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African Bank has spent R72 million of its R225 million budget on building a transactional banking unit as part of the company’s plan to double its client base over the next three years.
Brian Riley, African Bank CEO, said this week that the bank was looking to grow its client base from 1.25 million to more than 2.5 million customers by 2021.
African Bank will launch transactional banking to the public in the first quarter of next year and to the bank’s staff in the last quarter of this year.
Riley said that African Bank would like to be a transactional bank that “competed at all levels” with a broad customer base.
“We will have an attractive offering to customers when we launch,” he added.
Riley said that the bank was “moving in the right direction”, but needed to improve a lot for it to be an “investable business”.
By 2021 – five years from when African Bank was relaunched in April 2016 after going bankrupt in August 2014 – the company would like to be a “decent retail bank”, Riley said.
African Bank was looking at adding extra partners and products, including launching transactional banking and offering a credit card.
African Bank is now taking retail deposits and has a retail deposit book of R200 million.
The bank has R12 billion in cash on hand. However, African Bank will start having to repay billions in debt from next April. “We have sufficient cash to take care of the next 24 months. Thereafter, we will have to roll the funding,” Riley said.
Riley said that African Bank would only look at relisting the company on the JSE once it was an “investable” business with a return on equity of 15% or more. For the half year ended March, African Bank generated a return on equity of 7.5% – a return of equity far below the local major banks.
“The right time to market would be as the business is starting to produce good, consistent results, decent return on equity and the strategy is looking good going forward that is when you tend to do an [initial public offering].”
Regarding the restructuring at African Bank, where 652 people could lose their jobs, Riley said that finance union Sasbo and the bank would be meeting on May 30 at the Commission for Conciliation, Mediation and Arbitration.
African Bank this week said it turned a profit of R53 million for the half year ended March from a loss of R1.7 billion for the half year ended March 2016, before it was relaunched and its “bad book” was hived off into Residual Debt Services.
