/ 14 December 2002

AMB on the watch list after R150m loss

CA-Ratings said Friday it was continuing to monitor the operating position of African Merchant Bank (AMB) after the specialist investment banker reported a net loss of R150-million for the year to the end of September.

The rating agency, an affiliate of Standard & Poor’s, said the generally weak operating conditions for investment banks had had an adverse effect on AMB’s operating income.

Coupled with the weaker confidence in the smaller banks in South Africa, AMB’s margin income had declined from R117-million in 2001 to only R59-million in the 2002 year, it said.

“Further, a large portion of the loss is attributable to the write- down of investments, mostly attributable to Pamodzi, and loans to the share incentive scheme of the group,” it added.

CA-Ratings said the banking group had commenced with a rationalisation programme to reduce operating costs and had refocused the business on advisory activities, financial markets trading and private equity through its subsidiary AMB Private Equity Partners.

“Subsequent to the year-end, depositors of more than R150-million have been repaid, which reduces the liquidity risk of the bank. The remainder of the depositors (approximately R108-million) should be repaid by the end of January 2003.

“The bank would then be in a position to hand back its banking licence,” the rating agency said.

Although the assets had declined from R2,4-billion to R1,8-billion in September 2002, the structure of the balance sheet had improved with the write-down of the investments and the lower gearing level of the bank, it added.

CA-Ratings will monitor the success of the cost reduction programme and the revenue generation of the different divisions of the refocused group, and will report on it shortly,” the rating agency said.

AMB, which has a long term- rating of zaBBB with a stable outlook and a short-term rating of zaA2, reassured stakeholders on Thursday that it was financially sound, adding that it regretted the degree of “speculative” media coverage it had attracted recently.

“In this regard, the board assures stakeholders that AMB’s ‘financial health’ has been sound at all times during this difficult period and at no stage has AMB faced liquidity constraints,” it asserted.

It said the board had been fully appraised of all correspondence between the South African Reserve Bank (SARB) and AMB and was fully satisfied that all correspondence had been appropriately dealt with and that the highest levels of corporate governance have been adhered to.

However, it was precluded from disclosing any of the details. – I-Net Bridge