Publications
Partners
Johannesburg - Shares of African Bank Investments [JSE:ABL] plunged for a second day on Thursday on widening worries the struggling mass-market lender may not be able to plug a R8.5bn hole in its balance sheet.
Abil, as the bank is called, plunged 65% to trade below R1 for the first time since 1996, valuing the company at around R1.4bn.
That followed a 60% drop on Wednesday.
Worth more than R21bn at its height, Abil's precipitous decline has wiped out R10bn in shareholder value in two days.
The bank's chief executive quit on Wednesday as the bank said it needed to raise R8.5bn in new capital after flagging a massive annual loss.
But investors are concerned it might not be able to raise the funds, given that the amount it is seeking is several times its current market capitalisation.
"If the shareholders don't support it then African Bank won't survive," Wayne McCurrie, a portfolio manager at Momentum Wealth, told Reuters on Wednesday.
Barclays on Thursday cut its target price on the bank to R1.83 from R5.41, keeping its "underweight" rating on the stock.
"An equity issue will be significantly dilutive which will put downward pressure on our target price," the bank said in a note to clients.
