S&P gives African Bank negative outlook

Ratings agency Standard & Poor’s (S&P) has given African Bank a preliminary "B+/B" global scale rating, placing it four scores below investment grade rating and giving it a negative outlook. This comes ahead of African Bank's April re-launch as Good Bank.

According to S&P, it based its preliminary ratings action on details contained in the public information memorandum.

In a statement S&P said:

"We assume that African Bank will operate with a diminished customer franchise, strong levels of capitalisation, inherently high cost of risk, weak profitability, and wholesale debt funding supported by at least two years of strong liquidity and government support… We assume the balance sheet and loan book will shrink conservatively over the next couple of years and that capital will decrease due to modest ongoing losses linked to credit losses and the negative carry from the large amounts of cash held on the balance sheet."

The ratings agency expects African Bank's longer-term loan loss experience to be significantly higher than that of other South African banks. It furthermore projects that African Bank will have total assets of R54.5 billion come its official re-launch date of 4 April.

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