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African Bank rescued by SA Reserve Bank

African Bank has been placed under curatorship but it will continue to operate and be open for business, says the South African Reserve Bank.

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This comes as African Bank announced that its Chief Executive Officer Leon Kirkinis, has resigned and that in the six-month period to March 2014, African Bank Investment Limited (Abil) posted a headline loss of R3.1 billion.

Abil’s trading statement for the third quarter that was released on 6 June was worse than what the market expected.

The Abil board announced its decision to sell Ellerine (its wholly owned subsidiary) as Ellerine Furnishers has been a significant drain on Abil requiring funding support of a minimum R 70 million a month.

African Bank does not oppose the curatorship.

Finance Minister Nhlanhla Nene has appointed Tom Winterboer as the curator.

Winterboer is a member of the global financial services leadership team at PriceWaterhouseCoopers (PwC).

The curatorship is a protection procedure that gives the Reserve Bank the legal means to create the necessary space to implement a resolution plan.

Abil will receive a R10-billion capital injection by a range of banks such as Barclays Africa Group Ltd., FirstRand Ltd. and fund administrator Public Investment Corp which have formed a consortium to underwrite the R10-billion capital raising.

The Reserve Bank said it would pay R7 billion of African Bank’s bad loan book. The bad book currently has a book value net of specific impairments of R17 billion.

“I want to emphasise that African Bank continues to operate during the curatorship and that Mr Winterboer will make decisions regarding the continued granting of loans and sound banking activities,” said Gill Marcus from the South African Reserve Bank.

The share price of African Bank crumbled from R 19.40 in October 2013 to just 31 cents before its shares were suspended on the JSE.

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