 2020,” curator Craig Du Plessis SAID.

Total assets stood at R4.2bn at the end of the period, against total liabilities of R9.5bn.

With Londiwe Buthulezi

gernetzkyk@businesslive.co.za