Reserve Bank takes almost R1bn hit on its African Bank Holdings investment

The SA Reserve Bank’s (SARB) has been forced to impair its investment in African Bank Holdings Limited (ABHL).

The central bank was forced to invest after ABHL's former parent, African Bank Investments (Abil), found itself facing collapse in late 2014.

The central bank’s 2023/24 annual report shows it booked an impairment loss of R982 million on ABHL due to a decline in its performance that resulted in a more modest outlook for future cash flows.

Though the carrying value of the SARB’s investment in ABHL is listed in its financials as having declined from about R4.26 billion in 2023 to R3.43 billion, a drop of about R830 million, this excludes the costs that will be incurred to eventually offload its stake in the lender. The likely route to dispose of that stake is a planned initial public offering (IPO) that was initially planned for 2025 but is now only expected to take place in 2026 or 2027.

"The performance of ABHL declined in the current financial year and resulted in a more conservative outlook on estimated future cash flows," the SARB said in its 2023/24 annual report. "As a result, the estimated recoverable amount of the investment decreased in the current year, and an impairment loss of R982 million was recognised."



Delayed strategy

The SARB also added that the recoverable amount from its ABHL investment had delinked to R3.1 billion, down from R4.1 billion in 2023, based on the lender’s fair value using a discounted cash flow methodology to arrive at the valuation, minus the expected cost to sell its 50% stake.

In May, ABHL CEO Kennedy Bungane said that an initial plan to list the group on the JSE in 2025 - as part of a strategy dubbed Excellerate25 - had been delayed by between 12 to 18 months in order to onboard new shareholders and "de-risk" the IPO process.

Bungane says the group is working on a two-stage pre-IPO process instead.

At the time, he said ABHL, whose public-facing brand has been changed to Africanbank, was working on a plan to allow its staff to hold 10% of the group. He said this would reduce the stakes of the SARB as well as other shareholders, which include the Government Employees Pension Fund (25%), FirstRand (6.55%), Standard Bank (5.95%), Absa (4.95%), Nedbank (4.10%), Investec (2.45%) and Capitec (1%).

-NEWS24