For the most part, the small banking sector — that is to say, ventures outside the big five of Capitec, FirstRand, Standard Bank, Absa and Nedbank, as well as sizeable specialist Investec — have lacked endurance.
The last great wave of smaller banking ventures rushed the JSE in the late 1990s, when there was a contention that established banks were aloof and out of touch with a new emerging market in both retail and corporate banking.
Numerous specialised ventures came to market when new banking licences were abundant, ventures such as The Business Bank (formed by former Nedbank heavyweight Piet Liebenberg), Fulcrum Science & Technology Bank, Unifer and Regal Treasury Bank Holdings, to name a few. This period also saw the rise of second-tier banks such as Saambou and BoE, both central figures when the tide eventually went out for the JSE’s so-called A2 banks and left many shareholders high and dry.
One notable survivor of this inevitable culling was African Bank Investments (Abil), which recovered strongly in the ensuing years to enjoy a period of vigorous growth and dividend-paying until about 2013, when investors started to sense something was amiss in what had been an incredible growth story. The following year, Abil sank into ignoble curatorship after the operating model was dangerously strained by a bout of reckless lending and bad debts. Ironically, the CEO at the time, Leon Kirkinis, is the subject of this week’s cover story.
With African Bank naming an interim CEO to replace Bungane, IPO plans might be flipped to the back of the board pack
Quite frankly, a dozen years ago not too many punters would have bet on African Bank emerging quickly from curatorship. But it did, just a couple of years later. Fewer would have expected African Bank — which offers eye-catching interest rates to depositors — to regain growth traction, make acquisitions to broaden its service offering and have plans for an IPO. But the bank, under the leadership of Kennedy Bungane, did just that.
However, Bungane’s sudden resignation as CEO with immediate effect last week calls all the positive pressing ahead by the bank into question. The board’s reluctance to comment further on Bungane’s departure does not leave a good impression, and predictably there have been snippets of negative speculation. Banks tend to keep a steady hand on the tiller for the longer term. Any chopping and changing, as witnessed at Absa in recent years, worries the market.
Digging deeper into African Bank’s most recent financial statements, it is apparent that there is still much to do to bring it up to spec for a JSE listing next year. With African Bank naming an interim CEO to replace Bungane, IPO plans might be flipped to the back of the board pack. Whoever is appointed CEO — and interim boss Zweli Manyathi looks more than capable — will be African Bank’s third CEO in five years. The Reserve Bank, with a 50% stake, and the Government Employees Pension Fund (25%) remain the anchor shareholders at African Bank, which, one should not forget, is a 50-year-old institution.
A consortium of six commercial banks — FirstRand, Standard Bank, Absa, Nedbank, Capitec and Investec — holds the balance of ownership. These banks might be coerced into playing a bigger role in shaping African Bank’s strategy, which, the board noted euphemistically, would now revolve mainly around “seeking to consolidate and embed African Bank’s organic and inorganic growth of the past five years, drive efficiencies and streamline its customer propositions”. Perhaps recent acquisitions Ubank, Grindrod Bank and parts of Sasfin brought scale but not the requisite returns.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.