African Bank to sell Ellerines, raise R4bn to boost capital

African Bank Investments, South Africa's largest provider of unsecured loans, plans to raise as much as R4-billion in equity to strengthen its balance sheet after an increase in bad debts.

The bank is working with Goldman Sachs Group on "a rights issue of up to R4-billion" and plans to accelerate the sale of its furniture retail business "to ensure a robust financial position for the coming years", the Johannesburg-based company said on Monday.

African Bank, which does not take deposits to fund its lending, has been unable to sell bonds overseas this year after a proposed regulatory fine and ratings downgrade. The South African economy has slowed and consumer bad debts have risen, forcing the bank to curb lending and increase bad loan provisions. 

African Bank bought Ellerines in 2008 and has not met profit targets for the retail business, which sells furniture on credit. The bank says Ellerines no longer fits into its strategy.

Fiscal third-quarter loans increased by 19% to R60.3-billion on the year compared with 25% growth in the previous quarter, while the number of loans fell by 10% to R17.7-billion from a year earlier. Non-performing loans rose to 30.2% in the quarter to June from 29.2% a year earlier. "The banking unit earnings for the second half of 2013 are expected to be lower than the first half of 2013," the bank said on Monday. This follows a 26% drop in earnings in the first half of the year.

African Bank's share price tumbled in May after profit decreased and the bank cut its dividend by 71%. The bank's share price has fallen by 55% this year, more than any other bank in South Africa, and closed trading at R14.39/share on Friday August 2. The share price fell by around 10% early on Monday morning before recouping losses. – Bloomberg, Reuters

Guest Author

Inside Uganda’s controversial ‘pregnancy crisis centres’, where contraception is discouraged

Undercover investigation shows that controversial US-linked centres are defying government policy and providing inaccurate medical information

Coronavirus reaction: Sinophobia with Western characteristics

Western media has racialised the coronavirus outbreak, leading to increased Sinophobia in several countries. Such dehumanisation of a race has no place in functioning democracies

Golding opportunity for kleptocrats

Government must take steps to clean up the country’s dirty real estate market, which has long offered a safe haven for criminals

SAA’s rescue men fly in defiance

The airline’s business rescue practitioners ignored a warning not to announce route closures and possible job cuts ahead of a restructuring plan

Press Releases

Response to the report of the independent assessors

VUT welcomes the publishing of the report of the independent assessors to investigate concerns of poor governance, leadership, management, corruption and fraud at the university.

NWU student receives international award

Carol-Mari Schulz received the Bachelor of Health Sciences in Occupational Hygiene Top Achiever Award.

Academic programme resumes at all campuses

Lectures, practicals, seminars and tutorials will all resume today as per specific academic timetables.

Strategic social investments are a catalyst for social progress

Barloworld Mbewu enables beneficiaries to move away from dependence on grant funding

We all have a part to play to make South Africa work

Powering societal progress demands partnerships between all stakeholders

So you want to be a social entrepreneur?

Do the research first; it will save money and time later

Social entrepreneurship means business

Enterprises with a cause at their core might be exactly what our economy desperately needs

Looking inwards

Businesses are finding tangible ways to give back – but only because consumers demand it