African Bank CFO Gustav Raubenheimer: Shareholder support to help manage funding

African Bank has entered into a R8 billion support arrangement with its shareholders.

African Bank Holdings has entered into a R8 billion support arrangement with its shareholders to re-enter the South African wholesale funding market. 

The bank said in a statement that the support facilities would be provided over a period of three years and four months from December. 

The support agreement comes after the South African Reserve Bank (SARB) informed African Bank Holdings in February about its intention to dispose of its 50 percent stake in the bank and open the way for a long-term sustainable shareholder that was better aligned to the bank’s growth aspirations.

The SARB acquired the shareholding in African Bank in 2016 as part of the restructuring of African Bank after the bank was placed under curatorship. The central bank provided a R5 billion capital injection to refinance the group’s operations.

African Bank CFO Gustav Raubenheimer said these support arrangements should provide further comfort and confidence to South African funders for future funding requirements. 

“The bank does not immediately require any additional wholesale funding or increased liquidity and we do not anticipate a requirement to enter the domestic wholesale funding market in 2020 for any listed issuance, despite the Covid-19 pandemic,” Gustav said.

He said that African Bank would continue to focus on diversifying its funding sources, across its retail deposit book. “The retail deposit products continue to be attractive to savers searching for the best interest rates in the domestic market. The retail book has grown significantly over the last few years, totalling approximately R4.8 billion as at the end of June.”

Gustav explained that the bank would be able to call for financial support at market-related funding from the shareholders. He said that the specific requirements provide that the aggregate support available from shareholders would not exceed R2 billion in the period from 1 December 2020 to 31 March 2021, and R2 billion in each of three 12-month periods thereafter commencing 1 April 2021 to 31 March 2024.

He added that the shareholder support, if required, would enable the bank to manage its funding base appropriately and manage liquidity risk effectively, as well as manage the balance sheet more effectively.

“The bank has made good progress over the past years, providing a diversified set of financial services and products, operating through a single channel and diversifying its funding base,” Gustav concluded.