African Bank expects the capital equipment and commercial property finance businesses it has acquired from Sasfin for R3.2 billion to contribute to its bottom line revenue growth in its asset book, the bank’s group executive for business banking, Zwelibanzi Manyathi, says.
The financier last year acquired Grindrod Bank and is geared to tap into its strategy to avail more capital to South African businesses through the new acquisitions. The prior year African Bank completed its acquisition of prominent micro-lenders Ubank.
As part of its strategy to contribute to transformation through capacitating South African entrepreneurs and SMEs, African Bank has revealed to Business Report that it is launching a digital lending platform early next year.
“We are building a digital lending business for entrepreneurs who need access to finance and funding to grow their businesses. We will be in the market with that in the first quarter of 2024,” Manyathi said in an interview on Friday.
He added that African Bank was geared to “build a diversified business” and that the acquisition of Sasfin’s businesses would also bring diversity in terms of its customer and talent base at a time retaining and securing talent for the financial sector is a challenging feat.
Under the deal, African Bank will bring more than 31 and six talented professionals from the two Sasfin entities who have specialised knowledge and experience in capital equipment and commercial property finance.
“These two transactions are earnings accretive and we are getting the full businesses, the system, and the people. That enables us to get this asset to work immediately and we should see not only growth in the asset book but good contribution to our bottom line revenue,” Manyathi told Business Report.
African Bank completed the acquisition of Sasfin’s capital equipment and commercial property finance businesses for R3.26 billion on Friday, after a few months of negotiations.
It put the value of Sasfin’s capital equipment finance business at R2.44 bn – including the advance book and goodwill – and that of the commercial property finance unit at R820 million, consisting of the advances book and associated shares and claims in the business.
“African Bank is on a journey to expand its core by looking for non-organic opportunities to scale and grow our business. This acquisition helps to diversify our income streams, balance sheet, the customers we serve as well as diversifying the risk profile to more secured lending,” said Kennedy Bungane, the bank’s CEO.
It expects to secure favourable feedback on the deal from a due diligence exercise, board approvals and prudential as well as regulatory approvals by 28 February 2024.
African Bank is currently integrating Grindrod into its business and over the past few weeks top executives have been “engaging with existing customers and prospective ones in Sandton, Durban” and Cape Town.
By 2025, said Manyathi, African Bank would have as many as 100 000 customers in business banking. However, he emphasised that the company was focused more on organic growth but would seize more acquisition opportunities as they emerge.
Although African bank has been on a growth strategy, Manyathi said he was worried about the slowed pace of economic growth in South Africa. Other finance institutions have complained of a tapering off in credit growth as interest rates bite into the credit payback ability of South Africans.
“The stagnant nature of the economy is a worry because when the economy is not growing it means you will have some sectors affected more than others. But our attitude is that you will always have an opportunity in the market; of course I worry about credit performance,” explained Manyathi.
The bank was, however, managing to keep its risk appetite in check, thanks to a talented and experienced team of bankers that “helps us to manage the risk” it faces. Crucially, African Bank was managing to retain and secure this talent.
“There is a battle for talent. In the people space, retention of talent is a challenge in South Africa. I spend a lot of time on people issues making sure we get it right.”
African Bank is owned by a consortium comprising of the Government Employees Pension Fund, the South African Reserve Bank (SARB), Absa, Capitec Bank, FirstRand, Investec and Nedbank Group. It is the subsidiary of African Bank Holdings, which the SARB said in 2022 it intends to list African Bank Holdings (ABH) on the JSE.
“The timing of the launch of the IPO (initial public offering) will be dependent on prevailing market conditions. The period leading up to the IPO will provide ABHL the opportunity to continue with its successful turnaround and execute its accelerated growth strategy,” SARB said at the time.
BUSINESS REPORT