Grindrod acquisition ‘a game changer for African Bank’

African Bank CEO Kennedy Bungane says S&P’s recent upward revision of its outlook is proof of the lender’s progress since implementing its Excelerate25 strategy that it expects will culminate in a listing in 2025.

Launched in 2021, Excelerate25 calls for a scalable, diversified, and sustainable business with a compelling listing proposition.

S&P Global Ratings revised the bank’s outlook to positive from stable last week, saying it expects the bank’s franchise and funding profile to strengthen “while it sustains strong capitalisation and improves or maintains asset quality indicators”.

Bungane said the revised positive outlook from S&P is a reflection of the consistent growth and delivery the lender has achieved over the past few years.

“African Bank is a very different organisation to what it was just a year ago,” he said. “In that relatively short space of time, we have integrated two financial institutions in Grindrod Bank and Ubank.

“The Grindrod Bank acquisition, in particular, is a development that is close to our hearts. It allows us to reclaim the original mandate of our pioneering founders and support the business ambitions of underserved entrepreneurs as we launch our business banking offering.

“The funding diversification is already evident as a result of the acquisition of Grindrod Bank, which introduced in excess of R12.5bn of funding liabilities, with the majority being business deposits which is new to the group,” he added.

The bank is funded by three main sources, including bonds raised under its domestic medium-term note programme that are listed on the JSE. It also raises bonds under the Euro medium-term note programme. Most of that paper is listed on the London and Swiss stock exchanges.

The acquisitions of Grindrod Bank and Ubank saw the group report a 193% increase in active customers in its most recent interim results, a 273% jump in insurance profits, and a 44% rise increase in interest revenue growth to R3.9bn.

“Our transactional account, MyWORLD, continues to win over SA consumers, and we have witnessed positive growth in customer numbers, transactions and funded accounts,” Bungane said.

“This year, we also launched our new loyalty programme, called Audacious Rewards, and a game-changing new product, called Tech Credit, which makes essential technology such as phones and laptops more affordable.

“We are developing an ecosystem of strategic partners who can enhance the value proposition of our products and services, and positively contribute to the evolution of our African Bank offering,” he added.

“There are a number of exciting projects in the pipeline, and we look forward to delighting our customers with a growing product suite through which they can unshackle their audacity and create the kind of prosperity our founders envisioned.”

The “new African Bank” emerged from the ashes of African Bank Investments Ltd (Abil) in 2016 — after going into curatorship in 2014 — a process that saw the Reserve Bank take a 50% stake in the lender.

The planned 2025 initial public offering will give investors an opportunity to buy the 50% stake owned by the central bank, which under normal circumstances isn’t allowed to own banks.

The Government Employees Pension Fund holds a 25% stake in the bank, and a consortium of SA’s five largest banks holds the remaining 25% on a pro-rata basis.

khumalok@businesslive.co.za