the g spot
African Bank out of the woods
“We’ve been able to more than double our deposits in three years since coming out of curatorship,” says African Bank CEO Basani Maluleke
African Bank was placed under curatorship in 2014, collapsed by years of reckless lending and a spiral in bad debt. Separated into a "good" and "bad" bank, it was recapitalised with R10bn from SA’s commercial banks as well as the Reserve Bank, which last week announced it was time to exit. The FM spoke to African Bank CEO Basani Maluleke and its group executive for credit, Vere Millican, and began by asking whether the sale will change anything.
BM: This process will have no impact on the lives of our customers. Though we’re grateful for the Bank’s support since 2016, we’re quite pleased in that we believe this is further evidence that African Bank is becoming more of an investible business.
The Bank ploughed in R5bn to recapitalise African Bank. Did it make a profit and who is it selling the stake to?
BM: They have just started the process of appointing a transaction adviser to assist it.
What about your other shareholders — FirstRand, Standard, Absa, Nedbank, Capitec, Investec and the Government Employees Pension Fund (GEPF)?
BM: We don’t expect that the banks will be long-term shareholders given that African Bank is a competitor, but the GEPF may have the appetite to be a longer-term shareholder.
How easy has it been to re-establish the brand of African Bank, and indeed the bank itself?
BM: We knew we would have to rebuild trust with people who had lost trust in the brand because of the curatorship, and we also appreciated that it was going to take a long time to do.
Trust takes a long time to build and you can break it in the course of one event. We didn’t change the name of the business because we realised that would look like a short-term fix but people don’t forget — they have long memories.
We think we’ve had some really nice successes: we’ve been able to more than double our deposits in three years since coming out of curatorship and I think … it’s a really strong signal of people having confidence in the organisation.
During the course of last year we started to see wholesale funders and institutions coming back.
How many customers do you now have, and how much money is on deposit with African Bank?
BM: As of end-September we were sitting with R2.4bn of deposits and about 23,000 customers on the deposit product. We’ve explained in the past that since 2016 we have seen customer numbers decline and we knew they’d decline because we’d changed our risk appetite and were not able to lend to people who were previously customers at African Bank.
What was encouraging about last year is that we started to see that trend reverse.
But in relation to newly launched TymeBank, whose growth numbers are quite staggering, or Capitec, those numbers are very low. Why don’t you think you’re getting the traction that they are?
BM: On the one hand we are hitting the budgeted customer numbers that we have. We’re happy with the momentum. Where we measure ourselves is the number of customers who actually become active on our base.
So you’ll see that customers open an account and never use it again. You can announce great customer numbers but what we’re looking at is how we get customers on board to activate those accounts so we can start earning revenue and actually get deposits into those accounts.
[That], for us, is a key success factor. We are a little bit behind where we would have liked to be at this point but the incremental growth is there and we’ll be reporting more detail about that in May.
How stressed are consumers at the moment? For example, do you think there’s going to be a new crisis for banking and/or microlending, given the level of retrenchments taking place this year?
VM: From my side looking after creditors and collections, I remain extremely concerned about the macroeconomic situation we are in, as all the banks are. In the latter part of last year we took a decision to tighten up our credit policies.
We increased our risk buffer by about 25% to cater for what we are observing in terms of the increase in retrenchment risk, which has [had] a material impact in terms of our growth rate and our lending in the market.
Are you being more conservative than others?
VM: What I see from the market reports is that there’s still growth in the market, but we’ve definitely reduced our growth more than others in the market have reduced theirs.