A leading analyst has suggested selling African Bank piece by piece as a way of salvaging the loss-making bank that has announced plans to retrench 1 200 employees.
In a statement released this week, the bank said due to costs having exceeded risk-adjusted revenue, it had no option but to review staff costs.
It had since begun Section 189A consultations with unions, a process that would potentially result in 1 200 job losses and the closure of 90 branches.
Speaking on 702’s Money Show, Stuart Theobald, the executive chairperson of risk advisory firm Krutham, said that while the board had been planning to list the company for several years, African Bank was at this moment not an attractive proposition for investors.
It was also not appealing to a larger financial institution and would be better off being sold piece by piece.
“An IPO (initial public offering) was tabled; we think an IPO is impossible; there is no way you could attract shareholders to buy into the bank at this point. Really, the only alternative we foresee is an acquisition.
“You are not going to get a bank coming to buy African Bank. There are possibly some big international banks, sometimes the Chinese or Indian banks, that talk about finding new interest in South Africa but given South Africa’s growth outlook and consumer outlook, you are not going to find it being [seen as] hot property.
“That leaves the alternative of breaking African Bank up, taking all of the bits that have been accumulated over the past few years and selling them to the highest bidder, attempting to acquire as much value as possible.
“We feel that is something that the shareholders need to face reality over, a reality that we feel has been avoided for the past seven years,” said Theobald.
He also raised concerns about the bank’s ownership structure, saying governance had been complicated by the South African Reserve Bank’s dual role as both the bank’s 50% shareholder and its regulator after the rescue.
The remaining 50% is split between the Government Employees Pension Fund and a
consortium of South Africa’s major banks, each with smaller stakes.
Theobald further laid the blame for the bank’s woes on its strategy of making acquisitions in a bid to diversify its offering, saying that had not been thought through.
In 2022, African Bank acquired U Bank, a worker-focused investment bank serving mining
communities, from the Mineworkers Investment Company.
In 2024 it bought Sasfin’s Commercial Equipment Finance and Commercial Property Finance divisions to expand into specialised finance.
African Bank also bought Grindrod Bank in a R1.5-billion deal, with the intent to expand into SME banking.
The acquisitions were intended to transform African Bank from a specialist unsecured lender into a diversified retail and commercial bank.
However, Theobald believes the expansion came at the expense of building a profitable and sustainable institution.
He said retrenchments were an unavoidable consequence of strategic decisions made over several years rather than a response to short-term financial pressure alone.
“It made what we thought was an error in deciding to deploy that capital by buying out banks that were available in the market. What we have is a bank that doesn’t really make sense; it subscales in all the areas that it operates; it has lost money in the past six months and the many negative metrics,” he said.
Radebe Sipamla, an investment analyst at Mergence, said the closure of branches reflected the realities of a business that was generating inadequate returns. “The reduction of headcount and costs through branch closures will ensure that the more profitable branches remain open, and this will help make the business more viable in the long run.
“But the earnings mix needs to be diversified to increase non-interest revenue and reduce concentration from its largely mono-line credit offering.”
He said organic diversification into other credit products would reduce the bank’s risky exposure to personal loans.
“If management fails to consider or act upon the data points given by their financial outcomes from their strategy and ignores the feedback given by consumer-facing staff, then questions need to be asked of the quality of leadership and whether fresh or higher-performing leaders need to be brought in,” he added.
African Bank parted ways with CEO Kennedy Bungane in March, with Zweli Manyathi stepping in on an acting basis.
- African Bank plans to retrench 1,200 employees and close 90 branches due to costs exceeding risk-adjusted revenue, prompting a review of staff expenses.
- Analyst Stuart Theobald suggests selling African Bank's assets piece by piece, as the bank is unattractive for an IPO or acquisition by larger financial institutions.
- Theobald criticizes the bank's expansion strategy through multiple acquisitions which diluted its focus and profitability, leading to sustained losses.
- Governance concerns arise from the South African Reserve Bank’s dual role as 50% shareholder and regulator, complicating ownership structure alongside other stakeholders.
- Analysts emphasize the need to diversify earnings, reduce reliance on personal loans, and possibly bring in new leadership to improve the bank's long-term viability.
A leading analyst has suggested selling African
In a statement released this week, the bank said due to costs having exceeded risk-adjusted revenue, it had no option but to review staff costs.
It had since begun Section 189A consultations with unions, a process that would potentially result in 1 200 job losses and the closure of 90 branches.
It was also not appealing to a larger financial institution and would be better off being sold piece by piece.
“An IPO (initial public offering) was tabled; we think an IPO is impossible; there is no way you could attract shareholders to buy into the bank at this point. Really, the only alternative we foresee is an acquisition.
“You are not going to get a bank coming to buy African
“
“We feel that is something that the shareholders need to face reality over, a reality that we feel has been avoided for the past seven years,” said
He also raised concerns about the bank’s ownership structure, saying governance had been complicated by the
consortium of
In 2022, African
communities, from the Mineworkers Investment
In 2024 it bought Sasfin’s Commercial Equipment Finance and Commercial Property Finance divisions to expand into specialised finance.
African
However,
He said retrenchments were an unavoidable consequence of strategic decisions made over several years rather than a response to short-term financial pressure alone.
“It made what we thought was an error in deciding to deploy that capital by buying out banks that were available in the market. What we have is a bank that doesn’t really make sense; it subscales in all the areas that it operates; it has lost money in the past six months and the many negative metrics,” he said.
Radebe Sipamla, an investment analyst at Mergence, said the closure of branches reflected the realities of a business that was generating inadequate returns. “
“But the earnings mix needs to be diversified to increase non-interest revenue and reduce concentration from its largely mono-line credit offering.”
He said organic diversification into other credit products would reduce the bank’s risky exposure to personal loans.
“If management fails to consider or act upon the data points given by their financial outcomes from their strategy and ignores the feedback given by consumer-facing staff, then questions need to be asked of the quality of leadership and whether fresh or higher-performing leaders need to be brought in,” he added.
African
