Losses at failed African Bank plunge

Residual Debt Services, which took on assets of failed African Bank, says losses narrowed in the fiscal first half as impairment charges declined.

Johannesburg - Residual Debt Services, which took on assets of failed African Bank Investments, said losses narrowed during the fiscal first half as impairment charges declined.

The company’s loss eased to R646 million ($43 million) in the six months through March compared with R2.8 billion a year earlier, the Johannesburg-based lender said in a statement on Thursday.

The credit impairment charge declined to R1.5 billion from R5.4 billion, it said by e-mail.

“Collections stabilised in a tougher economic environment,” the company said. A better-than-expected impairment charge compensated for lower-than-forecast income from interest on loans, while foreign-exchange losses were better than the company predicted as were re-organisation costs, it said.

The earnings include the final operational results from African Bank’s bad assets and a portion of its viable assets.

The lender’s good assets, together with its liabilities, were transferred to a new company named African Bank, which was given a cash injection of R10 billion and restarted trading in April. Residual Debt Services, which is still under administration, was left with the rest of the company’s book.

Read also: Report lifts lid on African Bank collapse

The lender collapsed in August 2014 after saying it needed to raise at least R8.5 billion to survive, causing the stock to be almost wiped out in the space of three days, and bond prices to slump by more than half.

The Public Investment Corporation, which manages pension-fund money for South African government workers, lost R4 billion because of the failure, with other investors including Coronation Fund Managers, Allan Gray, Barclays Africa Group and Old Mutual’s Nedbank also suffering losses.

In May, a central-bank probe into the collapse found that directors allowed ex-CEO Leon Kirkinis to dominate the board, weren’t qualified enough to oversee a bank and were negligent in providing loans to the company’s furniture-retail unit.

Two groups of black shareholders, which held a combined 4.9 percent of the lender, are suing the directors for R2 billion. The directors have said in court documents that they aren’t liable.

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