Picture: MICHAEL ETTERSHANK
Picture: MICHAEL ETTERSHANK

TROUBLED unsecured lender African Bank Investments (Abil) came under renewed selling pressure on Thursday, with the share price falling from R2.70 to 99c in less than an hour.

That effectively wiped out a further R3bn in market value after the group lost 60%, or R7bn, in equity on Wednesday.

At 10.15am Abil shares were trading at R1.07, 60.37% down on the day, as 24-million shares traded hands. At 11.06pm shares fell further to 50c, 81.48% lower on the day with the market cap amounting to R750m from R4bn at the start of trading.

All the bigger banks were also down, led by Standard Bank falling 0.73%, but Capitec was flat at R234.

Analysts said the market focus had changed from the expected losses the group announced on Wednesday to a probable non-take up by the market of the intended R8.5bn rights issue to bolster its capital.

Abil earlier announced that it had to do another impairment write-off of R3bn to bring the bank’s bad debt level in line with industry standards, thought to be that of Capitec.

An analyst said any rights issue would have to be priced lower and at a reasonable discount to the present lower share price, which would add further pressure on present capital levels.

"African Bank still has a long way to go, with the funders likely the major losers," he said.

Abil’s funding amounts to R54bn which is centred in the wholesale market with institutions, some in Switzerland, acting as the major capital providers. The bank has to refinance seven of its present bonds over the next 12 months. This will have to be done at higher yields than presently offered.

Some analysts have speculated that Abil could be forced to change its wholesale funding method to one that was more acceptable to shareholders. "At the same time, the value of assets have deteriorated over the past few months as write-offs proved to be insufficient," the analyst said.

Another analyst said the R8.5bn sought by management was a very large amount relative to African Bank’s market value, which had fallen from just more than R10bn on Tuesday to only R1.6bn on Thursday morning. "Any take-up by the market will depend on the new plans initiated by management."

These include ring fencing the "good" part of the lending book from the "bad" book. At the same time some of African Bank’s operations are still cash generative, with the lender collecting R7bn on loans in the third quarter of the present financial year.

PwC has been appointed as new advisor to the group and will probably focus on income generation at the group before deciding what to do with more long-term issues, such as the wholesale funding base.

African Bank chairman Mutle Mogase said on Wednesday the group expected a further negative capital impact of up to R2.5bn on the disposal of Ellerines.

"We have met and will meet our funding obligations as and when they fall due," he said.