RESCUE: Curator Tom Winterboer addresses the media on African Bank’s salvaged ‘good bank’. Picture: MARTIN RHODES
RESCUE: Curator Tom Winterboer addresses the media on African Bank’s salvaged ‘good bank’. Picture: MARTIN RHODES

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AFRICAN Bank’s "good bank" is talking to Guardrisk to act as underwriter for insurance to cover loans if customers die or are retrenched.

Guardrisk was approached after the "good bank" battled to acquire existing credit life partner Standard General Insurance Company from African Bank Investments Limited (Abil).

"It looks like it’s with Guardrisk. Negotiations are taking place with Guardrisk," African Bank curator Tom Winterboer said.

The "good bank", which is scheduled to launch in April, was salvaged from the ruins of Abil, which went into curatorship last year. The curators have ruled out offering secured lending and it is looking to diversify its product offering through other channels.

On product diversification, African Bank "good bank" CEO Brian Riley said: "We are considering three or four other products. At this stage, we have not finalised them."

Asked to explain what this entailed, Mr Riley said: "We are looking at insurance, transactional banking, client channels. There’s a possibility of partnerships in loans. It could be white labelling."

White labelling refers to a company producing a product for another company to sell under its brand.

Transactional banking would be looked at in due course and this was unlikely to be in the next year or 18 months, Mr Riley said.

The "good bank" needed to restore client confidence before rolling out transactional banking, he said.

There were no plans to offer secured lending products such as vehicle asset finance and home loans in the short-to medium-term as this required a lot of capital, he said.

African Bank had been offering vehicle asset finance on an unsecured lending basis, but Mr Riley, who was previously CEO of Wesbank, the largest vehicle asset financier in the country, said this would no longer happen.

"We have definitely scrapped that part of the business. We felt we were targeting the bottom end of the market."

"Good bank" group chief financial officer Gustav Raubenheimer said there was no return on equity on the scrapped vehicle asset finance book.

When African Bank was salvaged, its senior creditors were subjected to a 10% haircut and subordinated debt holders were given a 62.5% cut.

In a supplementary information memorandum posted on Tuesday, the "good bank" said senior debt holders would be paid some cash and this would reduce their exposure to 80% of what they initially held.

Subordinated debt holders will also be paid 10% or R165m in cash to reduce their R1.65bn exposure to the "good bank". This means subordinated debt holders will now have exposure of R1.48bn.

The "good bank" is expected to return to a projected profitability of R458m in the 2017 financial year and R876m in 2018.

Next year, it will have a total loss of R2.6bn due to the once-off goodwill impairment of R2.3bn. Before the impairment, the "good bank’s" loss would have been R289m.

In the year ended-September, African Bank said the "good bank" and the "bad bank" had posted a combined loss of R7.2bn, a decline of 22% compared to R9.3bn last year. This was due to the adoption of much more conservative provisioning for bad debts.